Vietnam appears to be emerging as a regional winner in the latest round of revisions to US President Donald Trump’s “liberation day” tariffs.
As Mr Trump drip-feeds new tariff rates in posts on social media, clear and significant differences are emerging between markets in Southeast Asia. The new tariff rates could intensify competition between the region’s major economies, as each tries to maintain a competitive advantage over its neighbours.
For the moment, it appears that Vietnam might have an edge. After intense lobbying by the Vietnamese government, the US has now slashed tariffs to 20%, down from 46%.
Vietnam’s neighbours have not been as successful in rolling back Mr Trump’s tariffs.
For Thailand, the tariffs have been set at 36%. For Malaysia it’s 25%. For Indonesia, it’s 32%. Even close US allies like Japan and Korea will face 25% tariffs. Laos and Myanmar will each face 40% tariffs, while Cambodia’s tariffs have been revised down from 49% to 36%.
The Philippines also has tariff rates of 20% (interestingly, that’s higher than the initial rate set in April). But its economy has a greater emphasis on services, and it arguably doesn’t compete as directly with Vietnam as other major Southeast Asian economies.
Foreign direct investment has been a key growth driver in Vietnam in recent years. It remained strong in the first quarter 2025, driven by the manufacturing and processing industries. Tariffs certainly aren’t the only thing that investors look at, but higher tariffs in Thailand and Indonesia might prompt some businesses to look at Vietnam more closely, especially if they plan on exporting to the US.
The original tariffs, announced in April, could have caused a contraction of 2% of GDP or more, depending on which analyst you believe. The impact will clearly be much smaller now that the US has relented.
The markets seem optimistic. Nike and Lululemon — which are both exposed to US-Vietnam trade — posted gains after Mr Trump announced the deal. The effect on Vietnamese equities was minimal. The local stock exchange is not hugely exposed to international trade. Furthermore, it is very retail driven, and any movements probably reflect sentiment. It’s likely that investors have already priced in the effects of tariffs.
Even so, a number of Vietnamese businesses who are more dependent on the US market will probably be breathing a sigh of relief.
Still, it wouldn’t be entirely accurate to call the latest tariffs a triumph. The tariff rates are roughly double what they were at the start of the year and they are still higher than those imposed on some close US allies such as Australia (10%). Also, the Trump administration is looking at a range of tariffs that apply to products rather than countries. It’s not entirely clear how they will affect Vietnam yet.
Furthermore, the rollout of these tariffs has been erratic, and it seems likely that there will be further movement. Between now and August 1, when they are supposed to take effect, every government in the region will be engaged in furious lobbying aimed at driving the tariffs lower.
Indonesia is offering a raft of concessions in an effort to secure a lower tariff rate. Malaysia is continuing to negotiate, although it has expressed less willingness to compromise. Thailand has offered to reduce the surplus, slash tariffs on several categories of agricultural goods, and increase imports of natural gas and aircraft.
Singapore’s situation is slightly different. It currently faces a tariff of 10%, and only runs a small surplus with the US. Mr Trump’s new ambassador recently faced a grilling in the US Senate over the trade relationship.
It’s entirely possible that the situation will look very different in three weeks, and based on past experience it would not be surprising if the Trump administration kicked the can down the road again, offering some kind of temporary reprieve while more negotiations take place.
Also, there is a caveat to Vietnam’s new rate: there will be a tariff of 40% on goods that are transshipped from China. The US has long had concerns that Chinese manufacturers are escaping tariffs by shipping through Vietnam, where the product is minimally altered (or not altered at all) before being shipped to the US.
Estimates of the scale of transshipment vary significantly, so it’s difficult to say with any real certainty how much impact this might have. It’s also not yet clear what the US will deem to be a transshipped product and what will count as local.
However, the Vietnamese government is serious about addressing the problem.
Given its goal is to move up the value chain, there’s little incentive for Vietnam to encourage transshipment, which does little to benefit the Vietnam’s economy or deliver the benefits of manufacturing to its people. Listed Vietnamese companies have almost no exposure to the transshipment trade.
Arguably, once there is a clearer picture of what counts as local and what counts as transhipment, some businesses with operations that hover near the legal boundary might even be inclined to bring more of the manufacturing value chain to Vietnam.
Despite the lingering possibility of future adjustments, Vietnam’s success in negotiating lower tariffs is a significant positive step, potentially enhancing its appeal as a manufacturing hub and reinforcing its strategic position as a driver of growth in Southeast Asia.