Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
The U.S.-Vietnamese commercial relationship has grown since the United States lifted its trade embargo against Vietnam in 1994 and the two countries renewed diplomatic relations in 1995. After 25 years of normalizing relations, the U.S. is now Vietnam’s largest export market, worth nearly USD 70 billion in 2020, and a major source of foreign direct investment, helping fuel Vietnam’s remarkable economic growth. The United States has also benefitted from stronger trade ties. Over the past five years, Vietnam’s export revenue to the U.S. surged 230 percent, while its import value was up by more than 175 percent. This country of over 98 million consumers, with a positive view towards the United States, exhibits the demographics needed for continuous growth over the next 20 years, and it is a rising star among Asia’s bustling economies. Previously, U.S. firms were slow to take advantage of the growing opportunities that Vietnam presented; however, U.S. firms are increasingly looking towards this market as a key component to their growth strategies in Asia. This Country Commercial Guide is intended to introduce U.S. exporters to doing business in Vietnam and provide the foundation necessary for a firm to take the initial steps needed to pursue business here.
Top five reasons why U.S. companies should consider exporting to Vietnam:
- The fastest growing middle and affluent class in the region, providing the right demographics for growth and receptivity to U.S. products and services.
- Over the past few years, Vietnam has been active in signing bilateral trade agreements with countries throughout the world.
- Strong GDP growth expected to continue for the medium-term.
- Large population of over 98 million consumers.
- Political stability in a region known for its uncertainty.
Since the launch of Doi Moi (Renovation), in 1986, Vietnam has moved from a subsidiary economy towards a globally integrated, socialist oriented market economy. Since 1990, Vietnam’s average economic growth rate of 5.5 percent has been second only to the People’s Republic of China (PRC) in Asia. In 2019, Vietnam’s GDP growth was more than 7 percent, and 2020 marked a growth rate of 2.9 percent, placing Vietnam among a handful of nations globally that reported positive economic growth amid the pandemic. Vietnam started 2021 with an expected economic growth rate of 6.5 percent, before climbing to 7.2 percent to stand first among ASEAN countries in 2022, according to the International Monetary Fund. Research from Fitch Ratings said that Vietnam’s economy remains robust due to a rise in exports and domestic activity. Additionally, manufacturing operations shifting from PRC to neighboring nations, in part because of PRC’s relationship with The United States, is also contributing to the growth. With these ongoing trends, Vietnam will be one of the most important U.S strategic partners in Asia Pacific.
This strong economic growth has resulted in a booming and optimistic middle class. During its plenary session in October 2020, Vietnam Communist Party’s Central Committee expected that Vietnamese people should earn around USD 5,000 per year on average by 2025, up from USD 2,750 in 2020. . Per Knight Frank’s the Wealth Report, “the dramatic growth of ultra-high net worth individuals in Asia is set to be reinforced by stellar growth rates in several countries, including Vietnam, which is expected to see its ultra-wealthy population rise by 170 percent to 540 over the next decade – the highest rate of growth in the world. Millionaire numbers are expected to jump from 14,300 to 38,600 over the same period.” This growth rate exceeds neighboring PRC and India.
The 2001 U.S.–Vietnam Bilateral Trade Agreement (BTA) transformed the bilateral commercial relationship between thetwo nations and accelerated Vietnam’s entry into the global economy, with Vietnam joining the World Trade Organizationl (WTO) in January of 2007. Since the BTA, bilateral trade increased from USD 2.9 billion in 2002 to over USD 75.7 billion in 2019, transforming Vietnam into the seventhlargest source of U.S. imports and 27th largest destination for U.S. exports. Vietnam was a major beneficiary of enhanced trade ties; in 2020, Vietnam held a USD 63.4 billion trade surplus with the United States.
U.S. goods exports to Vietnam in 2020 were nearly USD 10 billion, slightly decreased from USD 10.9 in 2019 and an increase of 270 percent compared to 2010. The top categories of U.S. goods benefiting from the increase of exports were electrical machinery, cotton, aircraft, plastic and machinery products.
U.S. export of agricultural products account for 30-40 percent of total exports to Vietnam, and the country remains a top ten market for U.S. food and agricultural products and it is the fastest growing market in the top ten. Furthermore, industrial inputs continued to see steady growth as Vietnam continues to import machinery, chemicals, instruments, and software to support its growing industrial sector.
U.S. businesses are enthusiastic about Vietnam’s commercial opportunities. A 2020 survey by AmCham and Economic Research Institute for ASEAN and East Asia (ERIA) in the ASEAN region revealed that 61.54 percent of U.S. firms are considering shifting operations to Vietnam from PRC, making Vietnam the most frequently cited alternative out of all ASEAN countries.
- VOV: https://vovworld.vn/en-US/current-affairs/us-vietnams-largest-export-market-930843.vov
- VOV: https://vovworld.vn/en-US/news/the-us-is-vietnams-biggest-export-market-968890.vov
- Worldometers: https://www.worldometers.info/world-population/vietnam-population/
- PRC-briefing: https://www.china-briefing.com/news/vietnam-overtaking-china-us-export-manufacturing/
- Macro Trends: https://www.macrotrends.net/countries/VNM/vietnam/economic-growth-rate
- Tuoi tre News: https://tuoitrenews.vn/news/business/20210414/vietnam-economy-to-expand-7-annually-in-202122-fitch-ratings/60368.html l
- Saigoneer: https://www.saigoneer.com/vietnam-news/20216-imf-predicts-vietnam-s-economic-growth-rates-will-top-asean-in-2022
- Congressioal Research Service: https://fas.org/sgp/crs/row/IF11107.pdf
- Congressioal Research Service: https://crsreports.congress.gov/product/pdf/IF/IF11753
- Census: https://www.census.gov/foreign-trade/balance/c5520.html
- Office of the United States Trade Representative
- AmCham-ERIA Survey