Will Vietnam be the Next “China” as the Global Supply Hub After Trump’s Tariffs

The newly elected Trump administration has implemented an aggressive foreign policy pattern. It referred to the recent news evidence, which shows that Trump has implemented many strict and aggressive trade policies for some countries, such as Canada, Mexico, and China, which indicates an aggressive approach in the prolonged examination of his foreign policy since day one in the office. Furthermore, among all the tariffs implemented, one that should be highlighted is the one toward China.

The case of tariffs toward China is special because China is regarded as one of the world’s most important supply chain hubs. Henceforth, by the implementation of these tariffs, there could be a huge shift in the global supply chain toward a new hub. One potential new hub is Vietnam, which has become one of the rising stars of the latest global supply chain hub because of its great potential. Henceforth, in this article, I will discuss the potential and possible outcomes of Vietnam as the new rising giant of the global supply hub as an alternative to China and how then Vietnam can foster its role in the global supply chain network.

The “Unseen” Tariffs Impact

Trump has imposed a striking tariff on China under the International Emergency Economic Powers Act (IEEPA). This tariff has impacted the trade dynamics between the two countries, thus raising the tension between the two nations. In his early time in the office, he initially set a 10 percent tariff in February 2025; hence, it later increased to 20 percent on March 4, 2025, as part of President Trump’s broader strategy to address trade imbalances and fentanyl trafficking concerns. Toward this aggressive policy, China responded with retaliatory tariffs on $13.9 billion worth of U.S. exports with rates of 10 percent and 15 percent and later expanded its measures, targeting $2.9 billion in U.S. agricultural exports at 15 percent and another $16.6 billion at 10 percent.

This tit-for-tat escalation mirrors the 2018-2019 trade war when China imposed tariffs on over $106 billion worth of U.S. goods in response to earlier U.S. trade restrictions. Economic models from the Tax Foundation suggest that these 2025 tariffs, alongside similar policies targeting Canada and Mexico, could reduce U.S. GDP by 0.4 percent before accounting for foreign retaliation, with employment projected to decline by 82,000 full-time equivalent jobs. Despite these prolonged aggressive tariffs from President Trump, which have led to a decline in imports from China, in some way, they have not significantly altered the overall U.S. trade balance, as many firms have diverted supply chains to other countries. Henceforth, this shift thus will lead toward a gradual transformation in global trade and supply chain patterns toward reinforcing the trend of manufacturing relocation to alternative hubs like Vietnam.

An Alternative: Vietnam

Vietnam has emerged as a rising star in the global supply chain due to a combination of strategic location, favorable trade agreements, cost advantages, and geopolitical shifts. It is because Vietnam has positioned itself as a prime destination under the “China Plus One” strategy, thus attracting significant foreign direct investment (FDI) in manufacturing. This positioning hence pushes companies to seek alternatives toward China because of the rising tariffs and geopolitical uncertainties.

Vietnam’s active participation in major trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) has opened access to global markets and reduced trade barriers, thus enhancing its export potential. Vietnam has also participated in various free trade agreements worldwide, thus fostering its role as a global trade playmaker.

Besides the CPTPP and the RCEP, Vietnam has also been involved in various free trade agreements. According to the source from Vietnam Briefing, Vietnam is currently a signatory to 18 active and planned bilateral and multilateral free trade agreements. Here are some of the items on the list:

List of Vietnam’s Free Trade Agreements

Source: (Vietnam Briefing, 2024)

This various involvement in trade agreements thus reflects a huge potential for Vietnam as a new global supply hub. Hence, it offers great potential to increase trade volume between Vietnam and many countries around the world. This potential can become a great market range for global investors and the flexibility as a global supply hub.

Other than the great potential of market reach from the FTA agreements, such as fostering the position under the “China Plus One” strategy, Vietnam’s logistics infrastructure, industrial parks, and government-backed policies also support its emergence as a key hub. It has some extraordinary improvements in digital transformation, blockchain integration, and semiconductor production, reinforcing its role in high-tech manufacturing. One of the notable moves that should be highlighted is Resolution No.57-NQ/TW, which explicitly makes science, technology, innovation, and digital transformation the top priorities for enhancing national competitiveness and attracting high-quality investments, particularly in industrial manufacturing. This policy from the Vietnamese government thus reflects a strong commitment to developing Vietnam as a global supply hub, especially in the industrial manufacturing sector, to increase national competitiveness and attract high-quality investment around the globe.

Lastly, with lower labor costs, a skilled workforce, and a neutral stance amid U.S. and China tensions, Vietnam will continue to gain traction as a resilient and competitive alternative to China in global supply chains. The labor costs in Vietnam are relatively low compared to the other costs in the region. The average wage in urban areas is around US$356,96, while the rural area comes up with around US$291,34. With this low wage cost, Vietnamese labor also has another plus point with its quality. Based on the PISA score, Vietnam is positioned as number two, prior only to Singapore, and it is also ranked 31 from 81 countries globally. This is reasonable because the government has put various efforts into promoting the quality of human resources in Vietnam. Henceforth, with this good quality of labor and low wage cost, Vietnam could become one of the most strategic places for a global supply hub.

What are the possible future implications?

Vietnam’s rise as a global supply chain hub carries far-reaching implications for international trade, economic growth, and geopolitical dynamics. As companies diversify their manufacturing bases through the “China Plus One” strategy, Vietnam’s expanding role will contribute to a more resilient and less centralized global supply chain that reduces the reliance on China and, hence, mitigates risks associated with geopolitical tensions. Its strategic position in Southeast Asia, coupled with favorable trade agreements (CPTPP, RCEP, EVFTA) and strong government incentives, positions Vietnam as a major global manufacturing and export powerhouse, particularly in high-growth sectors like electronics and semiconductors.

Furthermore, the surge of foreign direct investment (FDI) and the nation’s emphasis on digital transformation and sustainability will propel economic growth that positions Vietnam as a significant participant in regional and global trade dynamics. Additionally, its impartial position in US-China relations enables it to draw investments from various international entities that have the potential to redistribute the economic power within the Asia-Pacific region. Nonetheless, this expansion is accompanied by heightened competition from other developing economies and the necessity of tackling infrastructure deficiencies and elevated logistics expenses.

Henceforth, further future implications that could possibly occur from this rising trend are the increasing tension and diversity of the Global Supply Hub. Because of these prolonged tariffs from the U.S., China may have to do various maneuvers to maintain its domination in the global production line. Thus, this could lead to an approach where China might reach out to Vietnam to become its close ally in the international trade arena. This move can be underscored by the similarity of the political system between Vietnam and China and also the geographical proximity between Vietnam and China.

Vietnam will be faced with various dilemmas, and if it wants to rise as a new independent global supply hub, then it has to be prepared for the emerging threats from the Chinese government. However, if they want to play it safe, Vietnam will continue to foster its role as a manufacturing hub while also engaging in a more intense relationship with China. Henceforth, one simple question remains to be discussed: could Vietnam become an independent rising star global supply hub, or is it just a proxy of the Chinese-impacted tariffs hub amid its impartial position toward the US-China tension?