Remove 'blocking rivers and banning markets' for the second time
On the morning of April 3, 2025 (Vietnam time), the Trump administration suddenly announced a 46% reciprocal tax on Vietnamese goods exported to the US. With export turnover to the US reaching 119 billion USD (nearly 30% of total exports), this tax could seriously affect Vietnam's economy.
Dr. Nguyen Hong Thach(ISEAS Institute Singapore)
• April 10, 2025
On the morning of April 3, 2025 (Vietnam time), the Trump administration suddenly announced a 46% reciprocal tax on Vietnamese goods exported to the US, causing shock because it far exceeded the forecast of 10%. Although the US later postponed the tax for 90 days (except for China), the threat of high taxes still exists. With export turnover to the US reaching 119 billion USD (nearly 30% of total exports)(1), this tax rate could seriously affect Vietnam's economy.
If prolonged, the high tax rate will severely impact key export industries such as electronics, textiles, footwear, and wooden furniture - many businesses that depend on the US market for more than 50% of their revenue. This could cause a decrease in orders, increased inventory, and disruption in cash flow. Other industries such as seafood, agricultural products, and telephones will also find it difficult to avoid the chain reaction.
At the macro level, with a tax rate of 46%, according to calculations by Dragon Capital Investment Fund, a decline in exports could cause GDP to fall by 1.4-2 percentage points.(2), leading to the risk of losing millions of jobs in labor-intensive industries. Trade instability also affects investment and Vietnam's position in the global supply chain. If tensions escalate, corporations may move production to other countries such as Malaysia or Mexico. Financial markets - stocks and exchange rates - may also be under pressure from investor concerns and the trade deficit with the US.
It is worth noting that the US complains a lot not about us selling a lot to the US but about the difficulty of the US selling to Vietnam. In the Vietnam-US trade relationship, non-tariff barriers are considered one of the direct causes leading to the US decision to impose a 46% tax. The White House Council of Economic Advisers estimates that US goods exported to Vietnam are subject to an "equivalent tax" of up to 90% if non-tariff barriers are included.(3)From there, Washington introduced a 46% reciprocal tax to "offset" the disadvantage.
In fact, the average tariff that US goods face in Vietnam is only about 15%, and the tax rate difference between the two countries is only about 7%.(4)However, non-tariff barriers such as technical regulations and complex administrative procedures are considered by partners to be unfair to trade, serving as grounds for retaliation.
Non-tariffs are considered a key issue in the implementation of reciprocal taxes by the United States and it is also a major content in the trade negotiations between the United States and its current partners. That is clearly shown in the message that President Trump once again gave on April 21, 2025 when he posted on social media 8 issues that he called "non-tariff cheatings".(5).
One of the main reasons for maintaining non-tariff barriers is to protect domestic production, especially in young industries. However, some industries remain underdeveloped and even less competitive in the international market.
Measures such as import licensing, strict inspections or complex technical regulations may help domestic enterprises “breathe easier” in the short term. But without institutional reform and productivity improvement, protection will make enterprises rely on it instead of innovate. Protectionist policies should only be temporary, with goals and a roadmap for withdrawal. Now is the time to review what to keep and what to open, not to keep everything and then close everything to the outside world.
If not designed transparently and evaluated periodically for effectiveness, non-tariff barriers can easily become an obstacle, weakening the very industry they are meant to protect. This is also an institutional bottleneck that General Secretary To Lam directly mentioned and requested to be eliminated for sustainable economic development.
History shows that whenever facing a crisis, Vietnam is forced to make strong reforms to survive and develop. 1986 was such a turning point. At that time, the economy fell into crisis: inflation was over 700%, there was a food shortage, and the country was under embargo. The 6th Congress initiated the renovation process, abolished the subsidy mechanism and removed domestic barriers, paving the way for the market to operate smoothly. After only a few years, Vietnam went from being hungry to becoming a leading rice exporter, inflation dropped sharply, people's lives improved, and the country began to integrate internationally.
In relation to the present, the 46% tariff that the US plans to impose on Vietnamese goods is a strong warning. If in 1986 we succeeded in removing domestic barriers, today, Vietnam needs to remove barriers that “block rivers and prohibit markets” on the international level - that is, review and remove unnecessary non-tariff barriers, make procedures transparent, and expand market access for partner goods. That is not only a solution to relieve pressure from the US, but also an inevitable step for Vietnam to continue to integrate deeply and sustainably.
90 days is a very short time for us to have a policy to resolve the crisis caused by the sudden change in the international economic environment. Focusing on bargaining over tax rates will not solve today's problem. Vietnam's purchasing power for American goods is also limited. Reforming the non-tariff barrier system is not for our partners but for us. We need to have the determination to reform to continue developing./.
(1) https://tuoitre.vn/my-ap-thue-46-doanh-nghiep-chuyen-huong-tinh-ke-tim-den-ga-khong-lo-moi-an-do-trung-dong-20250409150633569.htm
(2) https://vneconomy.vn/cac-nha-dau-tu-nuoc-ngoai-noi-gi-ve-thue-suat-46-my-ap-len-hang-hoa-viet-nam.htm#
(3), (4)https://vneconomy.vn/cac-nha-dau-tu-nuoc-ngoai-noi-gi-ve-thue-suat-46-my-ap-len-hang-hoa-viet-nam.htm#
(5) Trump names '8 non-tariff sins' in Easter post, threatens trade payback - The Economic Times
