Electrical wire production at Tran Phu Electrical Mechanical Joint Stock Company, located in the Vietnam-Singapore Industrial Park (VSIP), Hai Duong Province. (Photo: DANG ANH)

Vietnam’s leading industrial production industries, including electronics, textiles and garments, leather and footwear, and wood and wood products, account for 30% of total export turnover to the US. As a result, the US's reciprocal tax policies are expected to have a significant impact on these industries.

Forecasting difficulties ahead

According to the General Statistics Office (under the Ministry of Finance), Vietnam’s Industrial Production Index (IIP) in the first quarter of 2025 increased by 7.8% year-on-year. The processing and manufacturing sector rose by 9.5%, marking the highest growth rate in 2020–2025. These results show that the industrial sector has maintained positive momentum from previous months.

Phi Huong Nga, Head of the Department of Industrial and Construction Statistics, noted that major export-oriented sectors contributing substantially to industrial growth saw gains of over 10%. These include automotive manufacturing (up 36.1%), leather and related products (up 18.1%), wood and products from wood, bamboo and rattan (up 11%), and electronics, computers, and optical products (up 10.6%).

However, some industries continue to face difficulties. The IIP declined or grew only marginally in several sectors, including electrical equipment manufacturing (down 1.1%), beverage production (down 0.7%), and crude oil and natural gas extraction (down sharply by 9.6%).

In the first quarter, 59 out of 63 provinces and cities reported IIP growth over the same period in 2024. Key industrial hubs such as Bac Giang, Bac Ninh, Hai Phong, Ha Nam, and Quang Nam recorded notable increases.

However, statistics also reveal challenges. The consumption index for the processing and manufacturing sector in the first quarter rose by only 5.4% (compared to an 8.2% increase in the same period last year), while inventory levels surged by 15.1%.

High inventories are placing pressure on businesses' cash flows, hindering their ability to reinvest in the next production cycle. Without effective solutions to replenish working capital, companies may be forced to reduce output.

Looking ahead to the second quarter and beyond, Nga warned that Vietnam's industrial sector will face increasing pressures, particularly given the country's high economic openness amid global uncertainties.

The US remains the primary export market for many Vietnamese firms, especially for key industrial products. Therefore, new US tariff measures could drive up costs, reduce the competitiveness of Vietnamese goods, and make it more difficult for firms to secure new export orders.

In addition, foreign markets are imposing increasingly stringent import requirements, particularly regarding sustainability and environmental standards. This forces Vietnamese companies to invest in more advanced technologies, upgrade production equipment, train a higher-skilled workforce, and source greener, higher-quality raw materials, all of which demand significant capital. These requirements are placing considerable pressure on enterprises.

Focus on supporting enterprises

Although the US has temporarily suspended the imposition of a 46% tariff on Vietnamese exports, experts warn that the 90-day grace period offers little time for meaningful trade negotiations. In a recent statement, US President Donald Trump reaffirmed that no extensions will be granted to countries failing to reach a trade deal within the deadline.

According to Nguyen Ngoc Thanh, Deputy Director of the Industry Agency under the Ministry of Industry and Trade, many of Vietnam’s key manufacturing industries are heavily reliant on the US market. Therefore, Vietnam must accelerate negotiations with the US regarding trade and tax policies, while pushing forward a bilateral Free Trade Agreement (FTA).

In parallel, domestic enterprises should maximise the benefits of existing FTAs, while regulatory agencies must expedite talks on new and upgraded FTAs to broaden export markets for Vietnamese producers.

Trade promotion efforts should also shift toward market diversification and capitalise on open-market opportunities provided by FTAs. This would help enhance exports to major existing markets while tapping into emerging markets with strong potential.

Le Hoang Tai, Deputy Director of the Vietnam Trade Promotion Agency, noted that recent trade promotion activities have seen innovation through modern approaches. These include online B2B matching between domestic and foreign firms, participation in virtual trade fairs, and welcoming foreign business delegations to Vietnam for sourcing.

Currently, the Trade Promotion Agency is developing a national sales promotion programme to stimulate domestic consumption. In 2025, the programme may be expanded to run twice a year instead of once, in coordination with foreign promotion campaigns to boost sales of Vietnamese goods at home and abroad.

To stimulate industrial production, Deputy Director of the Industry Agency Nguyen Ngoc Thanh has called on ministries, sectors, and local authorities to prioritise the removal of obstacles facing industrial and energy projects. He also urged accelerated development of manufacturing industries that support renewable energy, as well as national key projects such as the North-South high-speed railway.

Thanh also emphasised the need for further legal reforms in the industrial sector. He proposed stronger administrative reforms, as well as the revision and supplementation of regulations that continue to hinder business operations. In addition, the agencies at all levels should also study and introduce new support and incentive policies for enterprises, especially in the processing and manufacturing industries, and for the effective implementation of technical support programmes to help businesses adopt advanced technologies, optimise production processes, reduce costs, and ensure operational efficiency.

According to Bui Huy Son, Director of Planning, Finance and Enterprise Management Department (under the Ministry of Industry and Trade), in the coming time, the Ministry will actively work with relevant agencies to implement measures encouraging enterprises to expand investment in prioritised industrial sectors. The Ministry also aims to attract major domestic and international corporations to invest in national key projects while creating favourable conditions for Vietnamese industrial firms to connect, promote partnerships, and seek foreign investment opportunities.