US President Donald Trump on April 10 announced a 90-day suspension of reciprocal tariffs for more than 75 trade partners that have not retaliated against the United States. During this period, these countries will face the same 10 per cent tariff. In response, Việt Nam is being urged to strengthen its internal capacity to weather external shocks—not just as a short-term adjustment to tariffs, but as a long-term strategy for sustainable growth.

Nguyễn Bá Hùng, chief economist at the Asian Development Bank (ADB), shares his perspective on the issue with the media.

What immediate steps can Việt Nam take to adapt to these challenges?

The first step is to stimulate domestic demand. This is not unique to Việt Nam—it reflects a broader global economic slowdown. To offset falling external demand, it is essential to bolster internal consumption.

The Government's recent reforms are moving in the right direction, aiming to enhance governance and expand development capacity. Since the COVID-19 pandemic, measures such as the 2 per cent VAT reduction have helped maintain consumer purchasing power. However, further progress will require more direct support for income growth.

Public investment can play a catalytic role—not only by driving business and production activity, but also by raising income levels. Beyond that, policies such as workforce retraining, social safety nets for the unemployed, and support programmes to help workers transition between jobs will help people maintain their livelihoods.

Such income-boosting measures have broader spillover effects and can be flexibly combined. For example, increasing public spending—particularly on infrastructure—is a logical step. Việt Nam’s public debt is only around 36 per cent of GDP, well below the 60 per cent cap, giving the government fiscal space to expand spending.

The second priority is to continue reforms to improve the business and investment environment—such as upgrading infrastructure, developing human capital, and enhancing overall competitiveness.

Externally, Việt Nam should diversify its export markets. While the US remains a key partner, it is not the only one. Other markets have not imposed high tariffs, presenting an opportunity to reduce reliance on a single market and strengthen global trade ties.

What about foreign direct investment? How can Việt Nam continue to attract and retain it?

It is still too early to assess the full impact of tariffs on foreign direct investment (FDI). For now, most investors are taking a wait-and-see approach. Generally, however, FDI is a long-term commitment, and short-term disruptions are unlikely to trigger major shifts.

While tax incentives are a tool to attract FDI, they are not sufficient on their own. Investors place significant value on infrastructure, the quality of local services, and the availability of skilled labour. Offering low taxes alone does not guarantee that foreign investors will stay—or come in the first place.

Instead, Việt Nam should focus on broader, long-term improvements such as infrastructure development and workforce upskilling. These investments not only enhance the country's competitiveness but also benefit both local firms and foreign investors.

What are ADB’s recommendations for stabilising key export-driven sectors if tariffs are imposed?

That depends on global competitiveness and Việt Nam's relative advantages. While we cannot control international markets, we can analyse how tariffs may affect demand.

For example, in industries such as textiles or footwear, price increases driven by tariffs could lead to a drop in demand. Demand elasticity is key—small price hikes may be absorbed, but significant increases could curb consumption.

That is why we continue to stress the importance of diversifying export markets. But to succeed in new markets, Vietnamese firms must improve product quality and meet international standards.

Do tariffs present an opportunity for local firms to move up the value chain?

Absolutely. At present, most FDI firms in Việt Nam operate by using domestic land, labour, and infrastructure, while importing materials and exporting the final product. This limits the value retained in the country.

For instance, in semiconductor production, only about 5 per cent of the value remains in Việt Nam. For electronics, the figure is about 10 per cent, and for garments, around 30 per cent, according to an ADB research. In other words, if a product generates VNĐ10 in value, VNĐ9 often goes abroad, with only VNĐ1 retained domestically.

To shift this, domestic businesses must become more involved in the supply chain. If local firms can provide materials or components to FDI enterprises, instead of relying on imports, more value will be retained in Việt Nam.

However, the key challenge is competitiveness. Local firms must offer products at prices and quality levels that rival those of foreign suppliers. This is the core message ADB wants to convey: boosting local competitiveness is essential to increasing Việt Nam’s share of the value chain.

Do you see the tariff situation as an opportunity for economic restructuring?

I do. As a saying goes, “In every crisis lies opportunity.” The US tariff policy reflects a broader shift in the global economic order—from open trade to one increasingly shaped by geopolitical and economic tensions.

This presents both challenges and opportunities for Việt Nam. It is a chance to accelerate domestic reform, diversify export markets, and deepen partnerships beyond the US.

Prime Minister Phạm Minh Chính has proposed a VNĐ500 trillion preferential credit package for innovation and infrastructure. How do you assess this initiative?

While full details are still emerging, the policy direction is sound. Whether tariffs remain in place or not, strengthening domestic demand is vital to supporting Việt Nam’s growth.

The focus on infrastructure is especially important, as it lowers operational and logistics costs over the long term. At the same time, increased investment in innovation is crucial. Việt Nam’s current R&D spending is only 0.4 per cent of GDP—far below the ASEAN average.

The proposed package amounts to about 4–4.5 per cent of GDP and remains well within the country’s fiscal capacity. Even if funded entirely by borrowing, public debt would rise to just over 40 per cent of GDP—still safely below the 60 per cent limit.

However, the key will be timely and effective implementation. If it can be rolled out this year, the impact could be significant. But if delayed over several years, the stimulus effect will be weakened. VNS