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Under Trump Tariffs, ‘Made In Vietnam’ Will Be The New ‘Made In China’
ILLUSTRATION BY CECILIA RUNXI ZHANG FOR FORBES; PHOTOS BY SCOTT OLSON/GETTY IMAGES; JDAWNINK/GETTY IMAGES
Nov 20, 2024,06:30am EST
Updated Nov 20, 2024, 10:14am EST
For decades, the Southeast Asian nation has opened its doors to major firms like Apple, Samsung and Intel. Now it’s poised to do even bigger business.
By Cyrus Farivar, Forbes Staff
President-elect Donald Trump says his plan to impose heavy tariffs on goods imported to the U.S. will shrink the federal deficit, lower food prices and create more jobs at home. On the campaign trail in Savannah, Ga., he vowed to “relocate entire industries” to the U.S. “You will see a mass exodus of manufacturing from China to Pennsylvania, from Korea to North Carolina, from Germany to right here in Georgia,” he said in September.
But such reshoring is unlikely to happen, certainly not at the scale and speed that Trump wants, if ever. Instead, expect to see one country as a major beneficiary of Trump’s policies: Vietnam.
“If previously it was made in China, now it’s going to be made in Vietnam,” Jason Miller, a professor of supply chain management at Michigan State University, told Forbes. “That production is not coming back to America.”
The Tan Vu container port in Hai Phong.
AFP VIA GETTY IMAGES
During the previous Trump administration, major foreign corporations, including Apple, Foxconn and Intel started pivoting to Vietnam as a way to diversify their manufacturing portfolio. Just two months ago, SpaceX announced a $1.5 billion investment in Vietnam, too. Even the Trump Organization is investing in the country, with a recently trumpeted $1.5 billion luxury real estate deal.
And now, the southeast Asian nation is well-positioned to benefit even more from the anticipated anti-China sentiment of the forthcoming administration — especially if it moves quickly to streamline regulation so that businesses can move in quickly.
Vietnam has a number of advantages over other regional rivals like India. First, as a single-party authoritarian state, Vietnam can and does set new business-friendly policy quickly. Additionally, the country is geographically well-positioned: it already has three of the world’s top 50 busiest ports, and is next-door to China, making trade and logistics between the two countries easier. Critically, Vietnam also has a free-trade agreement with the European Union – the only other regional country besides Singapore to have one. (India is currently negotiating such a deal, which would smooth imports and exports between the E.U. and the world’s most populous country.)
Vietnam is also moving quickly to improve the infrastructure needed to support large projects, like the country’s new decree earlier this year that allows companies to buy green energy from solar power producers, rather than go through the traditional state power utility. The move, which makes it easier for companies to meet their climate targets, was applauded by Apple, Samsung, the country’s largest foreign investor, and the United States embassy in Hanoi.
Trump has repeatedly said in recent months that he wants to promote American manufacturing and make foreign made goods more expensive to import. He’s singled out Mexico as well as China, saying earlier this month that he would implement tariffs of between 25% and 100% on products made south of the border. Previously, he said that goods made in China should be hit with a 60% tariff, while anything manufactured abroad should have a blanket 20% tariff — including Vietnam. But the country clearly sees an opportunity for growth.
“Vietnam could be mildly successful or it could be hugely successful depending on how it facilitates this [foreign direct investment] wave,” Anh Ngoc Tran, a professor of governance at Indiana University and a former advisor to the Vietnamese prime minister, told Forbes.
Tran said he is currently preparing a memo for Hanoi about how his home country can capitalize on these strict new trade rules, as Vietnam bets that a huge influx of foreign capital will help transform it into a developed, high-income country by 2045. At the top of Tran’s list is targeting multinational corporations that will bring their own ecosystem of suppliers, and focusing on higher-value goods.
“Vietnam should prioritize companies that will bring other companies to Vietnam," he said. “If you bring Apple, there are a lot of other suppliers that want to be close to Apple – companies that allow Vietnam to move into a more high-tech sector. Instead of doing footwear and textiles, Vietnam should aim for biotechnology and AI and semiconductors.”
That’s a shift from its roots as a manufacturing powerhouse in southeast Asia. The country first developed a reputation in the 1990s for footwear and textile manufacturing for foreign multinational corporations like Nike and Adidas. But by the 2000s, major electronics companies began moving out of China to take advantage of lower labor costs and favorable trade agreements in Vietnam. Samsung opened its first manufacturing plant there in 2008, and other large multinational companies, including LG and Intel, quickly followed suit. This wave of multi-billion dollar deals prompted smaller suppliers for those larger firms to also set up shop in the country.
As a result, Vietnam’s trade deficit with the United States – the difference between what it exports versus what it imports – has tripled since 2004. According to the United States Census Bureau, Vietnam now has the fourth largest trade deficit with the United States, behind China, Mexico, and the European Union.
When the first Trump administration imposed tariffs on specific goods made in China, like solar panels and washing machines, in 2018, they did not entice firms to bring manufacturing home. Instead, production just shifted to Vietnam, as well as other Asian nations, including Thailand, Malaysia, and India. But Vietnam’s GDP has grown fasterthan any of its Asian neighbors except for China, averaging 6.2% growth per year.
By May 2020, Apple began moving manufacturing AirPods out of China and into Vietnam. Months later, Foxconn reportedly began moving some of its iPad and MacBook assembly out of China and to Vietnam at Apple’s request. (Apple has also moved some production to India.)
Statistics from the United States International Trade Commission also show that between 2018 and 2019, electronics imports from Vietnam almost doubled. A 2023 report from the World Bank found that between 2017 and 2022, the amount of Chinese-made items ranging from sewing machines to laser printers imported into the U.S. fell, while the share of Vietnamese-made items rose at corresponding rates.
Vietnam had clearly pounced on the opportunity. It’s “one of the countries that managed to take advantage of the U.S.-China tariffs, in terms of being able to enter the U.S., at least over the first few years of the trade war,” Pablo Fajgelbaum, an economics professor at the University of California, Los Angeles, told Forbes.
That grew the country’s entire export economy as plants shifted to Vietnam, manufacturing goods for more than just U.S. consumers. “Vietnam grew its exports to the rest of the world, too,” Fajgelbaum said. He expects that if there’s a gap in tariffs between Vietnam and China, companies will continue moving their plants there.
Recently, Maersk announced late last month that it had opened its first bonded warehouse in northern Vietnam – a facility where goods can be stored before paying duties or tariffs – in the Haiphong seaport region, and announced that Amazon Vietnam would be its first client. Lego, the Danish iconic toy maker, also said earlier this month that its new $1 billion plant in Binh Duong was nearly complete, and would come onlineearly next year.
Vietnam has also cozied up to Trump himself. In early October, Eric Trump, the president-elect’s son and the executive vice president of the Trump Organization, announced the development of a $1.5 billion project that will include five-star hotels and golf courses in a province outside Hanoi.
“Vietnam has tremendous potential for luxurious hospitality and entertainment, and we are beyond thrilled to work with this amazing family to redefine luxury in the region,” the younger Trump said in a statement at the time, referring to the company’s Vietnamese partners.
Domestic investors see great opportunities too. Michael Kokalari, chief economist of Vina Capital, one of Vietnam’s largest investment firms in the country, with $3.7 billion under management, told Forbes that he believes all of these trends will create demand for logistics and clean energy companies, and help grow the middle class in Vietnam. “Much of our investment activities at VinaCapital are focused on companies that either directly or indirectly benefit from the growing middle class,” he said by email.
Just as companies once moved manufacturing to China, Trump’s tariffs will just accelerate the shift to Vietnam. Either way, the domestic ship has sailed.