Calm before the "turbulent wave"

There is a rush of information from the US government to impose tariffs on goods of countries importing into this country. The tax rate is increasing every time, putting more pressure and worry on businesses. Vietnamese businesses are not out of this worrying "spiral". However, in the face of a wave of evil, it is always a wise choice to calm down to find the right countermeasures.

Understanding the right policy is very important

On February 10, 2025, US President Donald Trump signed an executive order imposing a 25% tariff on steel and aluminum products imported into the United States. This decision takes effect from March 4, 2025 and there are no exemptions or exceptions for any country[1]. This decision is aimed at protecting the domestic industry and reducing dependence on foreign supplies. The U.S. administration expects that the high tariffs will help domestic steel and aluminum producers compete better, create more jobs and boost U.S. domestic economic development. At the same time, the new policy, increasing import tariffs, will help reduce dependence on foreign supplies, especially from countries with large steel and aluminum exports to the US such as Canada, Brazil, South Korea and Vietnam. This decision of the Trump administration is not a new step but makes it very difficult for countries that import large aluminum and steel into this market to maintain market share.

Multidimensional impact policy

It can be seen that this decision, along with a series of policies based on Donald Trump's "America First"[2] principle, could lead to retaliatory measures from trading partners, causing tensions and disturbances in global trade. The impacts of policies from the United States will always be closely monitored and assessed by countries and businesses around the world to take appropriate countermeasures. This U.S. policy is no exception.

With the United States, in addition to the above positive aspects, their consumption market is significantly affected such as: (1) Increasing product prices. Rising prices of imported steel and aluminum can lead to higher production costs in industries such as construction, automobiles and consumer goods, which in turn pushes up retail prices. (2)  Inflation risk. Rising production costs can contribute to inflation, affect consumer purchasing power, and increase the cost of living.

With Vietnam, because it is one of the leading countries exporting steel and aluminum to the US market. Specifically, in 2024, Vietnam will export about 983 million USD of steel and steel products, along with 479 million USD of aluminum and aluminum products to the US market[3]. Therefore, the new tax policy causes many disadvantages for the import of aluminum and steel into this market for relevant enterprises of Vietnam. The first and most obvious disadvantage is the reduction in competitiveness. High tariffs increase product costs, reduce the competitiveness of Vietnamese steel and aluminum in the US market. Second, the market share is shrinking. Due to high prices, demand from U.S. importers may decrease, leading to a decrease in export volume. Third, steel prices in the general market will drop sharply. Due to excess supply and difficulties in penetrating aluminum and steel products into the US market, it will lead to a decrease in world steel prices due to "supply greater than demand".

However, the policy of imposing new import taxes on aluminum and steel is not completely detrimental to Vietnam. Because since 2018, Vietnam has been subject to a tariff of 25% on steel and 10% on aluminum under Section 232. With the new ordinance, the aluminum tax rate increased to 25%, which is the same as steel. Therefore, this policy only affects Vietnam's aluminum products and Vietnam's aluminum enterprises. Therefore, enterprises with a high proportion of steel exports to the US such as Nam Kim Group, Hoa Sen Group, and Ton Dong A will be affected, but the impact is not significant. Moreover, this policy of the United States does not have any reductions or exceptions, which also helps Vietnamese businesses not to face too many disadvantages when having to compete directly and fairly with businesses from major aluminum and steel exporting countries to the United States such as South Korea,  Mexico, Canada or Brazil. In particular, when exceptions and exemptions are removed, countries with previous advantages such as Canada or Mexico will be forced to compete fairly with the rest of the country without being able to count on the beneficial terms of the previously signed agreement[4].

Source: The Saigon Times

What is the solution for Vietnamese businesses?

In the context of unpredictable fluctuations in the world market in recent years, proactively preparing appropriate countermeasures will help businesses minimize the risks of being caught up in fierce "trade wars" initiated by major countries. So what is the right and necessary solution in this context?

First, businesses need to diversify export markets. Seek new markets and reduce dependence on the US market by expanding to other markets such as ASEAN, EU, Japan and South Korea, where Vietnam has signed free trade agreements and has good trade relations, on the principle of "reciprocity" and mutual respect. At the same time,  Finding and taking advantage of signed FTAs to be able to use tariff incentives from these trade agreements to increase competitiveness is an immediate solution that businesses should look for.

Second, businesses need to improve quality and reduce production costs. Although this is an expensive and time-consuming solution, it is a fundamental and sustainable solution for businesses to promote their own competitiveness in the new context. Accordingly, businesses should invest in technology to improve the production process to improve quality and reduce product costs. In addition, optimizing management by applying effective management measures to reduce operating costs is also a way for businesses to compete fairly with major manufacturers in the world in this field.

Third, strengthen trade remedies for themselves. Businesses should note that it is important to monitor policies and regularly update changes in trade policy in the US and other markets to take timely response measures. Because above all, all preparations before "thunderstorms" are always necessary and should be done to minimize damage. At the same time, businesses need to focus on cooperation and close contact with functional agencies, such as the Ministry of Industry and Trade, the Ministry of Planning and Investment, and the Department of Industry and Trade of provinces and cities to grasp appropriate and official information and policy guidelines to have more optimal solutions in responding to new developments in policies and markets. In addition, when facing trade remedy lawsuits, businesses need to cooperate, work closely and carefully with the authorities to protect their interests.

Finally, businesses should develop high value-added products. Diversifying products by shifting production to high-value-added steel and aluminum products, meeting the needs of niche markets that have not been explored by many other businesses and countries is also a long-term solution that businesses should aim for. Because the development of specific and high-value products will help businesses promote customer demand in the same product labeling market. To do this, businesses need to focus on R&D (product and market research) to understand the needs and trends of each market to develop suitable products.

In general, the US imposes a 25% tariff on imported steel and aluminum poses a great challenge for Vietnam's exporters. However, by diversifying the market, improving product quality, and strengthening trade remedies, businesses can minimize negative impacts and continue to develop sustainably amid unpredictable market fluctuations in the coming time.

Lawyer Nguyen Van Phuc

HM&P Law Firm