Vietnam Scrambles to Diversify Exports as U.S. Tariff Threat Looms

Vietnam, once a poster child of globalisation’s new frontier, is learning the hard way that no export miracle is immune to geopolitical turbulence.

With the United States threatening a fresh wave of tariffs amid mounting trade tensions, Vietnamese firms are now embarking on a sweeping rethink of their export strategy — pivoting away from overdependence on American demand and casting a wider net across emerging markets.

At the heart of the crisis is Washington’s increasingly aggressive stance on trade imbalances. The Trump administration, under pressure from domestic industries and emboldened by hawkish bipartisan rhetoric on China and its economic satellites, has hinted at levying tariffs on Vietnamese textiles, electronics, and footwear — sectors that have become linchpins of the Southeast Asian nation’s economy.

For Vietnamese exporters, many of whom relocated from China in search of lower labour costs and tariff-free access to U.S. markets, the threat is existential. The country’s trade surplus with the U.S. reached over $115 billion last year, making Vietnam Washington’s fourth-largest source of imports. That dependence is now being cast in an unfavourable light, particularly in a pre-election atmosphere in which “rebalancing trade” plays well with American voters.

“Vietnamese firms are now doing what they perhaps should have done earlier — diversifying,” says Nguyen Thanh Lam, an economist at the University of Economics Ho Chi Minh City. “It is not just about finding new markets, but about rethinking supply chains, product design, and investment structure.”

Major players in Vietnam’s export machine — such as VinFast, TNG Investment and Trading, and Saigon Newport Corporation — have already begun shifting gears. Instead of doubling down on U.S. demand, they are cultivating relationships in Latin America, Africa, and the Middle East, regions often overlooked in the rush for Western dollars but now seen as essential buffers against Western protectionism.

There are signs of progress. Earlier this month, a delegation of Vietnamese business leaders signed a preliminary trade agreement with Brazil aimed at boosting exports of apparel, seafood, and electronics. Meanwhile, Vietnamese rice and coffee exporters have begun exploring long-term partnerships in sub-Saharan Africa, capitalising on growing urban populations and rising consumer demand.

The European Union, too, is coming into sharper focus. The EU-Vietnam Free Trade Agreement (EVFTA), signed in 2020 but underutilised due to logistical and regulatory hurdles, is being revisited with urgency. The Ministry of Industry and Trade has urged firms to make better use of preferential tariffs under the deal, particularly for agricultural and light manufacturing products.

Still, the shift won’t be seamless. Despite its reputation as a nimble, business-friendly economy, Vietnam faces structural limitations that make diversification a daunting challenge. Much of its export base remains reliant on foreign direct investment — particularly from South Korea, Japan, and Taiwan — with production geared toward U.S. specifications and consumer habits.

Moreover, analysts warn that simply replacing one major customer with another doesn’t address deeper issues. “There is a risk that Vietnamese firms become just as dependent on Europe or Asia as they are on the U.S.,” says Natalie Chen, a trade specialist at the London School of Economics. “What’s needed is a strategic upgrade — more local value-added production, investment in branding, and a move up the technological ladder.”

Vietnam’s government appears to have taken that message to heart. In April, it unveiled a new export development framework designed to support domestic small and medium-sized enterprises (SMEs) in accessing new markets. The initiative includes subsidies for participation in overseas trade fairs, tax breaks for exporters investing in R&D, and state-backed credit for logistics upgrades.

At the same time, Hanoi is carefully treading the diplomatic line. While publicly downplaying the likelihood of a U.S. tariff escalation, officials are lobbying behind closed doors to avoid a confrontation. “Vietnam understands that its relationship with Washington goes beyond trade,” says a Western diplomat based in Hanoi. “There’s a strategic element — particularly as the U.S. looks to counterbalance China in the region.”

Indeed, that strategic calculus may offer Vietnam a temporary shield. As a critical player in U.S.-led Indo-Pacific frameworks — including IPEF (Indo-Pacific Economic Framework) and the Quad+ dialogues — Vietnam has geopolitical leverage that other exporting nations lack. Washington may be reluctant to push too hard on tariffs, lest it drive Hanoi closer to Beijing.

But the message from the market is unambiguous: the era of unbridled access to U.S. consumers is over. For Vietnam, which has ridden the crest of globalisation’s third wave with astonishing success, the challenge now is to adapt without losing momentum.

As Lam puts it, “This is not a crisis. It’s a correction — and if Vietnam plays it wisely, it may emerge stronger, more resilient, and less vulnerable to the whims of any single market.”

Main Image: By Jim 陳 – Saigon Night, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=75798427