Vietnam’s Response to U.S. Tariff Shifts: Balancing Challenges with Reform

On April 2, 2025, the Trump administration announced a 10% baseline tariff on all imports to the U.S., effective April 5. In addition, a 46% reciprocal tariff specifically targeting Vietnamese goods was set to take effect on April 9. However, following initial diplomatic engagements, the U.S. agreed to a 90-day pause on the higher tariff, maintaining the 10% rate during this period. This gives Vietnam a valuable window for strategic response and reform, with officials actively pushing for more favorable terms through ongoing trade negotiations.

How is Vietnam's Economy Affected?

The April 2025 U.S. tariff policies have triggered a major realignment in the global trade landscape and supply chains, with many economies reassessing their export strategies, trade dependencies, and investment priorities. Vietnam, as Asia's rising manufacturing hub and one of the United States' key trading partners — particularly with exports as one of its key growth drivers — finds itself at the intersection of these shifts. On one hand, the country faces short-term challenges as it's potentially exposed to one of the highest reciprocal tariff rates on exported goods to the U.S., but on the other, its government explores long-term growth opportunities through foreign diplomacy and domestic reforms.

In the immediate aftermath of the U.S. tariff announcements, the VN-Index plummeted by 6.7% on April 3, marking its steepest single-day decline since 2001, with approximately 70% of stocks on the Ho Chi Minh Stock Exchange hitting their daily limit down (Bloomberg). This sharp downturn was driven by investor concerns over the potential impacts of the high tariffs on Vietnamese exports to the U.S., particularly textiles and footwear, and on the broader Vietnamese business landscape.

While dramatic, such selloffs are not uncommon in Vietnam’s retail-heavy stock market. With a high proportion of individual investors — many of whom respond swiftly to macro headlines — short-term volatility can often overshoot fundamentals. As long-term investors in Vietnam, we’ve seen this before. These steep corrections, often driven by sentiment rather than substance, are when staying calm, focused, and selective matters most.

Vietnam’s Response: Reform, Investment, and Diversification

In response to the initial tariff announcement, the Vietnamese government has acted swiftly to mitigate downside risks and support growth. Key measures include infrastructure investment, policy support from the State Bank of Vietnam, and a renewed push to diversify export markets and reduce dependency on the U.S.

Given that much of the current market movement is driven by speculation, with final policy outcomes yet to be determined, we as long term investors have been pleased to see several meaningful developments and government initiatives already underway — many of which position Vietnam favorably in the region.

Firstly, according to a recent notice from the U.S. Customs and Border Protection, electronics — including smartphones, laptops, and semiconductors — have been exempted from the new tariff measures. This is a significant win for Vietnam’s electronics manufacturing sector, home to major players like Samsung, LG, and Intel. In 2024, Vietnam exported approximately USD 50 billion worth of electronics to the U.S., estimated by VnEconomy.

Secondly, since early 2025, Vietnam's Ministry of Industry and Trade has been encouraging businesses to diversify export markets by fully utilizing its existing 17 free-trade agreements (FTAs) with over 60 global partners to avoid dependency on any single economy. The Ministry also emphasized the need for higher product quality and better compliance with technical, labor, and environmental standards to boost both trade volume and value.

Last but not least, Vietnam continues to invest in its long-term competitiveness through significant domestic reforms and growth initiatives, such as:

• Infrastructure investment: Major projects have been fast-tracked, including the confirmed North–South national railway and the acceleration of Vietnam-China rail links. These projects create jobs, boost productivity, and strengthen internal demand — helping absorb any short-term labor dislocations from export-driven industries.
• Capital market reform: Vietnam is pushing for a long-awaited market upgrade by FTSE Russell in September 2025, a move that could increase institutional inflows and improve market liquidity. In anticipation of the upgrade, one of Kenno's portfolio companies, Masan (MSN) has already signaled its intention to lift its foreign ownership cap to 100%, which would be a strong signal of the market’s openness and maturity.
• Administrative restructuring: The planned reduction from 63 to 34 provincial-level units marks a major shift toward streamlined governance. This bold reform is aimed at improving efficiency, resource allocation, and long-term development planning.

Implications for Kenno's Portfolio

At Kenno, we’ve invested in Vietnam for over a decade — and we’ve seen this kind of short-term volatility before. Vietnam’s equity market is heavily retail-driven, and retail investors often respond to macro headlines with emotional, broad-based selling. That’s what we saw on April 3, but seasoned investors know: market sentiment often runs ahead of fundamentals. In fact, we see this as an opportunity to identify strong companies that might be oversold and undervalued during this time despite solid long-term fundamentals.

Even when we fully acknowledge the potential short- and long-term impacts of the tariffs and track developments closely, our long-term view of Vietnam's investment case hasn't changed. None of our investee companies have direct export exposure to the U.S. or fall under the scope of the proposed tariffs. Instead, our portfolio focuses on high-quality, domestic-facing businesses that stand to benefit from Vietnam’s growing middle class and strong internal demand. In moments like these, we look past the noise and focus on long-term value.

A Confident, Long-Term View

Vietnam’s growth has long been anchored in export-led industrialisation, and we believe that remains a core pillar of the country’s economic model. At the same time, the country’s resilience lies in its ability to adapt. Policymakers are investing heavily in education, infrastructure, and innovation to move up the value chain and avoid the middle-income trap — building a more diversified and future-ready economy. Even if tariffs were to stay elevated, we are confident that Vietnam’s strong fundamentals, young, educated, and increasingly tech-savvy population, and proven track record of reform will enable it to adjust and thrive in the years ahead.

We hope you have found some useful information and enjoyed reading the article. We will keep monitoring the situation closely and bring you any major developments. Let's get in touch to discuss how Vietnam’s investment landscape might present attractive long-term opportunities. You can also subscribe to our monthly newsletter for more insights.

Disclaimer:

This document is prepared by Kenno Asset Management Pte. Ltd. ("Kenno"), the investment manager for the Asia Top Picks Fund which is open only to professional investors. This marketing communication does not constitute investment advice. Please refer to Kenno’s official fund documents before making any final investment decision. The information provided in this document is accurate as of the time of writing. Kenno does not guarantee the ongoing accuracy or completeness of this information and is not responsible for updates or changes after publication.