Nghe An businesses face new US tax orders

Potential market

Currently, the United States is the 4th largest export market of Nghe An (after China, Hong Kong, and South Korea). In 2024, the export turnover between Nghe An and the United States will reach 256.8 million USD, accounting for 8.6% of the province's total export turnover of goods. Of which, cement is 77.4 million USD; textiles and garments are 59 million USD; shoes and sandals of all kinds are 35.4 million USD; steel and iron of all kinds are 20.37 million USD;... The current demand for connection with the United States focuses on the province's strengths such as: agricultural and aquatic products, stones of all kinds, plastic beads, construction materials, electronic components and equipment, etc.

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According to US data in 2024, Vietnam is the 8th largest trading partner of the United States and the United States is Vietnam's largest export market. The trade surplus between the two countries reached about 123 billion USD, ranking 3rd after Mexico and China. The foreign trade structure of the two countries is complementary, helping US consumers access goods at competitive prices and good quality. In January 2025, Vietnam's export turnover to the United States increased by 36% over the same period last year.
The imposition of reciprocal tariffs is intended to push countries to review their trade policies and expand market access for US products.

Mr. Nguyen Van Hiep - Head of Trade Management Department, Nghe An Department of Industry and Trade, said: The US imposition of a 46% countervailing tax on goods, including those from Nghe An province, has posed a big challenge for export enterprises.

The first affected are businesses that export goods directly to the US such as: cement, textiles, footwear, steel, tiles, fruit juice, seafood or businesses that export raw materials through parent companies to export goods to the US such as: electronic components, solar panels, etc. Businesses face the risk of reduced profits, reduced export orders, and even some small and medium-sized businesses may close and may reduce production scale, cut working hours of workers, and unemployment will also increase.

The decline in exports to the US also reduces demand for various supporting industries in the province. Sectors such as transportation, logistics, packaging and raw material suppliers that rely on export-oriented manufacturing industries are likely to experience a decline in business activities and revenues.

If import tariffs are too high for Vietnam, US importers will likely look for alternative supply options to significantly mitigate the increased costs. Countries such as India, Mexico and many countries in Southeast Asia that are not subject to similar tariffs will become more attractive as potential suppliers. These countries can provide similar product quality at significantly lower import costs, encouraging US businesses to diversify their supply chains away from Vietnam. This change could have long-term impacts on Nghe An's export volume to the US market.

The high tariffs also have an adverse impact on foreign direct investment (FDI) in Nghe An, especially in sectors that are heavily dependent on the US market (electronic components, textiles, footwear, etc., which are the province’s major export sectors). If the US market becomes significantly less viable or less profitable due to high tariffs, potential investors may hesitate or delay in establishing or expanding export-oriented manufacturing facilities in Nghe An, hindering the province’s long-term economic development and industrialization goals.

What do businesses say?

Mr. Nguyen Quoc Hung - Assistant General Director of Vilaconic Joint Stock Company said: Vilaconic exports to a wide range of markets. In 2024, the company exported to 90 countries and territories, so the US tax did not greatly affect Vilaconic's export business. Currently, Vilaconic's exports to the US are mainly high-quality rice products. The average price of Vietnamese rice is higher than that of Thailand and India. The US tax on Vietnam makes it more difficult for businesses to compete with Thailand and India (which are taxed lower) in the US market. Vilaconic is working with the exclusive distributor of Vilaconic products in the US to come up with timely solutions so as not to disrupt the supply chain.

The news that the US will impose a reciprocal tax of up to 46% is like a "tsunami" for the Vietnamese textile and garment industry. However, many businesses still expect the policy to be adjusted according to trade practices and bilateral cooperation. Garment is an essential consumer industry, so it is hoped that there will be flexibility in tax adjustment policies.

As one of the enterprises with a large export volume to the US, a representative of Minh Anh Garment Company said: Minh Anh Garment Company exports up to 95% of its goods to the US. Currently, the export tax rate is 10%, the contract is signed until the third quarter of 2025, so there is no immediate impact, but if the 46% tax rate is maintained, our enterprise as well as many domestic textile and garment enterprises will fall into an extremely difficult situation, because there are companies exporting up to 80%, even 90% of their output to this market. Therefore, we expect that the Trump administration will be able to adjust the tax rate more appropriately after the negotiation rounds.

It is known that the average export tax rate of Vietnamese garments to the United States will increase from 18% to 46%, the highest among major textile and garment exporting countries to this market, only after China 54% and higher than other competing countries such as Bangladesh 37%, Indonesia 32%, India 27%, Türkiye 10%. The imposition of the above tax rate has an unpredictable impact on the Vietnamese garment industry in general and Nghe An province in particular. Orders signed until the end of the second quarter of 2025 may be postponed, canceled or delayed in payment, causing cash flow risks for businesses. Orders being negotiated in the third quarter of 2025 may not be successful. The demand for textiles and garments in the United States will decrease, people will tighten their spending because prices are too high. The trend of shifting orders from Vietnam to other competing countries with lower tax rates will cause a shortage of local orders or businesses will have to deeply discount to maintain customers. Risk of heavy losses due to price reduction to compensate for tax increase to keep jobs.

In response, many businesses said they are looking for ways to diversify their markets and find new customers to reduce their dependence on the US.

On the other hand, the garment industry recommends that the Government consider, direct research and implement a number of solutions to support garment enterprises to promote domestic textile consumption: Adjusting VAT to below 8% and reducing personal income tax to increase domestic purchasing power, supporting the consumption of part of the garment industry's output. Stabilizing production costs, suspending electricity price increases and increasing regional minimum wages in the last months of 2025 to reduce the burden of input costs for enterprises.

Support credit for businesses, do not lower credit ratings, do not increase interest rates or cut credit limits for garment businesses with negative production and business results due to negative impacts from market fluctuations, to help businesses overcome difficult times, ensure jobs and income for workers.

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According to statistics from the Vietnam Textile and Apparel Association, the US has been a key export market for the textile and garment industry for many years. In the first two months of 2025 alone, Vietnam's textile and garment export turnover reached more than 7 billion USD, an increase of 14% over the same period in 2024, of which the US market accounted for 40%. The biggest obstacle today is that the Vietnamese textile and garment industry is still too dependent on raw materials from China. Therefore, if the origin of these materials cannot be controlled, the risk of being taxed is very high. According to experts' recommendations, textile and garment enterprises need to invest in technology to increase traceability and transparency of the supply chain. On the Government's side, it is necessary to implement preferential policies for the development of supporting industries, especially the domestic production of raw materials and accessories, so that enterprises can be more proactive in terms of inputs and enhance their defense against fluctuations in international trade.

Along with the textile industry, businesses in fields such as electronic components, wood, footwear, handicrafts, agricultural and food processing... will also be significantly affected if the new tax rate from the US is applied. According to information from the Department of Industry and Trade, currently, businesses exporting to the US market are requesting the Government and the Ministry of Industry and Trade to soon negotiate with the US to postpone the decision to impose taxes to spend time discussing and finding a reasonable solution for both sides. Or reduce the tax rate to 46%, similar to the average tax rate that Vietnam applies to imported goods from the US of 9.4%.