Workshop of the West: Navigating the US-Vietnam Trade Relationship for Investors

Introduction

In the space of a single decade, Vietnam has gone from a peripheral manufacturing economy to one of the most important trading partners of the United States. Bilateral trade now exceeds $200 billion annually, the country has become a critical hub in global supply chains, and major US companies including Apple, Intel, Nike, and others have committed tens of billions of dollars to expand their Vietnamese operations.

This transformation has been turbocharged by a series of geopolitical shifts. The first Trump-era trade war pushed companies to diversify production away from China. The pandemic exposed the risks of over-concentration in a single country. The second Trump administration’s tariffs in 2025 and 2026 have accelerated this trend further, with Vietnam emerging as one of the clearest beneficiaries of what is widely described as the “China plus one” strategy.

For investors, the US-Vietnam corridor represents one of the most consequential trade relationships of this decade. It cuts across consumer electronics, apparel, footwear, furniture, agriculture, and increasingly semiconductors. It also intersects with the broader trade policy debates we have explored in previous articles, including the trade dynamics.

This article is the latest in our trade relations series. It breaks down what’s driving the US-Vietnam relationship, which sectors benefit most, what risks investors should be aware of, and where the corridor is likely headed.

The 2025 Trade Framework and 2026 Tariff Reality

The most important recent development in US-Vietnam relations was the trade framework signed in October 2025 at the 47th ASEAN Summit in Kuala Lumpur. The deal set Vietnam’s tariff rate to the US at 20%, far below the 46% reciprocal tariff that had been initially threatened in April 2025.

The framework agreement includes several key elements. Vietnam committed to removing tariffs on almost all US goods, including agricultural products, food, and industrial machinery. The agreement also addresses non-tariff barriers, streamlines import processes for medical devices and pharmaceuticals, and includes cooperation on intellectual property protection and supply chain resilience.

In practical terms, the 20% Vietnamese tariff has restored and even expanded Vietnam’s competitive advantage over China, which now faces average US tariffs of roughly 50%. This 30-percentage-point gap has accelerated the shift of manufacturing from China to Vietnam across multiple industries.

However, the framework also includes a critical provision: a 40% tariff on goods identified as transshipment, meaning Chinese products rebadged and shipped through Vietnam. This is the Trump administration’s response to a long-standing concern that Vietnam has been used as a backdoor to circumvent US tariffs on Chinese imports. Implementation of the transshipment rules has been complex, and the boundaries between legitimate Vietnamese manufacturing and disguised Chinese exports remain contested.

Trade Volume and the Balance of Power

US-Vietnam bilateral trade reached approximately $209.5 billion in 2025, up significantly from earlier in the decade. The relationship is heavily one-sided. US exports to Vietnam were around $15.7 billion in 2025, up 20% from 2024, while US imports from Vietnam totalled approximately $193.8 billion, a 42% jump.

The resulting trade deficit of around $178 billion makes Vietnam the third-largest source of US trade deficits, behind only China and Mexico. This imbalance has been a source of political friction for years and was the primary driver behind the initial threat of 46% tariffs in early 2025. The 20% rate finalised in the October agreement represents a compromise that both sides could accept, but the trade imbalance remains a structural feature of the relationship.

For Vietnam, the United States accounts for around 30% of its total exports, making the US market overwhelmingly important to the country’s economic model. For the US, Vietnam has become a critical supplier of consumer electronics, apparel, footwear, furniture, and increasingly machinery and electrical equipment.

Early 2026 data suggests this trajectory is continuing. In January alone, Vietnam recorded a $19 billion bilateral trade surplus with the US, the highest of any US trading partner that month, driven by a 53% year-on-year jump in exports.

Key Sectors at a Glance

The US-Vietnam trade relationship spans a wide range of sectors, with significant concentration in a few key industries. Full-year 2026 data is not yet available, but the most recent complete annual figures (2025) give a clear picture of the sectoral breakdown. Early 2026 data points to continued strong growth, with Vietnam recording a $19 billion trade surplus with the US in January 2026 alone, the largest of any US trading partner that month, as exports surged 53% year-on-year.

These figures collectively illustrate why Vietnam has become indispensable to several major global industries.

Electronics and Computers: The Foundation

Electronics and computers form the cornerstone of Vietnam’s export profile to the US, accounting for around $107 billion in 2025, a 48% jump from 2024. The growth reflects Vietnam’s emergence as the second-largest electronics manufacturing hub in Southeast Asia after China.

Samsung is by far the largest investor, with operations producing roughly half of the company’s global smartphone output. Intel operates one of its largest assembly and test facilities in Ho Chi Minh City. Apple has steadily shifted iPhone, iPad, and AirPods production to Vietnam, with major suppliers including Foxconn, Luxshare, Goertek, and Pegatron all expanding their Vietnamese footprint significantly.

The growth has accelerated as US-China tensions have escalated. Apple alone has reportedly committed billions of dollars to expanding Vietnamese production, with a goal of producing up to a quarter of all iPhones in Vietnam by the end of 2026. Industry analysts expect the relocation of consumer electronics production to continue for several more years before stabilising.

Vietnam’s role in semiconductors is also expanding. The country has been a key beneficiary of US efforts to diversify chip packaging and assembly away from China. Companies including Amkor Technology and ASE Group have built or expanded operations, and the Vietnamese government has actively courted further semiconductor investment.

Phones: The Samsung-Apple Story

Mobile phones and components represent another massive trade category at roughly $57 billion in 2025. Samsung dominates this category, having relocated the majority of its smartphone manufacturing to Vietnam over the past decade. The company employs over 100,000 workers across multiple Vietnamese facilities and accounts for roughly a fifth of total Vietnamese exports.

Apple’s presence is also significant and growing. While iPhone final assembly remains heavily concentrated in China, an increasing share of components and assembly has shifted to Vietnam. The shift has been driven by both tariff considerations and supply chain diversification, with Apple seeking to reduce its dependence on any single country.

For investors, the phones sector creates exposure not just to Samsung and Apple but to the broader ecosystem of contract manufacturers, component suppliers, and logistics companies that have built Vietnamese operations. This includes Taiwanese giants like Foxconn and Pegatron, Chinese-headquartered Luxshare, and a growing number of Vietnamese suppliers moving up the value chain.

Textiles, Apparel, and Footwear: The Traditional Strength

Vietnam has long been a manufacturing centre for apparel and footwear, and the sector remains a major component of bilateral trade. Textiles and apparel exports to the US reached approximately $20 billion in 2025, while footwear added another $10 billion.

Nike is the largest single investor in Vietnamese footwear manufacturing, producing roughly half of its global footwear output in the country. Adidas, Puma, Lululemon, and numerous other major apparel brands have similar levels of dependency. For these companies, Vietnam is not just a source of supply but a strategic pillar of their entire production model.

The transition during the first Trump-era trade war saw apparel and footwear among the earliest beneficiaries of China decoupling, given the relatively lower complexity of garment manufacturing compared to electronics. Vietnam captured the bulk of the relocated capacity, though some has also moved to Bangladesh, India, Indonesia, and Cambodia.

The 20% US tariff applies to these goods just as it does to electronics, but the cost competitiveness of Vietnamese production has so far been able to absorb the tariff impact without major price changes. The bigger risk is the 40% transshipment tariff, which could affect goods where Chinese materials or partially completed inputs are integrated into Vietnamese final products.

Furniture and Wood Products: A Quiet Success

Furniture and wood product exports from Vietnam to the US have surged in recent years, reaching approximately $10 billion in 2025. Vietnam has become the largest single supplier of furniture to the US market, overtaking China, and many major US retailers including Wayfair, Ashley Furniture, and IKEA source significant volumes from Vietnamese factories.

The growth in furniture exports reflects both the shift away from Chinese suppliers and the maturation of Vietnam’s domestic furniture industry. Vietnamese manufacturers have invested heavily in design capabilities, quality control, and logistics, allowing them to serve mid-market and even higher-end US customers.

The sector faces some challenges, including concerns about deforestation and timber sourcing. Vietnamese authorities have worked with US regulators to strengthen traceability requirements, though enforcement remains a work in progress.

Agriculture and Seafood: Smaller but Strategic

Agricultural trade between the US and Vietnam is smaller in absolute terms but strategically significant. Vietnam is one of the largest seafood suppliers to the US, particularly for shrimp and pangasius. US agricultural exports to Vietnam include cotton, soybeans, dairy products, and tree nuts.

The 2025 trade framework included Vietnamese commitments to remove tariffs on US agricultural products. This has opened opportunities for US farmers and exporters, particularly in cotton, beef, and dairy. The fact that Vietnam was willing to make agriculture a significant component of the deal reflects the strategic importance of preserving access to the US market.

Foreign Direct Investment Flows

The trade relationship is underpinned by significant foreign direct investment. Vietnam attracted approximately $28 billion in FDI commitments in 2025, with the US and US-affiliated companies accounting for a meaningful share. Major announcements have included Apple supplier facility expansions, Intel chip packaging investment, and Marvell Technology design centres.

Beyond US companies, Korean and Japanese investment in Vietnam has also surged. Samsung’s commitments to Vietnam alone exceed $20 billion cumulatively. Japanese manufacturers including Canon, Honda, and Panasonic have all expanded operations.

Vietnamese investment in the US is much smaller but growing. VinFast, the Vietnamese electric vehicle maker, has invested in a North Carolina manufacturing facility, although the project has faced delays and operational challenges. Other Vietnamese companies are exploring US partnerships in technology, agriculture, and renewable energy.

The FDI flows are likely to continue expanding as long as the tariff differential between Vietnam and China remains substantial. Even with the 20% US tariff, Vietnam offers a significantly more favourable cost structure than Chinese alternatives for most manufactured goods.

The Transshipment Question

One of the most contested elements of the US-Vietnam relationship is transshipment, the practice of routing Chinese goods through Vietnam to avoid US tariffs on Chinese products. The 40% transshipment tariff included in the 2025 framework is designed to address this concern, but defining and enforcing the distinction between legitimate Vietnamese manufacturing and disguised Chinese exports is complex.

The issue matters for investors because the credibility of Vietnam as a manufacturing destination depends on the trade framework holding. If transshipment loopholes are widely exploited, the US could escalate enforcement actions or raise tariffs. If, on the other hand, Vietnam successfully establishes itself as a genuine alternative to Chinese production rather than a circumvention route, the country’s strategic position will continue to strengthen.

Some sectors face this question more acutely than others. Solar panel manufacturers based in Vietnam have come under particular scrutiny, with several facilities essentially functioning as final assembly operations for Chinese components. Steel and aluminium products have also been flagged for transshipment concerns. Pure-play Vietnamese manufacturers in electronics, textiles, and footwear face less risk.

Geopolitics: Walking a Tightrope

Vietnam’s foreign policy approach to balancing relationships with the US and China has been characterised as “bamboo diplomacy”, flexible and resilient, capable of bending without breaking. The country has cultivated strong economic and security ties with the United States while maintaining important relationships with China, its largest trading partner overall.

This balancing act has become more difficult as US-China tensions have escalated. The framework agreement with the US includes commitments on supply chain transparency that could be interpreted as taking sides, but Vietnamese leadership has been careful to avoid explicit alignment with either superpower.

Vietnam has also been deepening relationships with other partners. The country has free trade agreements with the European Union, Japan, the UK, and several others. It is a member of the Regional Comprehensive Economic Partnership (RCEP), which includes China, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which does not include either the US or China.

For investors, Vietnam’s diplomatic positioning matters because it shapes the longer-term sustainability of the country’s role in global supply chains. A Vietnam that is genuinely diversifying away from Chinese dependence is more attractive than one that is purely a low-cost alternative to Chinese production.

Future Outlook: Where the Relationship Is Headed

Several factors will shape the trajectory of US-Vietnam trade over the next several years:

• Trade framework implementation. The October 2025 deal is a framework, not a final agreement. Detailed implementation, including how transshipment rules are enforced and how non-tariff barriers are resolved, will significantly affect the practical impact of the agreement.
• Manufacturing diversification trends. As long as US-China tariff differentials remain large, manufacturing relocation to Vietnam will continue. However, Vietnam has capacity constraints, including labour, electricity, and infrastructure. Some manufacturers are also exploring India, Indonesia, Thailand, and Mexico as alternatives or complements.
• Vietnamese industrial upgrading. Vietnam is actively trying to move up the value chain into higher-margin industries including semiconductors, electric vehicles, and renewable energy components. Success in these areas could fundamentally shift the country’s economic profile.
• Infrastructure and electricity. Vietnam’s rapid industrial growth has strained its electricity grid and logistics infrastructure. Resolving these bottlenecks is essential for continued expansion. Watch for major infrastructure announcements and foreign investment in power generation.
• Currency and labour costs. The Vietnamese dong’s relationship to the US dollar and the trajectory of Vietnamese wages will affect competitiveness over time. Wages have been rising, but remain well below Chinese levels.
• US political dynamics. The 20% tariff was a negotiated compromise. Future US administrations could revisit Vietnam’s tariff treatment, either to strengthen the relationship or to address ongoing trade imbalance concerns.

Sector Implications and DCSC

The US-Vietnam corridor cuts across some of the largest and most dynamic sectors of global trade. Dynamic Company Sector Classification system tracks over 1,500 sectors, giving investors the granularity to map their portfolio exposure to specific industries benefiting from or affected by the bilateral relationship.

Key sectors to explore include consumer electronics, semiconductors, smartphones, textiles and apparel, footwear, furniture, agricultural products, seafood, and contract manufacturing. Each of these has distinct dynamics within the US-Vietnam corridor and different exposure to tariff, transshipment, and geopolitical risks.

The US-Vietnam relationship is likely to remain a defining feature of the global trade landscape throughout this decade. For investors, understanding the structural drivers, the sectoral breakdown, and the geopolitical context is essential for identifying both risks and opportunities.

Explore the full sector taxonomy at dcsc.ai.