Trump tariff angst distanced Vietnam from China – but that did not last

HANOI – In Vietnam’s northern manufacturing belt, tariff angst is not stopping the flow of Chinese money. If anything, it is growing.

From a Chinese circuit board maker’s eager calls for workers, to construction crews rushing to finish a new plant for a Shenzhen producer of gaming parts, the electronics hub of Bac Ninh province just east of Hanoi is buzzing with Chinese activity. So much so that provincial officials expect to rubber-stamp US$1 billion (S$1.3 billion) in new investment licences – many of them Chinese.

Just months ago, the rhetoric from hawks in US President Donald Trump’s administration had been clear: global producers like Vietnam must rely less on China’s supply chain or risk even higher tariffs. Mr Trump’s trade adviser Peter Navarro took to Fox News in April and described Vietnam as “essentially a colony of communist China”.

But the reality has painted a different picture for Vietnam. Mr Trump announced in early July that he had reached a deal with Hanoi,

setting tariffs at 20 per cent for goods made in Vietnam

and 40 per cent for products suspected of being rerouted – or “transshipped” in trade speak – from countries like China. Neighbours in South-east Asia are getting tariffs of about 20 per cent, while China faces a duty of about 55 per cent, leaving Vietnam relatively secure.

“Vietnam is still in a relatively favourable position,” said Bloomberg Intelligence analyst Steven Tseng. “While its 20 per cent tariff isn’t the lowest, it doesn’t necessarily hurt competitiveness given Vietnam’s cost advantage, established industrial base and geographical proximity to China. It still makes sense for Chinese manufacturers to shift to Vietnam.”

Ms My Trinh, a manager at KCN Vietnam, which builds ready-to-use factories and warehouses for global suppliers, said the first phase of her company’s latest industrial developments sold out fast. Most of the dozen factory shells will bear the logos of Chinese firms, including Shenzhen MYGT, which makes game controllers for Microsoft and Nintendo, and Dongguan Rayking Electronics, a maker of electroacoustic circuit boards.

A major sticking point remains what the White House counts as a transshipped product – something the Trump administration is expected to detail soon. But despite the uncertainty, Vietnam’s growing role in the global supply chain has meant that foreign investments are increasing, said Mr Nguyen Duc Long, a Bac Ninh provincial official. Mr Long expects US$1 billion in investments in the province, on top of US$4 billion in foreign money already pledged in the first half of 2025.

Vietnamese officials have cause to be cautiously optimistic. China remains the country’s largest trading partner by a wide margin. Investments pledged by those from China and Hong Kong in the first half of 2025 jumped 23 per cent on the year to US$3.56 billion, according to Vietnamese government data. In the second quarter, after Mr Trump announced his tariffs, they increased 24 per cent from a year ago. 

But officials in Hanoi also acknowledged that the tariffs could hit its US exports hard and the tech industry is especially vulnerable. Shipments to America may decline by as much as a third and tech exports could drop by about US$15 billion, according to an internal government assessment dated July 11, Bloomberg News reported. Vietnamese officials have said negotiations with the US are ongoing. Manufacturers may be hit by another curveball: Beijing, not happy that suppliers are expanding beyond its borders, is making it harder for experts and high-tech manufacturing equipment to go abroad.

“Vietnam remains a very attractive investment destination,” said Mr Daniel Kritenbrink, who was US ambassador to Vietnam from 2017 to 2021 and is now a partner with The Asia Group consultancy. “But I don’t know that I’ve seen any massive new projects either. We have to see where these trade negotiations land.”

China factor

Vietnam imported nearly US$85 billion worth of goods from China in the first half of 2025 alone, a 26 per cent jump year over year and nearly 4 per cent of total imports.

“The inputs Vietnam needs for its top exports – phones and textiles – are dependent on China,” said Ms Trinh Nguyen, a senior economist at Natixis. 

The irony is that the country’s trade gap with the US – the third-largest behind China and Mexico in 2024 – accelerated because of Mr Trump’s first-term trade war with China, which drove more manufacturers to Vietnam. Now, as the nation becomes more entrenched as part of the global supply chain, it finds itself relying more on Chinese parts than ever before. Much of what’s “Made in Vietnam” is made possible by China.

Mr Trump had tried to decouple countries like Vietnam from China, as evidenced by the steep 40 per cent tariff on transshipped goods, but those efforts “will remain ineffective, as China continues to be a major supplier of a wide range of components”, Bloomberg Intelligence’s Mr Tseng said.  

At a recent electronics expo in Bac Ninh, Chinese executives fanned out across exhibition halls. The consensus: Vietnam’s attraction will outlast the Trump administration. 

Factory renter KCN Vietnam knows this well. It has 11 industrial sites in the country and plans to more than double that number by 2028.

Customers “are really pushing us” to get factories ready as soon as possible, said KCN chief operations officer Hardy Diec. “The majority are signing five-plus year contracts. They are here to invest for the longer term.” BLOOMBERG