As an importerseeking to diversify your manufacturing sources, Vietnam presents a compelling single source, or your ‘China-Plus-One’.
As the sixth largest source of US imports in 2024, with competitive labor costs, a skilled workforce, and significant trade agreements, Vietnam has emerged as a global leader in several key industries. Vietnam’s manufacturing strengths range from textiles and garments to electronics and furniture.
While tariff storm clouds gather over the Big 3 Exporters to the US, Vietnam has grown as an exporter of manufactured goods to the US.
Over the past ten years, the growth of the Big 3 Exporters has been mixed.
- China fell by 14%.
- Mexico increased by an impressive 58%, and
- Canada’s grew by 8%.
The real standout has been Vietnam whose exports to the US have surged by 308%. At this average annual growth rate of 30%, Vietnam is on track to overtake both Germany and Japan in 2025.
Big money is being invested in Vietnam by the largest companies. Apple has invested over $15 billion in the past five years.
Are you keen to find out more about the Vietnamese manufacturing landscape and how it can benefit your business?
Who’s manufacturing what in Vietnam today?
Vietnam’s manufacturing growth has been driven by the establishment of global leaders across a range of key industries.
1. Electrical Equipment and Machinery.
- Samsung – smartphones, televisions, home appliances, and semiconductors.
- LG – smartphones, televisions, and other consumer electronics,
- Intel – semiconductors,
- Canon – printers, copiers, and other imaging equipment and
- Foxconn – smartphones, tablets, and laptops
2. Shoes and Footwear
- Nike
- Adidas
- VF Corporation –Timberland, Vans, and The North Face brands
- Pou Chen Group – footwear brands including Nike, Adidas, and Reebok
- Tae Kwang Industrial – footwear manufacturer producing various global brands.
3. Apparel and Textiles
There are more than 6,000 textile manufacturers employing more than 2.5 million workers.
- VF Corporation – The North Face, Timberland, Vans, and Dickies.
- Gap Inc. – Gap, Old Navy, Banana Republic, and Athleta.
- H&M – the Swedish multinational clothing-retail company.
- Zara – the Spanish fast-fashion clothing company.
- Uniqlo – The Japanese casual wear designer, manufacturer, and retailer
4. Furniture and Home Furnishings
- Ikea
- Ashley Furniture – The furniture manufacturer and retailer.
- West Elm – The home furnishings retailer.
- Williams-Sonoma – The kitchenware and home furnishings consumer retailer.
- ScanCom – The Danish outdoor furniture manufacturer.
5. Medical Equipment
- Nipro – dialysis equipment, syringes, and needles.
- Terumo – catheters, syringes, and blood bags.
- Cardinal Health – medical supplies and equipment.
- Medtronic –medical equipment and therapies.
- B. Braun – medical devices and disposables.
What’s attracting these manufacturers to Vietnam?
Global brands with manufacturing and export operations driving an average annual US import growth rate of 30% benefit from multiple factors. Each of these factors delivers benefits to manufacturers, big and small.
Low Labor Costs – Vietnam has set minimum hourly wages by region. Even at the highest wage rate, it is a cost-effective location for production.
Vietnam’s highest-paid region is set at a minimum monthly wage of VND 4.96 million, or approximately USD$196. This equates to a minimum hourly wage rate of approximately USD $1.22.
By comparison, China’s highest minimum hourly wage rate is approximately USD $2.52.
Skilled Workforce – Vietnam has a young and growing workforce. Almost 60% of Vietnam’s population of 100 million are under 35. This expanding, skilled workforce is sustaining the annual 30% US import growth rate.
Stable Political and Economic Environment – Vietnam operates under the single Communist Party government. This has delivered political stability and a growing economy. In turn, this has attracted foreign investment to grow Vietnam’s manufacturing base.
Government Support and Incentives – The Vietnamese government encourages foreign investment and offers incentives to attract manufacturers. Vietnam has set up several Industrial Investment Zones, over 220 Industrial zones, and 16 Economic Zones to encourage foreign manufacturers.
These zones have several benefits for foreign investors:
- 10% tax rate locked in for 15 years
- 50% tax benefit for all employees
- 0 Corporate taxes for four years
- 50% discount on corporate taxes for up to 9 years after the first four years
Key locations include:
- Vietnam Singapore Industrial Park – several spread across Vietnam
- Hiep Phuoc Industrial Park – located near Ho Chi Minh City in the south.
- Dinh Vu – Cat Hai Economic Zone – located near Hanoi in the north.
- Dong Nai Industrial Zone Authority – located near Hanoi in the north.
Free Trade Agreements – Vietnam has an extensive network of free trade agreements, including the CPTPP and EVFTA. These reduce trade barriers and enhance access to key export markets. They prove Vietnam’s willingness to open and free trade. There is no FTA in place with the US.
- The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a trade agreement among 11 Pacific Rim countries. The US withdrew from the Trans Pacific Partnership (TPP) in 2017. This agreement reduces tariffs and improves market access for member countries, indirectly benefiting US-Vietnam trade.
- The EU-Vietnam Free Trade Agreement (EVFTA) eliminates nearly all tariffs between Vietnam and the European Union. While not directly involving the US, the EVFTA demonstrates Vietnam’s commitment to open trade policies and integration into the global economy.
- ASEAN Free Trade Area (AFTA) aims to reduce tariffs and promote economic cooperation among Southeast Asian countries.
- Other FTAs are active with several other countries, including Australia, China, India, Japan, and South Korea
Location, Logistics, and Shipping from Vietnam
Certain industries and manufacturing operations tend to cluster in different locations. Each is serviced by more than one key deep-water export port and serviced by at least one international airport – all linking to destinations in the US.
The clustering is driven by a variety of factors including:
- Labor availability and skills,
- Infrastructure (the location of industrial parks, transportation networks, and port facilities) • Proximity to raw materials is essential for industries like furniture and food processing • Regional government incentives and policies.
In Vietnam, manufacturing specialization roughly falls into three regions – the north, the south and central.
- Northern Vietnam
- Electronics Manufacturing- Samsung, LG, Canon, and Foxconn. In addition to the availability of skilled labor and established industrial parks, they benefit from their proximity to China for component supply.
- Southern Vietnam
- Footwear and Apparel – Nike, Adidas, and VF Corporation. Key drivers are the large workforce and well-developed infrastructure.
- Furniture Manufacturers- IKEA and Ashley Furniture. Their key is their proximity to timber resources.
- Central Vietnam
- Textiles and Garments manufacturing has been driven by its history as a textile production centre and skilled workforce.
- Other key industries are spread across the country.
- Medical Equipment is not dependent upon key materials or labor, so have been growing in both Ho Chi Minh City in the south and Hanoi in the north.
- Food Processing is spread depending on the specific agricultural products being processed. For instance, coffee processing is concentrated in the growing region of the Central Highlands, while seafood processing is coastal.
Challenges in Manufacturing in Vietnam
Potential US tariffs:
The new Washington Administration views the US trade balance as a scorecard for the international trade game.
- When it’s a positive number, the US is winning.
- When it’s a negative number, the US is losing.
At the end of 2024, Vietnam held the third deepest trade imbalance of the Top Ten sources of US imports. Alongside China and Mexico, Vietnam is winning the game against the US.
The potential is high for greater tariffs on Vietnam to match those announced for China, Mexico, and Canada.
US Politics vs US Trade Policy mismatch:
- Politics: The US does not recognize Vietnam as a market economy. The US has imposed many anti-dumping duties on imports from Vietnam. It also puts Vietnam in the same group as North Korea, Russia, and China. Meanwhile, 72 other countries do recognize Vietnam as a market economy. This includes Australia, the UK, Canada and Japan. These countries recognize Vietnam’s active participation and open cooperation in global trade.
- Trade: Vietnam is important as the sixth largest source of imports. It’s a key destination for direct foreign investment. It’s an obvious choice in “friend-shoring” or diversifying the supply chain out of China. Vietnam and the US elevated their relationship to be a ‘comprehensive strategic partnership’. There appears little chance of this elevation with China, North Korea or Russia.
Infrastructure: Vietnam’s rapid industrialization highlights typical infrastructure gaps, environmental problems, and bureaucratic inefficiency. Investment has focused on road, seaports and airports. Further investment is being made into improving road, rail and inland waterways.
Intellectual Property Rights Protection in Vietnam
Vietnam is a member of the World Trade Organization and World Intellectual Property Organization. IP in Vietnam is in line with most aspects of international IP protection standards. This encompasses the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
Vietnam is also a signatory to many international IP agreements.
These include:
- The Paris Convention – where any person from a signatory state can apply for a patent or trade-mark in any other signatory state. They will have the same enforcement rights and status as a citizen of that country.
- The Berne Convention – where each member state recognizes the copyright of authors from other member states in the same way as the copyright of its own citizens.
- The Madrid Protocol – where an individual or business can secure a ‘bundle’ of national trade-mark registrations in different jurisdictions, through a single application.
- The Patent Cooperation Treaty – like the Madrid Protocol, but for patent applications. Vietnam is not a signatory to the Hague Agreement. This agreement secures design protection in multiple countries through a single filing. Vietnam appears on the Watch List in the US Trade Representative’s Special 301 Report regarding IP rights. Seeking proper IP advice is recommended.
Do I pay any Export Taxes in Vietnam?
Vietnam taxes a limited range of exports of primary products.
Taxed products include crude oil, scrap metal, mined minerals (coal, iron ore, rare earth minerals), and Timber Products. The taxes are applied to products with little or no value added.
How do Vietnam Import Tariffs Compare to Other Countries?
Importing into the US from Vietnam attracts the basic US tariff rates (January 2025). This is the same rate as comparable manufactured goods source markets – Mexico and India.
These sources enjoy the additional 301 China tariff. In the two examples of the T-Shirts and sunglasses, imports from China attract an extra tariff of 7.5%. Further tariffs will follow.
Vietnam is unlikely to escape the tariff increases. While it holds onto 3rd place on the trade deficit, Vietnam will be in the spotlight. When these tariffs arrive, the interesting point will be the difference in tariff rates between these key markets. Time will tell.
Is Vietnam for you?
Vietnam presents a compelling “China-Plus-One” option. With its competitive labor costs, skilled workforce, and significant trade agreements, Vietnam is a global leader in several key industries.
While the threat of US tariffs looms and infrastructure challenges remain, Vietnam’s location, government support, and growing economy offer clear opportunities for US importers. Careful consideration of these factors will be crucial for entering the Vietnamese market and achieving success.
