Vietnam and the US were at war for 20 years beginning during the administration of President Dwight D. Eisenhower when he sent paramilitary units to operate in Vietnam on 1 June 1954 and ending by President Richard Nixon in 1975. The war took almost 60,000 American soldiers lives and at least one million Vietnamese. They had a bitter relationship after this until 11 July 1995, when the US and Vietnam announced their normalising diplomatic relations. The US and Vietnam commemorated 27 years of diplomatic relations with the US reaffirming its support for Vietnam, including the peaceful resolution of disputes, rule of law, freedom of navigation and unimpeded commerce.
Since then, Vietnam has significantly increased its exports to the US, primarily due to the signing of a Bilateral Trade Agreement (BTA) which granted Vietnam access to the American market with lower tariffs. Vietnam has been able to attract foreign investment, particularly during the US-China trade war, allowing Vietnam to position themselves as a cost-effective manufacturing hub for goods destined for the American market. This, combined with a focus on export-oriented economic policies, has made the US Vietnam's largest export destination today.
During the past two decades, to catch up with ASEAN countries, Vietnam, as a bloc member, has invested heavily in improving its infrastructure, making it more attractive for foreign companies to set up manufacturing operations.
The Wall Street Journal (WSJ) reported that Vietnam found the sweet spot in the global economy during President Donald Trump’s first trade war with Beijing. The country became a magnet for Chinese manufacturers looking for a production base from which to ship their goods to the US tariff-free.
According to the WSJ, Vietnam significantly increased its exports to the US primarily due to the signing of a Bilateral Trade Agreement (BTA), which granted Vietnam access to the American market with lower tariffs, coupled with the country's ability to attract foreign investment, particularly during the US-China trade war, allowing them to position themselves as a cost-effective manufacturing hub for goods destined for the American market, this combined with a focus on export-oriented economic policies.
The Vietnamese government actively promotes export-driven economic growth, creating a supportive environment for exporters. Hence, the Vietnamese economy has expanded around 8% a year, buoyed by a gusher of foreign investment and booming exports to the US. The country now supplies a third of the sports shoes, half of the wooden beds and dining tables and a quarter of the solar cells imported by the US.
Moreover, Reuters recently reported (25 Feb 2025), Vietnam's goods exports to the United States accounted for 30% of its gross domestic product last year, the highest share among US top trade partners. A Reuters review of public data shows the Southeast Asian nation experienced a surge in foreign investment after the first Trump administration started a trade war with Beijing in 2018 as foreign multinationals moved factories from China to its southern neighbour to avoid US tariffs. Vietnam has become an attractive partner as US corporations bet on the country as a production hub for goods often exported to the United States. The massive inflow of manufacturing investment has turned the Communist-run nation into a major node in global supply chains and significantly boosted its economic ties with the United States. Vietnam now directs 29% of its exports to its former foe.
According to Vietnamese customs data, last year, with goods exports worth USD142.4 billion, Vietnam became the sixth largest exporter to the United States after Mexico, China, Canada, Germany and Japan, United Nations commodity trade statistics show. Shipments to the US last year represented about 30% of Vietnam's GDP of USD468 billion, based on the IMF's estimates, the largest share for all US trading partners.
Some analysts have pointed out that Vietnam's economy expanded 7.09% last year to USD476.3 billion, faster than the 5.05% expansion in 2023, driven by strong exports and robust foreign investment inflows. According to government data released in January 2024, Gross Domestic Product (GDP) grew 7.55% in the fourth quarter of 2023, the fastest quarterly growth in more than two years. The General Statistics Office said in a report exports and FDI fuelled GDP growth of 7.09% in 2024, vs 5.05% in 2023. Senior official said this data are a 'good foundation' for economic growth in 2025.
However, according to the US Center for Strategic and International Studies (CSIS), it is questionable whether Vietnam can sustain such unforeseen growth in its export performance in the long term. In fact, experts on Vietnam’s trade strategy voice their concerns that the current success of Vietnam in diverting China’s trade may be short-term, for reasons that are structural and difficult to be adjusted. To explain these concerns, it is important to examine how Vietnam was so successful in diverting China’s trade in the first place, according to these experts. Since Vietnam became a magnet for Chinese manufacturers looking for a production base from which to ship their goods to the US tariff-free, Trump and his team are signalling that they intend to slam this backdoor shut.
Also, the WSJ reported recently Jamieson Greer, Trump’s nominee for US trade representative, said the US should tighten trade rules to prevent what he described as “third-country workarounds”, in which goods that contain a lot of Chinese parts or were made in a third country by a subsidiary of a Chinese company enter the US without facing the steep tariffs they would have had they come directly from China.
Though he didn’t name them specifically, Vietnam and Mexico are among those countries where Chinese companies have moved their operations. Vietnam is a trade target of the new administration in other ways, too. The US president has floated the idea of levying tariffs on all imports into the US and talks about forcing countries to close their trade gaps with the US. Vietnam exports to the US nine times as much as what it imports from the country, putting it fourth behind China, Mexico and the European Union for the US’s biggest bilateral trade deficits.
Hence, while Vietnam is a winner today, tomorrow is in doubt according to Adam Sitkoff, head of the American Chamber of Commerce in Hanoi, saying, “Given Vietnam’s large trade surplus with the US, the country may be particularly exposed to a more protectionist economic agenda.”
