HANOI – In a strategic move to ease trade tensions with Washington, Vietnam has announced significant tariff reductions on key U.S. products, including liquefied natural gas (LNG), automobiles, and ethanol. The cuts aim to address concerns over Vietnam’s growing trade surplus with the United States, which exceeded US$123 billion in 2024.

The Southeast Asian manufacturing hub has taken proactive steps to adjust its trade policies in response to increasing pressure from the Trump administration, which recently expanded tariffs on major trading partners. While Vietnam and the U.S. maintain a Comprehensive Strategic Partnership (CSP), the absence of a formal free trade agreement (FTA) has left Vietnam vulnerable to potential trade restrictions.

Key Tariff Reductions and Their Impact

Nguyen Quoc Hung, head of the Finance Ministry’s tax policy department, announced on March 25 that Vietnam will implement tariff reductions aimed at “improving trade balances with Vietnam’s trade partners.” Among the key changes:

• LNG tariffs will be reduced from 5% to 2%. While Vietnam has yet to import LNG from the U.S., discussions are ongoing with American suppliers to fuel the country’s upcoming LNG power plants, two of which are set to commence operations by June 2025.
• Automobile import tariffs will be lowered from their current range of 45% to 64% down to 32%, making U.S. vehicles more competitive in the Vietnamese market.
• Ethanol tariffs will drop from 10% to 5%, with the complete removal of tariffs on American ethane.

Hung confirmed that a formal decree on the tariff reductions will be finalized within March, with immediate implementation following its approval.

Vietnam’s Broader Strategy to Manage U.S. Trade Relations

Vietnam’s decision to cut tariffs is part of a wider effort to prevent retaliatory trade measures from the U.S., which has been scrutinizing its trading partners for large trade imbalances. To complement the tariff reductions, Vietnam has also undertaken several additional measures:

• Diversifying imports: The government has encouraged Vietnamese firms to increase the purchase of U.S. agricultural products, technology components, and machinery to offset the imbalance.
• Boosting U.S. investments in Vietnam: Hanoi has introduced new incentives to attract U.S. companies, particularly in high-tech industries, semiconductor manufacturing, and renewable energy projects.
• Strengthening compliance with trade regulations: Vietnam has been tightening regulations on transshipment practices to avoid accusations of Chinese goods being routed through Vietnam to evade U.S. tariffs.

Navigating Trade Tensions Without an FTA

Despite being a key U.S. trading partner in ASEAN, Vietnam lacks a formal Free Trade Agreement (FTA) with Washington, making it susceptible to unilateral tariff measures imposed by the U.S. administration. While the Comprehensive Strategic Partnership (CSP) signals deeper cooperation, it does not provide the same level of trade security as an FTA.

As trade relations between the U.S. and China remain tense, Vietnam has benefited as a major alternative manufacturing base for global supply chains. However, the growing trade surplus with the U.S. has put it in a challenging position, prompting Hanoi to take proactive steps to rebalance the economic relationship.

With tariff reductions, increased U.S. imports, and enhanced compliance measures, Vietnam is seeking to maintain its strong economic ties with Washington while mitigating the risks of potential trade restrictions.

Whether these efforts will fully satisfy U.S. trade policymakers remains to be seen, but for now, Vietnam is making calculated moves to secure its place in an increasingly uncertain global trade landscape. (zai)