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The Vietnamese dong is near a record low versus the US dollar, despite the US-Vietnam trade deal and strong Vietnamese economic growth for 2Q25. Having depreciated by 2.6% year-to-date, the VND remains close to the weak end of its trading band. The State of Vietnam (SBV) has been tolerating currency weakness by guiding the VND daily reference rate weaker since February 2025, likely aiming to offset the loss of export competitiveness stemming from higher US tariffs and ongoing trade uncertainty. This could persist for some time, as economic conditions will likely remain challenging in 2H25, despite US tariffs on Vietnamese goods being lower than initially feared.
Vietnam’s real GDP growth showed remarkable resilience and strength in 2Q25, accelerating to 8.0% YoY, bringing the expansion in 1H25 to 7.5% YoY. This was thanks to broad-based improvements, with goods exports front-loading during the 90-day US reciprocal tariff pause being a major driver. While we anticipate slower and volatile growth in 2H25 due to still-high global trade frictions, the surprisingly robust performance in 1H25 warrants an upward revision of our 2025 real GDP growth forecast to 6.5% (from 5.8%). US tariffs on imported Vietnamese goods will be at 20%, which was much lower than the punishing 46% announced on Liberation Day, and the new duties for key regional competitors (Malaysia: 25%, Indonesia: 32%, Bangladesh: 35%, Cambodia and Thailand: 36%) announced on July 7. However, uncertainty remains regarding the interpretation of transshipment goods that will face 40% US tariffs. White House trade advisor Peter Navarro said in April 2025 that approximately one-third of Vietnam’s exports are re-routed from China, while a Harvard study found ~2% to 16.5% of Vietnamese exports to the US being re-routed in 2021, depending on the measure. Vietnam’s export-oriented factory sentiment, based on the June 2025 manufacturing purchasing managers index, remained weak. New export orders in June 2025 experienced their sharpest decline since September 2021, matching the contraction in May 2023. We foresee a payback in goods exports in 2H25, as front-loading eases, which could be tough for domestic demand to fully offset.
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