As trade tensions between the U.S. and its global partners escalate under newly imposed tariffs, Vietnam finds itself both vulnerable and uniquely positioned to seize emerging opportunities. Dr. Jayant Menon, a seasoned trade economist and Visiting Senior Fellow at Singapore’s ISEAS-Yusof Ishak Institute, unpacked this complex landscape in a recent webcast that explored the impact of these policies on Vietnam and Southeast Asia — particularly within the broader context of the U.S.–China trade war.
Decoding the BAD Tariffs
Contrary to the term “reciprocal tariffs,” the U.S.’s new levies function more as bilateral adjusted deficit (BAD) tariffs. These tariffs are calculated based on a formula that ignores trade in services, enforces minimum thresholds, and lacks true reciprocity. Countries with large trade surpluses — like Vietnam — are most exposed. With a surplus of over $120 billion, Vietnam faces a steep 46% tariff under this model.
A Mixed Bag for Vietnam
While these developments pose clear challenges, they also offer strategic opportunities. Vietnam has already emerged as a major beneficiary of the U.S.-China trade war, attracting Foreign Direct Investment from firms looking to shift manufacturing away from China. Its comprehensive trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) and the EU-Vietnam Free Trade Agreement (“EVFTA”), give it preferential access to key markets.
However, this advantage could be diluted depending on the outcome of ongoing negotiations. If the U.S. and China reach a compromise — or if U.S. tariffs on China are lowered and those on Vietnamese goods remain relatively high — the investment inflows to Vietnam could slow. The outcome of U.S. and China tariffs discussions will be crucial in determining the region’s competitiveness and supply-chain shifts.
Reform Opportunity amid Crisis
Beyond trade, Dr. Menon pointed to a silver lining: The current situation could serve as a catalyst for long-overdue domestic reforms in Vietnam. These include easing foreign ownership restrictions, addressing licensing and subsidies, and reducing the influence of state-owned enterprises. As Vietnam seeks to move up the value chain and attract high-quality investment, resolving these non-tariff barriers is increasingly important.
Global Implications and U.S. Trade Reliability
The erratic nature of U.S. tariff policymaking adds another layer of uncertainty. From shifting exemptions to the sudden introduction of new rates, the lack of predictability discourages long-term investment and complicates trade planning for global firms.
Dr. Menon also highlighted that the core of the U.S. trade deficit is not trade policy, but domestic imbalances — chiefly low savings and high consumption. Tariffs may redistribute deficits across countries, but they cannot eliminate them.
The Road Ahead
As negotiations unfold, the path Vietnam takes will depend not just on external trade policy, but also on how it responds internally. Will it capitalize on this crisis to push through economic reforms and modernize its trade framework? Or will uncertainty and protectionism undercut its growth trajectory?
One thing is clear: Vietnam is no longer a passive player in global trade — it’s a pivotal actor, navigating between geopolitical pressure, economic opportunity, and the shifting dynamics of the U.S.–Vietnam trade tensions.
About Dr. Jayant Menon
Dr. Jayant Menon is a Visiting Senior Fellow at the ISEAS–Yusof Ishak Institute in Singapore and former Lead Economist at the Asian Development Bank. A specialist in trade and investment, he has authored numerous publications and advised governments across Asia, including contributing to Cambodia’s Vision 2030 strategy.
This article is adapted from the GLG complimentary webcast “Vietnam at the Crossroads: Navigating the Impact of U.S. Tariffs,” hosted on May 23, 2025. Watch the full webcast replay to hear Dr. Menon’s insights in his own words. If you would like to speak with experts like Dr. Menon, please contact us below.