Vietnam sees strong exports, FDI pledges in April despite tariff woes
However, manufacturers are concerned about the production outlook in the months ahead, based on S&P Global’s monthly survey
[HANOI] Vietnam had strong trade and foreign direct investment (FDI) growth in April, despite external challenges posed by the introduction of tariffs by the United States, its largest export market.
Based on data released by the General Statistics Office of Vietnam (GSO) on Tuesday (May 6), exports and imports rose sharply by 19.8 per cent and 22.9 per cent year on year, respectively, to US$37.45 billion and US$36.87 billion.
“This likely reflects a surge in front-loaded orders from the pause to ‘Liberation Day’ tariffs, and temporary exemptions on electronics,” noted Oxford Economics economist Adam Ahmad Samdin, who expects Vietnam’s export growth to continue in the next few months.
On Apr 2, US President Donald Trump announced a reciprocal tariff rate of 46 per cent on Vietnam – one of the highest levies in Asia. He later paused the tariffs on most countries for 90 days, during which the 10 per cent “baseline” rate will be applied.
Amid tariff uncertainties, Vietnam’s major export category of computers and electronics in April surged 58.7 per cent from a year ago to US$8.1 billion. Shipments of footwear as well as textiles and garments – key export products from Vietnam to the US – rose sharply by 20.5 per cent and 17.7 per cent, respectively, to US$2.2 billion and US$3 billion.
In the first four months of 2025, the US remained Vietnam’s largest export market, accounting for nearly 31 per cent of Vietnam’s total outbound shipments. The South-east Asian country also maintained a sizeable trade surplus with the US at US$37.7 billion, up 24.9 per cent year on year.
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Meanwhile, China continued to serve as the biggest import source, making up 39 per cent of Vietnam’s total imports. This expanded Vietnam’s trade deficit with China to US$35.1 billion, up 44.2 per cent from the year-ago period.
In the year to April, Vietnam recorded a US$3.8 billion surplus, narrowing markedly from US$9.1 billion in the same period of 2024 as imports increased stronger than exports at 18.6 per cent and 13 per cent, respectively.
FDI also accelerated with pledges reaching US$13.8 billion, marking close to 40 per cent growth compared with the same period last year. This indicates future foreign capital inflows into Vietnam, while actual disbursement in the four months grew firmly by 7.3 per cent to US$6.7 billion.
Analysts said that Vietnam’s FDI attractiveness is attributed to its strong fundamentals, including an extensive network of 17 free trade agreements that offer large export markets beyond the US.
“While (multinational corporations) may pause on fresh FDI given the cloudy global economy, firms will think twice about relocating solely on basis of tariff differentials,” stated Maybank analysts in a note last month.
Cranking up domestic economy
On the domestic front, retail sales growth climbed 11.1 per cent from a year ago last month – the strongest since May 2023, bringing the increase in the January-April period to 9.9 per cent.
GSO attributed the expansion to increased consumer spending and travel demand during major national holidays, along with a surge in international arrivals, which rose 23.8 per cent year on year to 7.7 million in the first four months of this year.
Headline inflation last month held steady at 3.1 per cent year on year, resulting in the average of 3.2 per cent in the first four months – well below the 5 per cent cap. However, core inflation, which strips out volatile items, quickened to 3.1 per cent in April, marking its highest level since November 2023.
“As (Asean) economies face the inevitable (trade turbulence), policymakers will likely crank their domestic economies to make up for the slack in trade, setting the stage for monetary and fiscal easing,” HSBC economists stated in a recent note.
Analysts expect the State Bank of Vietnam, the country’s central bank, to lower policy interest rates and increase tolerance to the weaker dong. The local currency has depreciated about 1.3 per cent against the US dollar since the start of this year.
In addition, fiscal policy support has been prepared, including the extension of tax payment deadlines, preferential loans for manufacturing, and value-added tax cuts.
Vietnam’s Prime Minister Pham Minh Chinh said on Monday that the country will adopt a flexible approach to managing its currency and interest rates to sustain loan demand and promote economic growth.
He also urged an acceleration in disbursements for public investment and the development of key infrastructure projects, including high-speed railways and nuclear power plants.
Uncertain outlook
S&P Global reported in its survey for the purchasing managers’ index that Vietnam’s factory activities contracted in April at the steepest fall since May 2023. Manufacturing new orders dropped the most in nearly two years, with demand from overseas declining more quickly amid the introduction of tariffs by the US and uncertain external market conditions.
This led to lacklustre employment, with job cuts at the highest rate in three-and-a-half years. Manufacturers were also concerned about the production outlook in the months ahead, with business confidence falling to the lowest level since August 2021.
“The potential for further disruption to the sector as a result of additional tariffs meant that business confidence slumped and was one of the lowest on record,” said Andrew Harker, economics director at S&P Global Market Intelligence.
Chinh said on Monday that the country is expected to begin its first bilateral trade negotiation session with the US on May 7 as one of the six prioritised nations for this round. On May 1, a Vietnamese delegation already travelled to the US to engage with US counterparts on trade.
Despite various global think tanks and financial institutions lowering Vietnam’s gross domestic product growth forecasts this year by one to two percentage points due to tariff challenges, the country kept its target unchanged at 8 per cent.
In the first quarter of this year, Vietnam’s economic expansion slowed to 6.9 per cent, from 7.6 per cent in the preceding three months.
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