1. How will Trump's tariffs affect Vietnam's export
performance? Compared with the 46% tariff rate announced in April,
would you consider 20% a favourable outcome from Vietnam's
perspective?
DMVN: While the imposition of 20% tariff will undoubtedly present
challenges, Vietnam's export performance is expected to remain
strong due to its strategic approach and unmatched international
integration. The new 20% tariff on Vietnamese exports to the US is
certainly a more favorable outcome compared to the initially
proposed 46%.
This reduction is a testament to the Vietnamese Government's
proactive and skillful negotiations. Furthermore, the tariffs also
apply to a wide range of other countries, which could help level
the playing field. To mitigate the negative effects, Vietnamese
businesses are already diversifying their export markets,
leveraging free trade agreements with the European Union (EVFTA)
and other partners.
2. How might Trump's tariff policies affect FDI flows into
Vietnam, particularly in light of the 40% tariffs on transshipment?
Compared with other ASEAN countries, what are Vietnam's unique
strengths?
DMVN: The 40% tariff on transshipment is a significant measure
aimed at preventing the rerouting of goods. However, Vietnam is
well-positioned to handle this challenge. This policy may actually
incentivize legitimate companies to invest in manufacturing with a
higher local content, rather than simply using Vietnam as a transit
point. This could lead to a higher quality of FDI in the long
term.
Compared to other ASEAN countries, Vietnam's unique strengths
are numerous:
- Political Stability with the private sector at the heart of its development: Vietnam's stable government and commitment to a pro-business environment, thanks to Resolution 68 issued recently, provide a secure foundation for long-term investment.
- Strategic Location: Its proximity and land border with China make it a natural hub for manufacturing and supply chain diversification.
- Strong Workforce: Vietnam has a large, young, and increasingly
skilled labor force with competitive wages.
Unmatched international integration: The country has a robust network of free trade agreements, including the CPTPP and EVFTA, which opens up access to many international markets.
3. How about Chinese investment? Do you anticipate an increase
of Chinese investment?
DMVN: I do anticipate an increase in Chinese investment, as the
country continues to be a key player in the regional supply chain.
Chinese companies are increasingly investing in manufacturing
facilities in Vietnam to produce goods that can be exported without
being subject to US tariffs on Chinese-made products. While this
trend has been ongoing, the new US tariffs on transshipment will
likely encourage a greater focus on investments that involve
substantial manufacturing and local value-add within Vietnam. This
will ultimately benefit the Vietnamese economy by creating jobs and
strengthening our manufacturing base.
4. In recent years, have you observed any trends or shifts in
foreign investment into Vietnam—either in terms of sectors,
source countries or investment strategies?
DMVN: In recent years, we have observed several key trends and
shifts in foreign investment into Vietnam. First of all, there is a
clear trend towards investment in high-tech manufacturing,
particularly in semiconductors, electronics, and advanced
components, as well as renewable energy, where I have seen billions
of dollars being committed to be invested in Vietnam. This aligns
with Vietnam's policy to attract higher-value and high-quality
investment. Also, while traditional investors from Singapore, South
Korea, and Japan remain strong, there is a growing interest from
other nations and regions seeking to diversify their supply chains.
Notably, foreign investors, especially Chinese investors, are
increasingly targeting the development of industrial parks,
warehouses, and logistics networks, recognizing the need to support
the country's growing manufacturing and export
capabilities.
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
