Trump tariffs threaten to crush Vietnam’s factory boom towns

HANOI - Vietnamese furniture exporter Paul Yang is in a 90-day race.

The vice-president of a factory that makes indoor wood furnishings for the likes of Williams Sonoma and Crate & Barrel Holdings is being urged by American customers to ship “anything that’s ready” to them in the window of normalcy President Donald Trump granted before the risk of punishingly high tariffs hits Vietnamese products exported to the US.

It may be the last opportunity to secure revenue from a customer base that buys goods equivalent to over a quarter of Vietnam’s US$400 billion (S$525 billion) economy if the nation does not secure a deal before Mr Trump’s grace period ends.

Nowhere is the perilous situation felt more deeply than in Vietnam’s southern industrial province Binh Duong.

With almost half of the US$34.5 billion of goods exported out of Binh Duong in 2024 shipped to the US, the region is especially vulnerable to tariff shocks.

“I’ve had so many video calls with my customers,” said Mr Yang, vice-president of Yang Cheng Wooden Industries International (Vietnam).

Last week, he was fretting about 200 containers of furniture worth US$4 million stuck in warehouses and at a port after US customers told him to freeze shipments following Mr Trump’s threat to slap a 46 per cent tariff on Vietnamese goods.

Binh Duong saw export orders worth more than US$708 million get cancelled over four days before the 46 per cent tariff was to land, government data showed.

More than 270 US orders for products ranging from shoes to electronics were scrapped, and another 175 were at risk, it said.

That data could change as US clients recalibrate amid the shifting tariff landscape.

Vietnam’s garment factories, many of which are located in Binh Duong, were bracing themselves for as much as a 50 per cent drop in orders before the high duty was, at least temporarily, lifted, said Ms Duong Thi Ngoc Dung, vice-chairwoman of Vietnam’s Textile and Apparel Association.

Now, companies are grappling with uncertainty about how to plan future production, she said.

Factory town

Located just north of the nation’s commercial centre Ho Chi Minh City, Binh Duong was known for its rubber plantations and swampland before global suppliers began arriving about three decades ago.

Now, lumbering container trucks clog highways as wide as eight lanes in a region filled with industrial zones and businesses serving Mandarin-, Korean- and Japanese-speaking managers.

It is a factory town on steroids, producing more than 10 per cent of the nation’s total exports by value in 2024, according to data from the province.

Global manufacturers have not only created a myriad of production-line jobs but also an ecosystem of locally owned sub-suppliers, said Mr Louis Nguyen, founder of Saigon Asset Management that invests in Binh Duong.

“Many Vietnamese have steady jobs instead of working on farms, living in small shacks in fields.”

Ms Ngoc Nguyen, a 32-year-old marketing manager at an international product quality control company, was destined to pick crops in Binh Duong if not for the factories, she said.

Her father, a former farmer, supplies raw materials to plants, a business that lifted her family out of poverty.

“It’s like a dream for me,” said Ms Nguyen, whose changing family fortunes meant that she and her sister could attend college.

Mr Trump’s tariffs, though, may challenge the nation’s ambitious goal of boosting economic growth to at least 8 per cent in 2025.

Each 1 per cent drop in US export value could cut gross domestic product expansion by about 0.08 percentage point, said National Statistics Office accounts department head Nguyen Thi Mai Hanh.

Split costs

“People in Binh Duong’s wood processing and manufacturing industry panicked,” said Mr Nguyen Ngoc Tung, deputy director of Tanuyen Hardware, which provides accessories to plants making wood products for companies such as Costco Wholesale and Walmart.

He worries he could be forced to lay off some of his 20 employees.

Some US buyers are requesting Vietnamese suppliers split the new 10 per cent tariff, Mr Tung said. But that is unsustainable for companies with razor-thin profits, he added. 

Mr Yang, the furniture exporter, said his company cannot afford to absorb even half of the new tariff. “I will have to shut down” if the tariff increases further, he said.

The sudden shift in tone from the US stunned the Vietnamese, who have long considered America as a friend 50 years after the war between the two countries ended.

As recently as in 2023, Washington and Hanoi upgraded diplomatic ties to a “comprehensive strategic partnership” – the highest level assigned by Vietnam to any partner.

Chinese President Xi Jinping, during his visit to Hanoi earlier this week, called on Vietnam to jointly oppose “unilateral bullying” to maintain global trade, to which the South-east Asian country demurred.

China, Vietnam’s largest bilateral trade partner, was the country’s third-largest foreign investor in 2024, funnelling US$4.7 billion into projects ranging from textiles to tech components.

Rather than provoke Mr Trump, Vietnam’s Deputy Prime Minister Ho Duc Phoc last week held urgent talks with US Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in search of a trade deal.

Meanwhile, an air of unpredictability weighs on Binh Duong’s factories, even as they rush to fill orders before Mr Trump’s 90-day tariff negotiation deadline expires. Every day, workers at Mr Yang’s 1,200-employee complex ask him for updates, he said.

Suppliers pester him about what US customers are saying. For now, Mr Yang has stopped buying materials for future production.

“After 90 days, what’s next?” asked Mr Yang, who also worries about the fate of his workers, hundreds of whom have been with him for more than 16 years.

“We don’t know.” BLOOMBERG