Vietnam Attracts Global Manufacturers Despite U.S. Tariff Increases

Despite the imposition of steep U.S. tariffs, Vietnam remains an attractive destination for foreign investment, particularly in manufacturing and industrial real estate. This sustained interest is driven by favorable policy incentives, ongoing improvements to infrastructure, and Vietnam's growing prominence as a strategic alternative in the global supply chain restructuring away from China. [para. 1]

Vietnam maintains deep economic ties with the United States. In 2024, exports to the U.S. reached $136.6 billion, representing nearly 30% of Vietnam's GDP. Although tariffs have negatively impacted Vietnam's manufacturing sector, the country is showing signs of recovery, as the manufacturing Purchasing Managers' Index (PMI) modestly rebounded from 45.6 in April to 49.8 in May 2024. [para. 2]

Foreign direct investment continues at a strong pace, especially in manufacturing and real estate. By April 2025, newly approved foreign investment had risen to $13.82 billion, a 39.9% increase year-on-year. Of this, $8.9 billion was directed to manufacturing and $2.83 billion to real estate, the latter marking a 61.9% increase. [para. 3] The robust growth in industrial and construction sectors, at 7.42% in the first quarter of 2025, contributed over 40% of national GDP. [para. 4]

Industrial park development is a priority for Vietnam, as prime land in central areas is running out, shifting demand to secondary provinces. The country has 416 industrial parks covering nearly 1.29 million hectares, with ambitious plans to add 221 new parks, expand 76 more, and reconfigure 22 parks by 2030. [para. 5][para. 10]

However, challenges persist. Complex approval processes, lack of coordinated infrastructure planning, land acquisition difficulties, and poor regional connectivity hinder faster growth. Additionally, Vietnam's land supply system is distinct from China’s: land is mostly freehold and sold by developers at higher prices, leading to longer acquisition times. Industrial land rents are rising at about 6% per year, often exceeding mainland Chinese prices. [para. 6][para. 7][para. 8][para. 9]

BW Industrial, a key player in Vietnam’s industrial real estate sector founded in 2018, manages over 50 projects across 12 provinces, with land holdings of 10 million square meters and assets worth $3 billion. The company reports that relocating companies face unexpectedly high hardware costs, lower labor productivity, and infrastructure bottlenecks in Vietnam, countering the assumption that the country is automatically a cheaper alternative to China. [para. 11][para. 12]

From the Trump administration through the COVID-19 pandemic and into the current Trump 2.0 era, global supply chains have shifted from "just in time" to "just in case" models, prompting suppliers to localize operations. New regulations requiring stricter rules of origin are pushing companies to relocate entire supply chains abroad. Since 2023, Chinese firms continue expanding overseas, motivated by various factors ranging from order growth to cost reduction or shifts in domestic policy. [para. 13][para. 14][para. 15][para. 16]

Vietnam retains a competitive edge in Southeast Asia with disciplined labor and favorable labor costs, buttressed by government efficiency, political stability, and 17 free trade agreements. Nevertheless, ongoing trade tensions with the U.S. present uncertainties. [para. 17][para. 18]

Looking forward, outbound manufacturing from China is expected to intensify over the next three years as U.S.-China tensions persist. As lead manufacturers shift operations, their suppliers are also relocating, rapidly forming new supply chains in Vietnam and other countries, though rising land and labor costs—wages are increasing 6-7% annually—remain challenges. [para. 21][para. 22][para. 23]