In a move reminiscent of his previous term, US President Donald Trump has reinstated tariffs on steel and aluminum imports, along with a plan for reciprocal tariffs targeting key trading partners, including Vietnam. As the US’s sixth-largest source of imports, Vietnam could face significant economic repercussions from these measures.
The Reinstatement of Steel and Aluminum Tariffs
On February 10, 2025, President Trump signed proclamations reinstating a 25% tariff on steel imports and increasing the tariff on aluminum imports from 10% to 25%. These tariffs, effective March 12, are part of an effort to protect US domestic industries from what the administration perceives as unfair trade practices. Vietnam, a significant exporter of steel and aluminum to the US, is expected to be impacted, although the full extent remains uncertain.
- Steel Exports: In 2024, Vietnam was the fifth-largest source of US steel imports, with exports valued at $1.13 billion. Despite existing tariffs, Vietnamese steel exports have continued to grow, suggesting resilience against such trade barriers.
- Aluminum Exports: Vietnamese aluminum exports, valued at $142.9 million in 2024, face a steeper challenge as the increased tariff could hinder growth, especially given last year’s decline in shipments.
Implications of Reciprocal Tariffs
On February 13, Trump announced a “Fair and Reciprocal Plan” to impose tariffs on countries with non-reciprocal trade relationships with the US. Vietnam, with its trade-weighted average most-favored nation tariff of 5.1% compared to the US’s 2.2%, is particularly vulnerable. The plan could significantly increase effective tariff rates on Vietnamese goods entering the US.
- Currency Manipulation and Trade Practices: Vietnam’s inclusion on the US watchlist for currency manipulation and its VAT policy could further complicate trade relations, potentially leading to additional tariffs.
- Economic Impact: With US-bound exports representing about 30% of Vietnam’s GDP, the country stands to experience substantial economic impacts from these tariffs . The reliance on the US market makes Vietnam particularly susceptible to any changes in trade policy.
Potential for Diplomatic Negotiations
Despite the looming challenges, there is room for negotiation between the US and Vietnam. Historically, Vietnam has shown willingness to engage in discussions to mitigate trade tensions. Recent meetings between US Ambassador Marc Knapper and Vietnam’s trade minister Nguyen Hong Dien highlight Vietnam’s openness to increasing imports of American goods, which could potentially defuse some of the tariff pressures.
- Trade Agreements: Vietnam might consider bilateral trade agreements that could ease market access for US businesses, thereby fostering a more balanced trade relationship.
- Investment Opportunities: The US could encourage Vietnam to expedite legal frameworks to attract more American investments in sectors like energy, semiconductors, AI, and aviation.
Future Outlook
As President Trump reinstates his aggressive trade policies, Vietnam finds itself at a crossroads. While the tariffs pose significant challenges, they also present an opportunity for Vietnam to renegotiate its trade relations with the US, potentially leading to more balanced economic exchanges. The coming months will be crucial in determining whether Vietnam can successfully navigate these tariffs and maintain its position as a key player in global supply chains.
The broader impact of these tariffs on global trade dynamics remains to be seen, as countries adjust their strategies in response to the US’s renewed protectionism. Both the US and Vietnam will need to weigh the benefits of maintaining strong economic ties against the backdrop of these challenging policies.
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