Wood industry faces mounting challenges amid US tariff pressure

Wood industry faces mounting challenges amid US tariff pressure

Vietnam’s wood industry faces mounting export challenges as US tariffs, rising logistics costs, and slowing global demand squeeze profits and cloud the outlook for the rest of 2025.

According to the latest data from the Department of Customs, wood and wood products ranked seventh among Vietnam’s top ten export categories in the first seven months of 2025, reaching $9.65 billion, up 8.1 per cent on-year.

The United States remained Vietnam’s largest export market, accounting for $5.41 billion or 56 per cent of the total, up 10.5 per cent from the same period last year.

Experts attribute Vietnam’s strong position in the US market – now among the top three wood exporters to the country – to its cost advantages, including low labour costs and the use of 70 per cent domestically sourced materials.

However, the US administration announcement in early April of a potential 46 per cent countervailing tariff on Vietnamese goods immediately placed the wood sector among those most at risk. If implemented, this tariff would significantly erode the price competitiveness of Vietnamese wood products, pushing up costs significantly.

During the tariff negotiation phase, with businesses hopeful for a more moderate 20 per cent rate, many leading exporters ramped up production to seize a ‘golden window’, resulting in relatively strong short-term growth.

Yet, business results from the second quarter (Q2) of 2025 suggest that the anticipated recovery has not fully materialised.

In Q2 of 2025, Duc Thanh Wood Processing JSC reported a 20 per cent decline in revenue to approximately $2.84 million. Its post-tax profit, however, rose 13 per cent to nearly $680,000, mainly due to cost-cutting measures and workforce reduction.

Similarly, An Cuong Wood Working JSC saw a 6 per cent drop in revenue, down to $38.4 million, while its post-tax profit rose 17 per cent to $5.52 million, driven largely by financial gains- specifically, the sale of shares in Central Hill Estate JSC.

Meanwhile, Thuan An Wood Processing JSC posted a 19 per cent decline in revenue to 2.16 million, with post-tax profits plummeting 38 per cent to just $40,000.

In contrast, Phu Tai JSC, which operates across multiple sectors, reported strong growth with revenue reaching $77.6 million and post-tax profits reaching $5.3 million, up 18.6 per cent and 17 per cent on-year, respectively.

Looking ahead to the second half of the year, export prospects appear even more uncertain. Tran Quoc Manh, vice chairman of Vietnam Handicraft Exporters Association, noted that adverse impacts are becoming visible as early as Q3, particularly in August and September.

"Most businesses are still operating but largely in a holding pattern," Manh said. "Selling prices are falling, product ranges are narrowing, and many customers, despite having placed orders, are delaying delivery ahead of market developments. Even import partners are uncertain about the situation, which is causing transaction timelines to stretch out."

He added that while the US market is already facing difficulties, the European market continues to shrink, increasing the pressure on Vietnamese exporters. The situation is expected to deteriorate further in Q4 as orders continue to decline.

Dang Quoc Hung, chairman and CEO of Alliance Handicraft and Wooden Fine Art Corporation, warned that the export wood market will face even greater challenges in the near future.

"Maritime freight costs have been trending upward, especially on routes to Europe and the US. However, the greater concern lies in the countervailing tariffs. Some recent shipments to the US have already encountered tax-related hurdles, and this is expected to continue affecting orders in the upcoming months. As taxes increase, companies are forced to raise prices, which reduces competitiveness and directly hits sales," Hung explained.

Hung also pointed out a shift in buyer expectations. "Previously, exporters typically absorbed all import taxes for shipments to the US, but now clients are pushing for shared cost responsibility. This forces businesses to raise prices, impacting customers and partners directly, some of whom have already raised concerns in recent weeks."

Despite growing instability, the Vietnam Timber and Forest Products Association remains optimistic that the country can still achieve its 2025 wood and wood product export target of $18 billion. However, the industry’s heavy dependence on the US market poses significant risks. Any fluctuation in American consumer demand can immediately affect Vietnam’s export revenues. As a result, regulatory bodies are encouraging firms to diversify their markets and tap into new growth areas.

Echoing this sentiment, Manh from Vietnam Handicraft Exporters Association said, "In reality, this is incredibly difficult. No market can replace the US in the short term."

VIR