The impacts of tariffs as well as global trade fluctuations are causing Vietnam’s economic GDP growth target of 8% by 2025 to face many major challenges.

Flexible adaptation

The 90-day period of reciprocal tax deferral from the US is a “golden time” for both businesses and industries to come up with plans that are not only urgent responses, but also long-term directions. The wood industry – one of the industries most affected by high tariffs and with nearly 50% of its exports to the US market – is taking advantage of this valuable time to find new directions.

For example, at Kim Gia Company, this enterprise said that it is working overtime to quickly pay off orders for the second quarter. The business department had to come up with two urgent solutions: finding a cheaper raw material supplier and reducing profit margins to compete with rivals from Indonesia, Malaysia and Thailand.

“The company can cut the profit margin by 7-10%, trying to reduce costs in the production process as well as related logistics costs, thereby reducing costs for customers,” said Mr. Nguyen Ngoc Huong, Director of Kim Gia Company, about the production orientation in the coming time.

Vietnamese businesses are quickly considering increasing the number of imported goods and products from the US, especially wood products such as sawn timber, logs, etc. to balance the trade balance. The Vietnam Timber and Forest Products Association, along with businesses, are preparing to participate in hearings if the US side requests proof that the trade relationship in the wood sector between Vietnam and the US is complementary.

Similarly, the Association of Seafood Processors and Exporters also recommends that within 90 days, businesses need to speed up transit and delivery to minimize the risk of being subject to high taxes.

In addition, it is necessary to proactively develop plans to expand new markets, gradually replacing the US market, with a focus on potential regions such as ASEAN, the Middle East, Korea and the EU.

Faced with unpredictable fluctuations in the US market, many Vietnamese seafood businesses are shifting to boost exports to Europe. According to statistics, export turnover to this market will reach about 1 billion USD by 2024.

At the end of the first quarter of 2025, with a growth rate of 6.93%, Vietnam continues to be among the leading economic growth groups in the world and the region. Growth drivers maintain positive momentum, with each month higher than the previous month and each quarter higher than the previous quarter. 

But challenges are approaching, reciprocal taxes, additional 10% tax from the US is casting a shadow over global trade, trade competition is increasing, can Vietnam maintain the growth rate to complete the target of increasing GDP by over 8% in 2025?

Opportunity to restructure the economy

Assessing the “health” of the economy, Mr. Hoang Van Cuong – Member of the Economic and Financial Committee of the National Assembly said that the growth figure of 6.93%, although not meeting expectations according to the proposed scenario, is an impressive increase, the highest compared to the same period in recent years.

“Over the past years, the economic trend has been that the first quarter usually grows at a low rate, and the remaining quarters are forecast to grow at a higher rate. Therefore, if there are no unusual impacts, if industries and sectors continue to maintain the current growth momentum, it is entirely possible to expect that the following quarters will achieve higher results to reach the growth target of over 8%,” said Mr. Hoang Van Cuong.

Mr. Hoang Van Cuong – Member of the Economic and Financial Committee of the National Assembly

Regarding growth drivers, Mr. Hoang Van Cuong said that both supply and demand of the economy showed signs of good recovery. The agricultural sector in the first quarter achieved a growth rate of 3.7% – an increase that has not been achieved in many years. Meanwhile, industry increased sharply to 7.8%, much higher than the 5.9% in the same period last year. In particular, the manufacturing and processing industry achieved a growth rate of 9.5% – in 2024 it was only about 6%…

Demand also continued to recover strongly, with total retail sales of goods and consumer services revenue at current prices estimated at VND1.7 million billion, up 9.9% over the same period. Meanwhile, tourism – one of the industries heavily affected by the pandemic, also recorded a strong recovery.

However, according to Mr. Hoang Van Cuong, the Vietnamese economy still faces many challenges from the outside. The reciprocal tax policy of the US President Donald Trump’s administration has caused many countries and international organizations to reconsider their growth scenarios to find ways to respond. The World Trade Organization (WTO) forecasts a decline in global trade of about 1%. The International Monetary Fund (IMF) has lowered its forecast for global economic growth in 2025 from 3.3% to 2.8% – the lowest since the beginning of the pandemic.

From another perspective, Mr. Hoang Van Cuong said that the current globalization context is creating a special position and strength for Vietnam, as an important link in the global production value chain with 17 signed free trade agreements (FTAs). Although the US tax policy may cause investment capital to shift, Vietnam has an advantage in attracting high-tech industries and value-added manufacturing.

“This is an opportunity to restructure production and business activities, not to fall too deeply into the path of cheap labor. We need to shift to investing in new areas, areas that can create a complete supply chain to have higher added value and labor productivity. This is an opportunity for us to restructure the economy,” Mr. Hoang Van Cuong emphasized.

Domestic consumption – an extremely important driving force

In the context of exports and FDI flows forecast to be negatively affected by tariffs, domestic consumption is considered an extremely important driving force.

Mr. Bui Nguyen Anh Tuan, Deputy Director of the Department of Domestic Market Management and Development, Ministry of Industry and Trade, said that to achieve 8% GDP growth, the total growth rate of retail sales of goods and consumer service revenue must reach 12%. This is a very challenging figure as in the past 10 years, no year has exceeded 9%, not to mention the period of very low growth due to the COVID-19 pandemic.

Domestic consumption is considered an important driver of economic growth in 2025.

“With the total increase in retail sales of goods and consumer service revenue in 2024 increasing by 9%, to reach the target of 12%, each person and business must spend one and a half times more than last year,” Mr. Bui Nguyen Anh Tuan informed.

Expressing his views on developing the domestic market, Mr. Dau Anh Tuan, Deputy Secretary General and Head of the Legal Department of the Vietnam Federation of Commerce and Industry (VCCI), emphasized that this is an attractive market with more than 100 million people and the middle and high income segment increasingly making up the majority.

VCCI representative assessed that in the context of tariff barriers being erected by countries alongside uncertain factors, the domestic market is an opportunity for Vietnamese businesses and industries. Businesses that want to be stable need to walk on “two legs” – foreign and domestic markets.

In the current context, the domestic market is facing great pressure from the risk of trade diversion. Many goods from neighboring countries, when unable to be exported to the US, will penetrate the markets of other countries, especially the Vietnamese market. Mr. Dau Anh Tuan said: “Vietnam has joined many FTAs, many tariff barriers have been removed, so the competitive pressure on Vietnamese enterprises right at home is very fierce. Enterprises need to always be in the mindset of having to develop and maintain the domestic market.”