Manufacturing sector exhibits resurgence in July, as indicated by our data.
Vietnam's Manufacturing Sector Shows Resilience Amid US Tariff Increase
Vietnam's manufacturing sector has shown resilience in the face of increased US tariffs, with the overall health of the sector improving significantly in July, marking the most marked improvement in almost a year. According to the latest Purchasing Managers' Index (PMI) report, the Manufacturing PMI rose to 52.4 in July, up from 48.9 the previous month, indicating expansion for the third consecutive month.
The expansion in the manufacturing sector was driven by an increase in new business, which expanded at the fastest pace since November last year. Despite the negative impact of US tariffs on new order growth, some respondents highlighted the resilience of the sector, citing the boost in localization and the move up the value chain.
The pace of depletion of stocks of purchases was the weakest since December 2023, suggesting that manufacturers are focusing on increasing production to meet demand. This was further evidenced by the renewed increase in purchasing activity, as rising output requirements led to a surge in demand for raw materials.
However, the tariff increase has resulted in a rise in input costs, with prices increasing for the second successive month. The latest deterioration in vendor performance was also solid, with material shortages resulting in a further lengthening of suppliers' delivery times.
Despite these challenges, manufacturers remain optimistic about output growth over the next 12 months. Confidence was supported by expectations of more stable economic conditions, upcoming product launches, and new orders. However, concerns over the potential impact of US tariffs continued to weigh on the outlook.
Andrew Harker, economics director at S&P Global Market Intelligence, warned that if raw material shortages persist, they could constrain the sector's future growth. Nonetheless, the strategic resilience shown by Vietnam's manufacturing sector in boosting localization and moving up the value chain suggests that the sector is well-positioned to weather the storm and continue to grow in the medium term.
[1] "US tariffs on Vietnamese manufacturing exports have increased from a 10 percent to a 20 percent rate as of late July 2025." [2] "The localization rate in key sectors is reaching 45–50 percent in 2025, supported by foreign investment in higher-value, high-tech manufacturing capabilities, reducing dependency on imported inputs."
- The US tariff increase on Vietnamese manufacturing exports has elevated from a 10% to a 20% rate as of late July 2025.
- The localization rate in key sectors is predicted to reach 45–50% in 2025, facilitated by foreign investment in higher-value, high-tech manufacturing capabilities, minimizing dependency on imported inputs.
- The resilience of Vietnam's manufacturing sector has NOT been solely sustained by combating US tariffs, but also by promoting localization and ascending the value chain.
- The sustained growth of Vietnam's manufacturing sector in the medium term may be challenged by lingering raw material shortages, posing a potential constraint on future growth, according to Andrew Harker of S&P Global Market Intelligence.
