Trade surplus target holds despite second-quarter headwinds

Trade surplus target holds despite second-quarter headwinds

The Ministry of Industry and Trade has identified three key headwinds for the second quarter while maintaining Vietnam's 2026 trade surplus target, as foreign-invested enterprises-led imports signal a production upcycle rather than imbalance.

The country's trade outlook is entering a more challenging phase in the second quarter of 2026, with mounting external uncertainties expected to weigh on export performance.

Speaking at the Ministry of Industry and Trade’s regular press briefing on April 9, Tran Thanh Hai, deputy director general of the Agency of Foreign Trade, pointed to three major challenges shaping the near-term outlook.

He noted that global consumption is weakening as inflationary pressures continue to erode purchasing power, despite easing geopolitical tensions in the Middle East. This shift in consumer behaviour is expected to reduce import demand in key markets, directly affecting Vietnam’s exports.

In addition, risks related to raw material supply, particularly oil, remain a concern. Hai explained that oil is a critical input for multiple industries, including chemicals, plastics, and fertilisers, and any supply disruption could significantly increase production costs and compress profit margins.

Rising logistics costs are also re-emerging as a challenge. After a period of stability, transport expenses are increasing again, adding pressure on exporters, especially those operating in low-margin sectors.

However, Hai noted that the outlook is not entirely negative. If geopolitical conditions improve further and oil prices decline, input and logistics costs could ease, creating stronger conditions for export activities.

In this context, he stressed that business adaptability would be critical. “Enterprises need to flexibly adjust their market strategies, improve competitiveness, and make effective use of free trade agreements to sustain growth,” Hai said.

First-quarter data provides additional insight into Vietnam’s trade dynamics. Total import-export turnover reached nearly $250 billion, marking an increase of about 22 per cent on-year and signalling a strong recovery in trade activity.

At the same time, the trade balance recorded a deficit of approximately $3.6 billion, drawing attention as the country continues to target a full-year trade surplus.

Hai noted that this development should be viewed in context, explaining that the first quarter is typically not a period of strong trade surplus, as businesses tend to increase imports of raw materials and capital goods in preparation for production cycles later in the year.

"During the first quarter, even if there is a trade surplus, it is usually not significant. This is the period when enterprises import inputs and invest in equipment for new projects," he said.

This trend has been further reinforced by strong foreign direct investment inflows in 2025. As foreign-invested projects move into the implementation phase, demand for machinery, equipment, and production inputs has risen accordingly.

Data reflects this shift. Imports of electronic components increased by around half, while machinery, equipment, and spare parts rose by approximately 22 per cent. Imports of fuel and animal feed materials also recorded notable growth, all of which are essential inputs for production.

From this perspective, the trade deficit in the first quarter carries more of an investment nature than indicating structural imbalance. Hai underscored that the situation remains under control, despite the rapid pace of import growth.

Nevertheless, pressure is expected to build in the coming quarters. As import volumes rise, the ability of businesses to convert these inputs into exportable output will be crucial in determining whether the trade balance can return to surplus.

Vietnam’s trade performance in 2026 is therefore best understood as being in a transition phase, where short-term challenges coexist with medium-term opportunities driven by overseas funding and industrial expansion.

VIR