HCM CITY — Economists and business leaders are raising concerns over the US announcement to impose a 46 per cent reciprocal tariff on Vietnamese goods starting April 9, warning of potential negative impacts on exports and the country’s overall economic growth.

Michael Kokalari, Chief Economist at VinaCapital, described the April 3 announcement of ‘reciprocal tariffs’ as “completely unexpected”.

“Based on our analysis, these tariffs will make it difficult for Việt Nam to achieve its 8 per cent GDP growth target,” he said.

Markets had anticipated a tariff of around 10 per cent, and VinaCapital had forecast an even lower figure. Kokalari noted that such a high rate runs counter to US interests and may trigger inflationary pressure that could influence upcoming midterm elections.

The 46 per cent tariff figure is based on the US Council of Economic Advisors (CEA) claim that Việt Nam imposes a 90 per cent tariff on US imports—a figure derived from a simplistic analysis of the bilateral trade deficit.

However, the US Trade Representative (USTR) contradicted this claim in a report published on April 1, stating that “the majority of US exports to Việt Nam face tariffs of 15 per cent or less”. Analyses from Bloomberg and other sources also suggest that Việt Nam’s average tariffs on US imports are only about 7 percentage points higher than US tariffs on Vietnamese imports. When adjusted for trade-weighted flows, the two countries’ effective import taxes are roughly equivalent.

Kokalari emphasised that the President Donald Trump administration seems to have based its entire trade and tariff strategy – or at least its entire opening negotiation position – on the numerical trade balances.

“It is extremely urgent for Việt Nam to immediately start importing a lot more from the US,” he stressed.

“We have heard from secondary sources that Trump administration officials appreciate the initial efforts Việt Nam is making to cooperate with efforts to reduce the numerical trade balance between the two countries, but US trade officials will not be assuaged by promises to make purchases at some future date,” he said.

He added that executives in the energy sector have indicated Việt Nam could begin importing up to US$35 billion worth of liquefied natural gas (LNG) annually by using floating storage regasification units (FSRUs) ships, as building permanent LNG terminals would take years.

Trade experts believe the 46 per cent tariff represents an opening position for negotiations, with intense discussions expected between the two countries in the coming weeks. However, there is little consensus on what the final rate might be. Given how high this initial negotiating position is, it is hard to see a final figure of anything less than 25 per cent, which would represent a material hit to Việt Nam’s GDP growth.

Market Impact

Kokalari said the announcement shocked investors, sending the VN-Index plunging nearly 7 per cent. But the selling was fairly uniform across-the-board, indicating that market participants will need more time and information to digest the likely impact of all of this on the economy and earnings growth. Even companies not directly affected by tariffs, such as IT outsourcing giant FPT, saw their shares drop by the daily limit of 7 per cent.

He noted that the reaction in the currency market was relatively muted, with the USD/VND exchange rate depreciating by less than 1 per cent on the day, and by less than 2 per cent year-to-date.

Historically, currencies of countries targeted by tariffs tend to depreciate by about half the tariff amount, he said, citing examples from Mexico during Trump’s first term. However, many tariff details remain unclear, including potential exemptions for specific Vietnamese exports.

Despite the uncertainty, some investment funds see opportunities.

“We are currently assessing the impact of the tariffs on the scenarios we have in place for our various portfolios and are looking for buying opportunities to take advantage of any short-term weakness against the backdrop of the potential longer-term impact on both the Việt Nam and global economies,” Kokalari said. “The sell-off gives active fund managers an opportunity to buy stocks that are fundamentally sound and will not be overly impacted by the tariffs at cheaper valuations.”

Shock to key export sectors

Việt Nam’s top export sectors, including textiles and garments, electronics, footwear, seafood, and furniture, rely heavily on the US market. The proposed tariffs represent a shock, and businesses are urging the Government to negotiate for a more reasonable rate.

Phạm Xuân Hồng, Chairman of the HCM City Association of Garment, Textile, Embroidery, and Knitting (Agtek), highlighted that the US accounts for 40 per cent of the industry’s total exports.

Currently, Vietnamese textile and garment products exported to the market are subject to a 16 per cent tax. If an additional 46 per cent is imposed, they will be unable to compete, he said.

Agtek members hope that the strong bilateral relationship and negotiation efforts from the Vietnamese Government will help reduce the proposed tariff rate. In the meantime, businesses will continue to diversify their markets to reduce their dependence on the US market, he said.

Nguyễn Đình Tùng, Vice Chairman of the Việt Nam Fruit and Vegetable Association and general director of Vina T&T Group, noted that most Vietnamese fruit and vegetable exports to the US currently face minimal tariffs, except frozen durian, which is taxed at 16 per cent.

He warned that higher tariffs could undermine the competitiveness of Vietnamese produce, prompting US importers to shift to suppliers in countries like Thailand.

The woodworking industry faces similar risks.

Ngô Sỹ Hoài, Vice Chairman and General Secretary of the Việt Nam Timber and Forest Product Association, described the new tax as “terrifying”, adding that the industry is still reeling from the news. He expressed hope that Việt Nam will soon begin formal negotiations to address the issue.— VNS