Hardest-hit Vietnam risks losing $32 billion from US tariffs, UN estimates

HANOI - US tariffs imposed in August risk slashing up to one-fifth of Vietnam’s exports to the United States, making it the worst-hit country in South-east Asia, according to estimates by the United Nations Development Programme.

Vietnam was the world’s sixth-largest exporter to America in 2024, with US$136.5 billion (S$175 billion) worth of shipped goods, US trade data show. Those goods are largely produced in factories run by US. and foreign multinational companies or their suppliers.

In a worst-case scenario of very high tariff-driven US inflation,

the 20 per cent duties levied on Vietnamese goods

could cause its US exports to fall “over time by more than US$25 billion (S$32 billion), nearly one-fifth of the yearly total”, Mr Philip Schellekens, UNDP chief economist for the Asia-Pacific region, told Reuters.

Vietnam’s finance and industry ministries did not immediately reply to requests for comment.

The first comprehensive Vietnamese data released since tariffs took effect on Aug 7 show Vietnam’s exports to the US, its biggest market, fell by 2 per cent in August from July, with a 5.5 per cent drop for footwear, of which Vietnam is the world’s second-largest supplier, according to the customs department. That followed a surge in exports before tariffs.

The World Bank revised down Vietnam’s growth forecasts for 2025 after the US tariffs took effect.

Nike, Adidas and Puma, which produce a large part of their global output of shoes through suppliers in Vietnam, declined to comment.

The 19.2 per cent potential fall in Vietnamese exports to America would be nearly twice as high as the average 9.7 per cent possible drop in exports from South-east Asia, the most impacted region in the continent and a major industrial hub, according to a UNDP report released last week, one of the first public estimates of the hit on trade flows since the tariffs took effect.

“No country in South-east Asia is more exposed to US tariff hikes than Vietnam,” said Mr Schellekens, noting only China in East Asia would be hit harder in dollar terms.

Among large South-east Asian nations, Thailand’s US exports could fall 12.7 per cent, Malaysia’s 10.4 per cent and Indonesia’s 6.4 per cent, the UNDP report said.

The estimated fall of US exports would shave roughly 5 per cent from Vietnam’s gross domestic product, although the tariff impact could take years to fully materialise, and was likely to be mitigated by exporters’ absorption of some costs, Vietnam’s diversification to other regions and bigger domestic spending.

The UNDP estimates are based on a scenario in which duties would be entirely passed through to US consumers, damping demand, which so far has not happened as the impact on US inflation has been moderate.

The UNDP did not take into account either the possible effect of 40 per cent tariffs on goods transhipped through Vietnam, which could have a devastating impact if Washington decided to set strict limits on foreign components used in exported items, given Vietnam’s goods highly rely on Chinese input.

The UNDP data did not factor in current tariff exemptions on consumer electronics which account for about 28 per cent of Vietnam’s total exports to America. However, even if Washington upheld those waivers, Vietnam’s US exports could still fall by US$18 billion, Mr Schellekens said. REUTERS