Vietnam GDP growth slowed in first quarter ahead of Trump’s tariffs

[HANOI] Vietnam’s economic growth slowed in the first quarter of the year, data showed on Sunday (Apr 6), ahead of challenges the export-reliant economy will face in coming months from hefty US trade tariffs.

The South-east Asian country’s gross domestic product (GDP) rose 6.93 per cent in the first three months from the same period last year, slowing from 7.55 per cent in the quarter ending in December, the National Statistics Office said in a report.

Exports and foreign investment in manufacturing are key drivers of Vietnam’s economy, but that model may come under pressure after US President Donald Trump announced a 46 per cent tariff on Vietnam’s exports to the US.

Prime Minister Pham Minh Chinh said Trump’s tariffs did not change the government’s target of at least 8 per cent growth this year.

To hit the target, growth for the remaining quarters will need to rise by between 8.2 per cent and 8.4 per cent, but if Trump’s tariff on Vietnamese goods causes a 10 per cent drop in the country’s shipments to the US, that could cut GDP growth by 0.84 percentage points, the statistics office estimated.

Hardest hit would be the garment, footwear, electronics and smartphone sectors, it said.

“Export to the US is one of Vietnam’s main drivers, the tariff may lower foreign investments into Vietnam, especially from American, South Korean and Chinese partners, which may lead to a decrease in jobs and income,” said Nguyen Thi Mai Hanh, a senior official at the statistics office.

The US remained Vietnam’s largest importer in the first quarter, and Vietnam’s trade surplus with the US rose 22.1 per cent from a year earlier to US$27.3 billion.

Industrial production increased 7.8 per cent in the first quarter year-on-year, slowing from 11.5 per cent in the December quarter. The agency warned that industrial production in the second quarter may face challenges due to the tariffs and global uncertainty.

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Exports rose an annual 10.6 per cent in the March quarter, accelerating from 7.9 per cent in the final quarter of 2024.

In a note published on Thursday, research firm BMI said the US tariff rate on Vietnam was harsher than expected, and the South-east Asian nation could see GDP growth miss its forecast for this year of 7.4 per cent by up to 3 percentage points.

“This will significantly damage Vietnam’s current (foreign direct investment)/export-based growth model, which heavily relies on exports to the US,” BMI said.

Economic activity in Vietnam usually slows in the first quarter of the year because of disruption from week-long celebrations for the Lunar New Year.

Investment consultants have said that growth may have been impacted this year as companies delayed investment decisions ahead of the tariff announcement.

A survey of US manufacturers in Vietnam in February showed that most expected layoffs and disruption to their local operations in the event of tariffs.

Vietnam’s consumer prices rose 3.13 per cent in March from a year earlier, the statistics office said.