How to protect the US export market?

The US market – the "promised land" bringing in more than 120 billion USD in export turnover for Vietnam in 2024[1] – has long been a driving force for the country's economic growth. But when President Donald Trump is re-elected on January 20, 2025 and relaunches the "America First" policy, the door to this "gold mine" is getting narrower than ever. Reciprocal tariffs signed on Feb. 13, 2025, along with tightening rules of origin and soaring operating costs, have turned the U.S. market into a tough arena. How can Vietnamese businesses not only survive but also develop in their largest market? This article will mention some specific solutions corresponding to the challenges that many businesses are facing to be able to overcome the tariff "storm" and maintain their position in the country of flags.

Strict control of the origin of raw materials

The Trump administration, with the goal of reducing the trade deficit (estimated to have a surplus of $110 billion with the US in 2024),[2] has turned the Rules of Origin (ROO) into a "shield" to prevent Chinese goods from "guiding" Vietnamese goods to avoid tariffs. U.S. Customs is no longer satisfied with simple paperwork, they require a perfect Form B Certificate of Origin (C/O), unscheduled factory inspections, Tier 2 and Tier 3 supplier lists, and a Regional Value Content (RVC) spreadsheet of 35-40%. Key industries such as textiles, footwear and electronics are under heavy pressure, because most of the raw materials, from fabrics, leather, and electronic components come from China, the country with the highest tariffs imposed by the US.

In fact, proving "pure origin" or "significant conversion" is not easy for Vietnamese businesses. Import invoices from China are often ambiguous, suppliers refuse to disclose detailed origins, and the process of applying for C/O at VCCI or the Ministry of Industry and Trade takes a whole week if the documents are flawed. A textile shipment, for example, may be subject to high taxes or refused customs clearance simply because it cannot prove the origin of the textile fabric in Vietnam. For small and medium-sized enterprises, which account for the majority in Vietnam, the lack of document management capacity and professional personnel makes this problem even more serious. If the requirements for origin are not met, the goods may be considered to have an unclear origin, putting businesses at risk of losing their large export markets.

To respond to this situation, businesses have no choice but to change themselves, including diversifying raw material sources, building a professional documentation system, training personnel with expertise in C/O and increasing the value of domestic products. Businesses should redirect to look for new raw material areas from countries that have trade agreements with Vietnam and less tariff risks from Japan, South Korea, and India, instead of being too dependent on China. In the early stages, the cost of accessing new raw materials may be high, but this may be a way for businesses to maintain their long-term ability to export to the US. The voucher system is also something that businesses need to pay attention to. Businesses should invest in management software to synchronize invoices, customs declarations, and production process explanation sheets. All information – HS code, quantity, value must match perfectly, ready to respond to unexpected inspections. The human resources team is also a core factor that helps businesses overcome the obstacles of US tariffs when they can organize training for personnel in their relevant departments on knowledge and skills in logistics and customs activities and prepare documents in the process of operation. Finally, autonomy in production and business activities is still a long-term and safe solution for businesses. Businesses can consider investing in the production of domestic raw materials (e.g. fabrics, components, ,...) to reduce dependence on imported raw materials. Of course, to do this, businesses need support and incentives from the State, and also determine a long-term business strategy and actively link with domestic raw material producers to create a closed and sustainable supply chain.

Optimize operating costs

Strict control of the origin of goods and the application of reciprocal tax policies not only put businesses at risk of goods not being cleared or subject to high tariffs, but also causing high selling costs, pushing up selling prices and losing price competitiveness compared to products from other countries/suppliers. For example, delays in customs clearance due to failure to prove the origin of goods can cause goods to be stored for longer, putting pressure on logistics costs for businesses. In the context that shipping freight rates in 2024 fluctuate erratically and tend to increase according to global geopolitical fluctuations as well as the impact of climate change, incurring additional storage and yard costs for a long time will be a very difficult problem for Vietnamese businesses. Not only that, the extension of the customs clearance time will also incur additional costs of cargo insurance and customs clearance fees for businesses. In particular, with a market that requires fast delivery speeds to meet retail demand (on Christmas, Black Friday,...) such as the US, a delay of a few more days for a shipment will also cause Vietnamese businesses to violate the contract, lose points in the eyes of partners or businesses have to choose another form of transportation such as by air, etc  where the shipping fee is many times higher than by sea. Vietnamese businesses, which rely on price advantages to compete with other suppliers, are now losing their competitive advantage due to spending too much money on logistics activities, which can make Vietnamese businesses unable to compete in the US market.

In order to somewhat reduce the burden of increasing the cost of goods, businesses can take into account solutions in improving their business activities as well as negotiating with partners in the most beneficial way.

First, in terms of internal options, businesses need to optimize their goods production process by pushing the network to apply technology and automation to production activities. For example, the widespread application of CNC machines for wood production, modern lines for textile systems to reduce labor costs and waste of raw materials. In addition, investment in product quality also needs to be taken into account by businesses in case they cannot afford to compete in price with exporters from other countries. Focusing on product development to improve quality can increase product value, thereby helping businesses reduce their dependence on price competition.

Secondly, negotiating with logistics units (shipping lines, warehouse lessors, insurers,...) is also something that businesses need to take into account, possibly through the signing of long-term contracts to get preferential and stable prices for a long time, avoiding the erratic fluctuation of transportation costs in the current period. In addition, directly negotiating with US import partners can also be an option that Vietnamese businesses need to take into account to share some of the logistics costs, instead of commitments to the quality of goods, which is a factor that businesses can autonomously.

In addition, after all, businesses still need to have the participation and support of State agencies in developing appropriate policies to support businesses in mobilizing capital, receiving lines, transferring modern technology, incentives for investment in the production of raw materials for strong export industries such as textiles and garments, etc  electronic components. Not only that, the State's participation in calling for cooperation between Vietnamese enterprises and partners from the US will also help expand cooperation opportunities and achieve more favorable trade conditions. Finally, the State needs to promote the reform and simplification of C/O issuance procedures as well as take stronger moves to support Vietnamese businesses in the face of barriers and requirements on the origin of goods.

It can be seen that the tariff policy of the Trump administration is not a "breeze", but a storm that tests the bravery of Vietnamese businesses. Strict control of origin and increased costs from taxes and logistics are threatening to wash away 120 billion USD of export turnover to the US, a market that Vietnam cannot afford to lose. However, if there is an appropriate plan to adapt and respond to these challenges, the competitiveness of Vietnamese enterprises will be significantly increased. At that time, the "resistance" of Vietnamese enterprises will be strongly strengthened in the face of market fluctuations, not only from the US but also from other countries in the context of the current "VUCA" world[3] .

Lawyer Nguyen Nhat Duong

HM&P Law Firm

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