U.S. tariff escalation strains Vietnam's export durability
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The United States' imposition of a 20% countervailing tariff on Vietnamese goods has sparked a ripple effect across the Vietnamese economy. According to the National Statistics Office (NSO) calculations, this tariff leads to a measurable reduction in Vietnam’s GDP growth.
The NSO used the Input-Output (I/O) Table framework to evaluate the impacts of the tariff from both the supply and demand sides. When the U.S. increased tariffs on Vietnamese imports from 10% to 20%, the cost burden on U.S. importers rose, with some of that cost likely passed on to Vietnamese exporters. This tariff effectively acts as a trade shock on Vietnam’s export-intensive industries, particularly in sectors like electronics, machinery, textiles, and footwear, which form large portions of exports to the U.S.
The Input-Output Table framework allows the National Statistics Office to trace how reduced demand in these export sectors cascades through the economy by impacting linked suppliers and producers, thereby decreasing overall GDP growth. While the direct numeric GDP impact is not quoted explicitly, the framework typically estimates that increased tariffs reduce production output multipliers and thus slow GDP expansion.
Certain product categories, such as textiles, garments, electronics, phones, and computers, are expected to see a 4 percentage point drop in export value due to the 20% tariff. This drop in export value, combined with the increased cost of imports, has led to a decrease in production, business activities, foreign and domestic investment, and economic growth in both the short and long term.
However, it's important to note that while the tariff may have a negative impact on Vietnam's economy, its goods are expected to remain competitive in the U.S. market due to price increases in goods from other countries as well.
The US remains Vietnam's largest export market, and the growth trend continues. In the first seven months of 2025, Vietnam's export value reached an estimated $261.8 billion, showing a 14.6% jump year-on-year. The total import value over the same period was more than $252 billion, marking an 18% increase.
Amidst these challenges, KPMG has launched a tariff modelling platform to help foreign-invested companies and exporters in Vietnam navigate US tariff risks. Trade negotiations with the United States in early July appeared promising, leading to a revised forecast for Vietnam's GDP growth in 2025 by 0.9% to 6.9%.
In conclusion, the 20% tariff imposed by the U.S. on Vietnamese goods reduces Vietnam’s GDP growth by decreasing export competitiveness and triggering negative ripple effects in the connected domestic production sectors. Despite these challenges, the Vietnamese economy continues to show resilience and adaptability in the face of changing trade policies.
[1] National Statistics Office, Vietnam [2] Input-Output Table framework, Economic Research Service, United States Department of Agriculture [4] Tariff, Wikipedia [5] KPMG, Vietnam Tariff Modelling Platform, Press Release, July 2025
- The increase in tariffs from the United States has a direct impact on the financial aspect of Vietnamese businesses exporting goods, particularly in sectors like electronics, machinery, textiles, and footwear.
- The reduction in Vietnam’s GDP growth, caused by the US tariffs, has far-reaching implications for the business community, affecting production, investment, and economic growth in both the short and long term.
