Affected Industries and Export Data

The 40% anti-circumvention tariff is poised to impact all key Vietnamese exports to the US, particularly those reliant on Chinese inputs and components. The most vulnerable sectors include electronics, machinery, textiles, furniture, and footwear. Heavy dependence on the US market amplifies the risks associated with new origin and transshipment regulations.

In 2024, Vietnam’s exports to the US totaled nearly USD 120 billion, up 23% year-on-year (an increase of USD 22.5 billion), accounting for 30% of the country’s total exports.

Vietnam’s export structure to the US in 2024

100%= USD 120 billion

Source: General Department of Vietnam Customs

Key Risks for Vietnamese Enterprises

– Profitability and competitiveness: The 40% tariff could severely erode profit margins and render products uncompetitive in the US market, potentially forcing firms to exit.

– Compliance burden: Exporters now bear full responsibility for substantiating “Made in Vietnam” claims. Any ambiguity in documentation may result in punitive tariffs.

– Supply chain restructuring costs: Firms dependent on Chinese inputs must seek alternative suppliers, a costly and complex process that could disrupt operations.

– Uncertainty in enforcement: A lack of clear and transparent enforcement guidelines may lead to arbitrary implementation, creating an unstable business environment.

Overall, while the 40% anti-circumvention tariff presents a significant challenge, it also offers an opportunity for Vietnamese companies and the broader economy to enhance capabilities, increase transparency, and pursue more sustainable growth models in the long term.

Opportunities for Japanese Enterprises in Vietnam

In this shifting policy environment, Japanese-invested firms in Vietnam are uniquely positioned to benefit due to four key advantages:

– Deep manufacturing capabilities: Japanese firms typically invest in advanced technology and sophisticated production processes, ensuring substantial transformation of products within Vietnam. This supports a strong case for genuine Vietnamese origin.

– Transparent supply chains: Japan’s rigorous supply chain governance allows for clear traceability of materials and added value generated in Vietnam, critical evidence in countering transshipment allegations.

– Reputation for compliance: Japanese companies enjoy a global reputation for regulatory compliance, offering a credibility advantage in dealings with US customs authorities.

– Substantive investment strategy: Their relocation to Vietnam aligns with long-term diversification strategies (i.e., “China +1”) rather than opportunistic tax avoidance. This is evident through substantial and sustained investment commitments.

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