According to the National Statistics Office (NSO) under the Ministry of Finance, total trade reached $659.58 billion between January and July, up 28.1% from a year earlier. Exports rose 21.7% to $319.53 billion, while imports climbed a much faster 34.8% to $340.05 billion, pushing the trade balance into deficit.

The July deficit alone stood at $3.59 billion, following deficits of $5.21 billion in May and $2.64 billion in June, suggesting that import demand remains strong.

Investment-driven imports

Economists argued that the headline deficit tells only part of the story. The rapid increase in imports was driven primarily by purchases of raw materials for manufacturing, machinery, equipment, and goods for investment.

Production inputs account for more than 94% of Vietnam's import bill, according to Pham Anh Tuan from the Institute of Vietnam and World Economy. This indicates that foreign currency is being used largely to finance industrial production and export manufacturing instead of domestic consumption.

Trade data also highlights Vietnam's continued reliance on foreign-invested enterprises.

During the first seven months of the year, the foreign direct investment (FDI) sector generated $255.89 billion in exports (including crude oil), accounting for over 80% of the country's total exports, while importing $247.91 billion worth of goods. The sector maintained a trade surplus of nearly $8 billion.

Meanwhile, domestic enterprises exported $63.64 billion but imported $92.14 billion, leaving them with a trade deficit of about $28.5 billion.

The contrast underscores Vietnam's dependence on multinational manufacturers for export growth, while domestic firms continue to play a relatively limited role in global supply chains.

No immediate cause for concern

Can Van Luc, chief economist at BIDV bank, said the current trade deficit should not be interpreted as a sign of economic weakness.

Companies are importing more raw materials and components to secure supplies amid continued global uncertainty and to prepare for stronger production in the second half of the year, he said.

"The current increase in imports reflects resilient manufacturing demand rather than a weakening economy," Luc noted.

Another noteworthy development is that despite the sizable trade deficit, Vietnam's exchange rate has remained relatively stable.

According to the NSO, the average U.S. Dollar Index (DXY) stood at 100.81 by July 25, up 0.76 points from June.

Domestically, the U.S. dollar price index increased 0.18% from the previous month and 0.38% year-on-year in July, while remaining almost unchanged compared to the end of 2025. Over the first seven months, the average USD price index rose 1.55% year-on-year.

In theory, a trade deficit increases demand for foreign currency to finance imports, thereby putting pressure on the exchange rate. However, current developments suggest that this pressure is being offset by other factors.

Nguyen The Minh, head of investment banking at An Binh Securities (ABS), argued that the cyclical nature of trade should be taken into account.

In the early months of the year, businesses typically increase imports of raw materials, machinery, and equipment to prepare for export orders scheduled for later in the year. If these imported inputs are successfully transformed into export products, the trade balance could improve during the second half of the year.

As export revenues return, foreign currency inflows would help offset import-related demand and ease exchange-rate pressures, he said.

Another supporting factor, he noted, is the favorable interest rate differential for the Vietnamese dong. When VND interest rates remain higher than USD rates, incentives to hold or speculate in foreign currency diminish, reducing pressure on the foreign exchange market.

In addition to export earnings, Vietnam's foreign currency supply also comes from foreign direct investment, remittances, tourism, and other international capital inflows. These sources help finance part of the foreign exchange needed for imports.

Consequently, the current trade deficit of more than $20.5 billion has not yet translated into significant volatility in the foreign exchange market, Minh argued.

Nevertheless, this stability would depend on the continued strength of foreign currency inflows and the recovery of exports in the coming months. If the trade deficit persists while capital inflows, remittances, or export revenues weaken, exchange rate pressure could intensify, he added.

Real risks lie elsewhere

Analysts are concerned not only about the size of the trade deficit but also about the economy's resilience if the deficit persists.

According to Tuan from the Institute of Vietnam and World Economy, Vietnam's foreign exchange reserves after the first half of 2026 were equivalent to only 1.9-2 months of imports, below the International Monetary Fund's recommended minimum of three months.

"This is an issue that deserves close attention," he emphasized.

Tuan said foreign exchange reserves are a crucial buffer that enables the economy to withstand fluctuations in exchange rates, capital flows, and international trade. As imports continue to expand, strengthening these reserves becomes increasingly important.

In the short term, a trade deficit is not necessarily problematic if imported goods are mainly used for production and subsequently generate export revenue, he stressed.

Tuan added that risks would emerge if imports continue to increase without corresponding growth in output, export orders, or value added, or if firms merely import materials for assembly while retaining only a small share of value domestically.

Beneath Vietnam's expanding trade volume lie structural challenges that remain unresolved.

Experts said the FDI sector currently accounts for more than 80% of total exports and dominates manufacturing and high-tech industries. By contrast, domestic enterprises contribute only around 20% of exports while recording a substantial trade deficit.

This highlights the limited participation of domestic firms in global supply chains, as well as constraints in technological capability and linkages with FDI enterprises.

Vietnam exports increasing quantities of electronics, computers, mobile phones, and other high-tech products, yet most components, machinery, and technologies are still imported.

As a result, rapid export growth does not necessarily translate into a proportional increase in domestic value added.

Unless Vietnam significantly raises its localization rate, it may continue relying on a model of importing components and materials for assembly before re-exporting finished products. Under such a model, trade volumes may continue to expand while spillover effects on domestic businesses, labor productivity, and technological capability remain limited.

On the positive side, Vietnam's trade continues to grow strongly. Exports maintain double-digit growth, manufactured goods account for more than 90% of total exports, and several product categories have achieved substantial scale.

However, in the long run, the quality of trade growth should be measured not only by total

Achieving this objective requires Vietnam to develop stronger supporting industries, improve domestic production of raw materials and components, deepen linkages between local enterprises and the FDI sector, and gradually strengthen technological capabilities.

The current trade deficit of over $20.5 billion is therefore not yet an alarming signal, provided that imported goods continue to support production and are transformed into future export capacity.

However, if domestic capabilities fail to improve, the trade deficit will become more than just an issue of the trade balance, it will also reflect Vietnam's continued dependence on imported inputs, foreign technology, and foreign-invested enterprises.

Ultimately, the key question is not merely when Vietnam will return to a trade surplus, but how much value the economy is able to retain from every dollar of exports.