Staff at a garment factory in Ho Chi Minh City, which supplies T-shirts and underwear to the U.S., were shocked by the newly introduced “devastating” trade tariffs on Vietnam that could have severe repercussions for their operations.
A major manufacturing hub that listed the United States as its largest market last year, this Southeast Asian country faced a hefty 46 percent tariff during President Donald Trump’s worldwide trade crackdown.
Even though there were general concerns about being a major focus due to its substantial trade surplus with Washington — ranking third largest after China and Mexico — the magnitude of the tariffs announced on Thursday was a shock for companies and manufacturing employees alike.
“Truly astonishing,” stated Tran Nhu Tung, who chairs the board of Thanh Cong—a manufacturing plant in Ho Chi Minh City producing garments for brands like DKNY and Walmart.
“Specifically within the textile sector, we didn’t expect this. I believed that because Vietnam is a smaller nation, the U.S. wouldn’t enforce such high tariffs,” stated Tung.
Approximately one-quarter of his exports are presently shipped to the United States, he mentioned.
In the trade conflict between Beijing and Washington during Trump’s first term, Vietnam capitalized on its strategic geographical placement and inexpensive skilled workforce to establish itself as a rival manufacturing center in Asia.
A number of businesses relocated portions of their supply chains, resulting in Vietnam’s trade surplus with the U.S. doubling from 2017 to 2023.
Currently, major companies like Nike—which manufactured 50% of its shoes and 28% of its clothing in Vietnam during the fiscal year 2024—are dealing with significantly increased expenses. They must either shoulder these additional costs themselves or pass them along to consumers, leading to a sharp decline in their stock prices on Thursday.
Analysts mentioned that these tariffs might push numerous entities to seek alternative locations for production.
“These items have slim profit margins and are highly sensitive to pricing changes, leading large corporations to redirect their orders to nations with more favorable reciprocal tariff rates,” explained Sayaka Shiba, who serves as a senior country risk analyst at the research company BMI.
Tariffs would “substantially harm” Vietnam’s present economic strategy focused on exports, as the country heavily depends on sales to the U.S., she explained, noting that under the most adverse conditions, this could result in a 3% reduction in GDP for the year.
Data from the US Trade Representative website indicates that the United States imported $136.6 billion worth of products from Vietnam in the previous year, which accounts for approximately 30 percent of its GDP.
Following the announcement, Hanoi’s stocks plummeted, causing its primary index to close 6.7 percent lower on Thursday—the largest decline since 2001 as reported by Bloomberg.
‘Can’t eat, can’t sleep’
The imposed tariffs have caused workers in Vietnam to worry about their future prospects.
“Due to constant worries about potentially losing my employment, I’ve been struggling with both eating and sleeping properly,” stated 38-year-old Cao Thi Dieu, who works at a shoe manufacturing plant in Ho Chi Minh City producing footwear for companies like Nike and Adidas.
“What will happen if I lose my job? How can I keep making enough money every month for my two kids’ education?” she said to AFP.
Shortly after the announcement, Vietnam’s prime minister called for the swift formation of a “rapid response team,” adding that Deputy Prime Minister Ho Duc Phoc was set to travel to the United States for an official “working visit.”
“Several people think that this tariff rate is primarily a negotiating tactic rather than an ultimate stance,” stated Dan Martin from the business consulting company Dezan Shira & Associates in Hanoi.
Even though Vietnam might aim for a decrease, past charm offensive efforts have been unsuccessful.
Earlier this week, Vietnam reduced import taxes on numerous items ranging from liquefied gas and certain agricultural products to vehicles, seemingly as an anticipatory move to mitigate the impact of these tariffs.
The company further declared that it would permit Elon Musk’s SpaceX to initiate its Starlink satellite internet service under a trial program extending until 2030.
However, it seems that the Trump administration was deeply frustrated with Vietnam for allegedly assisting in efforts to evade tariffs placed on China.
A White House official informed journalists, “The operation in Vietnam functions this way: They establish these sites that appear, when viewed from above, as though they are production facilities. However, China merely transports its goods into these storage buildings, after which Vietnam ships them to us.”
However, a 2024 report from the International Monetary Fund stated that there was “no definitive proof” indicating Vietnam’s involvement in aiding Chinese exports to the United States.
“Most companies aren’t trying to manipulate the system,” Martin stated. “They’re here because Vietnam offers both strategic and operational advantages.”