Viet Nam and Japan: What do US tariffs mean for Asia's efforts to diversify trade away from China?
Following the first China-US trade war and concerns about economic coercion from China as well as supply chain resilience, many countries in the Indo-Pacific have pursued ‘China plus’ trade strategies in attempts to reduce reliance on China, encouraged by the US. At the same time, major companies have sought to reduce their reliance on China in their supply chains. But what do the US’ sweeping tariffs mean for countries in Asia who have been heeding the US’ call to diversify trade away from China, many of whom have been on the receiving end of some of the largest tariffs? Ho Chi Minh City-based Haike Manning and Tokyo-based Akiko Fukushima share perspectives from on the ground.
*A lot can happen in 24 hours, and the perspectives given below were written prior to the announcement of a 90-day pause in the implementation of tariffs.
Viet Nam
Haike Manning, former New Zealand Ambassador to Viet Nam (2012 to 2016)
With a new administration in Washington, a lot has changed since former U.S. Secretary of Agriculture Tom Vilsack met with Vietnamese Vice President Vo Thi Anh Xuan in Washington, D.C. in March 2024
President Trump's imposition of a 46 percent ‘reciprocal’ tariff on Vietnamese exports to the US is potentially a significant blow to Viet Nam's export-driven economy. The US is Viet Nam’s largest export destination, taking nearly 30 percent of its exports in 2024, valued at over US$119 billion.
By way of comparison, New Zealand’s most important export market, China, takes approximately 25 percent of our exports. Imagine how New Zealand would be feeling if China suddenly imposed a 46 percent tariff on our exports: that’s the position Viet Nam finds itself in.
This development threatens Viet Nam's ambitious goal of achieving GDP growth of eight percent in 2025. Prime Minister Pham Minh Chinh has reaffirmed this target despite the looming tariffs, emphasising the need for economic restructuring and market diversification. However, Viet Nam’s National Statistics Office has estimated that even a 10 percent reduction in exports to the U.S. could decrease GDP growth 0.8 percent per annum.
Vietnamese President Pham Minh Chinh meets with his US counterpart in 2023 during warmer times for the bilateral relationship
The tariffs also call into question the "China Plus One" strategy, where in recent years, encouraged by the US government, US multinationals have been shifting their investment and manufacturing operations from China to countries like Viet Nam. For example, Nike now produces about 50 percent of its global footwear and 28 percent of its apparel in Viet Nam, employing over 130,000 workers. Its shares are taking a hammering as investors expect supply chain disruptions, increased costs and falling demand in the US market.
Viet Nam’s leadership has demonstrated notable pragmatism, both in the lead up to President Trump’s announcement, and after. In recent weeks, Viet Nam had indicated a willingness to lower its tariffs on US goods, and also to significantly increase purchases of US goods, particularly LNG, agricultural goods and aircraft/defence equipment.
Since the tariff announcement, Viet Nam’s top leader, Party General Secretary To Lam, has spoken to President Trump, proposing removal of all tariffs between the two countries, and a 90-day delay on implementation of the tariffs, to enable further bilateral negotiations. Viet Nam has already dispatched a delegation, led by Deputy Prime Minister Ho Duc Phoc, to Washington for further discussions with the Trump administration.
Party General Secretary To Lam has proposed the removal of all tariffs between Viet Nam and the United States
Given Vietnam’s strong trade, investment and security relationship with the US, Viet Nam’s government and businesses are unlikely to make any sudden moves in the short term. At the same time, Viet Nam has one of the strongest free trade agreement (FTA) networks in the region, including the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the EU-Viet Nam FTA, which offers diversification options in future.
Coincidentally, China’s President Xi Jinping will also visit Viet Nam in mid-April, with trade, infrastructure and investment links likely to be high on the agenda.
Japan
Akiko FUKUSHIMA, Senior Fellow, The Tokyo Foundation
President Donald Trump addresses the media prior to the signing of the U.S-Japan Trade Agreement and the U.S.-Japan Digital Trade Agreement in 2019
President Trump’s unilateral announcement of baseline and ‘reciprocal’ tariffs, even on its allies and partners – including a 24 percent tariff in the case of Japan in addition to the already-announced 25 percent on Japanese automobiles – caused a major stir in Japan.
This announcement calls to mind the Smoot-Hawley Tariff Act of 1930, which imposed significant tariffs on a swathe of imports to the US and ended up deepening the Great Depression. Japanese stocks fell sharply the days following the harsher-than-expected announcement.
Depending on how long these tariffs will be maintained by the US, the Japanese economy will likely be hard hit. Moreover, Southeast Asian countries, where Japanese businesses have shifted their investments from China for supply chain resilience, have been hit with extremely high tariffs: Cambodia (49 percent), Viet Nam (46 percent), Thailand (36 percent) and Indonesia (32 percent). This concerns Japan both from the perspective of geopolitics and geoeconomics. Should the US maintain these tariff decisions, Southeast Asian nations may reconsider their relations with the US, while some in the Indo-Pacific may wish to seize the soft power gap left by the US.
Discussion in Japan itself has not yet touched on implications of the tariffs for our alliance with the US.
Japanese Prime Minister Shigeru Ishiba described President Donald Trump as "sincere, very powerful and strong willed," following their meeting in Washington, D.C. in February
While many are criticising the announcement and some are opting for retaliation by placing tariffs of an equal amount on imports from the US or other means, Prime Minister Shigeru Ishiba on 5 April announced his intention to negotiate with President Trump and on 7 April has agreed with President Trump to nominate ministers in change of negotiation by the phone conversation.
Although we do not know how President Trump calculated the ‘reciprocal’ tariff and do not appreciate this action towards Japan, especially after the Japan-US alliance was described by the two countries’ leaders just two months ago as entering a “new golden age”, Japan plans to propose a comprehensive package to respond to President Trump’s complaints about Japanese non-tariff barriers.
The 'new golden age' of US-Japan relations was short lived
Witnessing Canada and Mexico’s use of USMCA (the free trade agreement between Canada, Mexico and the United States), Japan may be able to similarly leverage the US-Japan Trade Agreement on market access for agriculture and industrial goods, agreed after the US pulled out of Trans-Pacific Partnership (TPP) discussions during the first Trump presidency.
Meanwhile, over the longer term, Japan must consider how it acts with like-minded countries for more durable trade arrangements, the enforcement of common rules, and how it can support Japanese businesses to manage the impact to prevent the global economy from falling into a negative spiral.
About the authors
Haike Manning is the former New Zealand Ambassador to Viet Nam (2012 to 2016). His 20-year career as a New Zealand diplomat spanned key global economies (India, Brazil, China, as well as Viet Nam), with a strong focus on supporting trade, business and education outcomes for New Zealand.
Since 2017, Haike has been based in Ho Chi Minh City, where he founded LightPath Consulting Group, a consulting business supporting international education providers to engage effectively in Viet Nam.
Dr Akiko Fukushima is currently a Senior Fellow at the Tokyo Foundation for Policy Research, Japan with a Doctoral degree from Osaka University and M.A. from the Paul H. Nitze School of Advanced International Studies (SAIS), Johns Hopkins University.
She is a Professor at the School of Global Studies and Collaboration, Aoyama Gakuin University and Director of Policy Studies at the National Institute for Research Advancement (NIRA). Concurrently, Dr Fukushima is a member of the International Advisory Board of the Hague Journal of Diplomacy. She has also been on the Japanese government committees on foreign, defence and security policies.
The Foundation's Asia in Focus initiative publishes expert insights and analysis on issues across Asia, as well as New Zealand’s evolving relationship with the region.
