Vietnam’s economic growth continues, but new US tariffs worry China and Asian supply chains

Vietnam's economy accelerated significantly in Q2 2025, with GDP growing 7.96% driven by an 18% surge in exports, following a new trade deal with the United States. While the agreement set a lower 20% tariff on Vietnamese imports, a critical clause imposes a 40% tariff on 'transshipped' goods, particularly from China, which poses a substantial risk to highly integrated Asian supply chains. This measure could impact Vietnam's GDP by 1.7% and other regional economies, raising concerns about potential broader US tariff extensions and complicating origin certification for many companies despite Vietnam's efforts to shift towards higher-value production.

Analysis

Vietnam has posted robust economic performance in the second quarter of 2025, with GDP growth accelerating to 7.96% year-over-year, significantly outpacing the 6.93% recorded in the first quarter. This growth was fueled by an 18% surge in exports, culminating in a trade surplus of $4.41 billion. The backdrop to this is a new trade agreement with the United States, which imposes a 20% tariff on Vietnamese goods—a figure considerably lower than the 46% initially threatened. However, a critical and potentially destabilizing component of this deal is a 40% tariff on goods deemed 'transshipped' through Vietnam, a measure aimed at curbing tariff evasion from China. Given the highly integrated nature of Asian supply chains, where many Vietnamese-assembled products contain Chinese components, this clause introduces substantial uncertainty. According to analysis from Nomura, this redefinition of transshipment could erode Vietnam's GDP by as much as 1.7% and negatively impact other regional economies, including China, Thailand, and South Korea. While Fitch Solutions projects a solid 6.4% GDP growth for Vietnam in 2025, the overarching risk remains the ambiguous enforcement of the transshipment rule and the potential for the U.S. to extend similar tariff structures across the region.

Key Decisions for Investors

• Investors should closely monitor the official definition and enforcement of the 'transshipment' clause in the new US-Vietnam trade deal, as this is the primary variable determining the risk to Vietnam's export-led growth.
• It is crucial to assess the supply chain exposure of companies manufacturing in Vietnam, specifically their reliance on Chinese components, to quantify their vulnerability to the 40% tariff.
• While short-term growth is strong, long-term investors might consider focusing on Vietnamese sectors actively moving up the value chain, such as semiconductors and advanced technology, which are less susceptible to tariffs on lower-end, China-dependent assembly.
• Consider hedging exposure to other Asian export economies like Thailand, South Korea, and Malaysia, as the potential regional contagion of this US tariff policy presents a significant, quantified risk to their GDP.