Containers at Cai Mep port in Ho Chi Minh City, southern Vietnam. Photo courtesy of the government's news portal.

Vietnam posted a merchandise trade deficit of nearly $14 billion during January-May, marking a sharp reversal from years of sustained trade surpluses and raising questions about the implications for foreign exchange reserves and the Vietnamese dong.

Vietnam's total trade turnover reached $445.12 billion during the five-month period, up 25% from a year earlier, the National Statistics Office reported.

Exports rose 19.5% to $215.66 billion, while imports surged 30.8% to $229.46 billion, resulting in a trade deficit of $13.8 billion. The deficit contrasts with a trade surplus of $5.1 billion recorded in the same period last year and marks the fifth consecutive month of negative trade balance in 2026.

Why imports rising faster than exports

In a talk with The Investor, Can Van Luc, chief economist at BIDV and a member of the National Financial and Monetary Policy Advisory Council, attributed the widening deficit to three main factors.

Firstly, businesses are increasing imports to stockpile raw materials and inputs amid rising geopolitical and supply-chain risks.

Second, prices of imported goods have increased significantly, particularly for energy products, fertilizers, electronic components, and industrial equipment.

Third, Vietnam's export structure remains heavily dependent on foreign-invested manufacturers.

The foreign direct investment (FDI) sector accounted for roughly 80% of Vietnam's export turnover and 72% of imports during the first five months of the year. While FDI firms (including crude oil) generated a trade surplus of nearly $7 billion, domestic enterprises recorded a deficit of about $20.76 billion.

"The figures highlight the urgent need for domestic companies to improve competitiveness, make better use of free trade agreements, and increase localization rates," Luc said.

He expects the trade deficit to ease as geopolitical tensions moderate and import prices stabilize.

According to Luc, inventory accumulation is likely to slow if concerns surrounding regional conflicts, including tensions involving Iran and disruptions in the Strait of Hormuz, diminish. Lower commodity prices would also reduce import costs.

Addressing the structural imbalance between domestic and foreign-invested firms, however, will require longer-term reforms and broader policy support, he said.

Can Van Luc, chief economist at BIDV and a member of the National Financial and Monetary Policy Advisory Council. Photo courtesy of BIDV.

Limited impact on the exchange rate

Despite concerns over the trade deficit, the impact on Vietnam's foreign exchange market has so far been modest, according to Luc.

During the five months, the interbank USD/VND exchange rate rose by just 0.06 percentage points compared with the start of the year, significantly below the 2.1 percentage-point increase recorded during the same period in 2025.

Luc said several factors have helped offset pressure from higher imports.

A relatively wide interest-rate differential between the Vietnamese dong and the U.S. dollar has reduced incentives for capital outflows, while lower gold prices have helped curb gold smuggling and related foreign-currency demand.

More importantly, strong inflows from foreign direct investment, remittances and international tourism have continued to support Vietnam's foreign exchange position.

As a result, the dong has remained broadly stable despite the trade deficit and only modest improvements in foreign exchange reserves.

Outlook for the rest of the year

Luc forecasts the USD/VND exchange rate will rise by only 1-2% for the full year, assuming current supportive conditions persist.

He expects the trade deficit to narrow significantly in the coming months and believes Vietnam could return to a merchandise trade surplus of $2-4 billion for 2026 as a whole.

Additional support may come from portfolio inflows if Vietnam's stock market is upgraded by FTSE Russell to secondary emerging market status in September 2026, a move that could attract fresh foreign investment into the country's financial markets.

While the recent trade deficit reflects short-term pressures from inventory building and higher import prices, economists say Vietnam's broader balance-of-payments position remains supported by robust capital inflows and resilient foreign currency earnings.