US tariff policies causing concern in Vietnam

US tariff policies causing concern in Vietnam

As new tariffs on imported goods may create significant impacts on domestic enterprises and foreign-invested enterprises (FIEs), legal reform is increasingly important for Vietnam to maintain its attractiveness and competitiveness.

US President Donald Trump announced a series of escalating tariffs in February, aimed at key US trading partners including Canada, Mexico, and China, as well as imposing tariffs on steel and aluminium imports and a worldwide reciprocal tariff plan.

This has raised fresh concerns over a global trade war, which could increase difficulties for struggling economies.

According to a report by the Vietnam Chamber of Commerce and Industry (VCCI), if the United States imposes tariffs on products originating from Vietnam, the consequences will not just be limited to domestic businesses but will also negatively impact FIEs.

For example, a multinational corporation may have a component manufacturing factory in Vietnam and an assembly line in Thailand with the intent to export to the US. When the US adjusts tariffs on a link in this chain, businesses will have to re-evaluate their production strategies, posing a difficult problem for Vietnam in retaining investment.

On the other hand, the supply chain of electronic components, electronic products, and others is a significant source of budget revenue for Vietnam.

Some economists believe that in the face of external tariff pressure, legal reforms will continue to be an important tool for nations to retain their attractiveness and competitiveness. The Vietnamese government has made significant strides in improving the business climate. However, further refinements are being sought to create a more favourable business climate.

"British businesses look forward to continued improvements, particularly in simplifying customs procedures, tax compliance, and licensing processes. Faster and more transparent administrative processes would greatly benefit companies looking to expand their operations, and market access," said Denzel Eades, chairman of the British Chamber of Commerce in Vietnam.

VCCI vice president Nguyen Quang Vinh

VCCI vice president Nguyen Quang Vinh said, "Policy stability is key, as large investors need a low-risk and predictable business environment."

According to the VCCI, countries such as Indonesia, Malaysia and the Philippines are improving their investment environments to attract foreign investment. With increasingly fierce competition from these countries, Vietnam faces the risk of losing out on foreign capital if it does not make appropriate policies.

Source: Foreign Investment Agency under the Ministry of Finance

Vinh believes labour costs and tax incentives are no longer unique advantages, as neighbouring countries are also adjusting their policies to draw in investment. "To maintain investment appeal and competitiveness, the country should improve workforce quality to meet the demands of FIEs in high-tech industries, accelerate the development of digital infrastructure and logistics, and enhance selective incentive policies focusing on high-value and sustainable industries."

"It is essential to ensure transparency and policy stability so that businesses can invest with confidence in the long term. Vietnam must continuously improve its investment environment and adopt a flexible foreign investment attraction strategy to maintain its regional position," said Vinh.

Experts also highlight that the rise of blockchain, AI, and digital currencies is evidence that the future will increasingly be shaped by technological advancements. Therefore, a country with strong technological investments will have a significant advantage.

VIR