Higher tariffs on China may boost Vietnam’s GDP through trade diversion. On April 9, US President Trump announced a 90-day delay in the implementation of reciprocal tariffs for all countries except China. In addition, the tariff on Chinese goods was increased to 125%, up from 54% previously announced on April 2. All other countries remain subject to a uniform 10% blanket tariff. The uniform tariff of 10% across the board could drag US demand down due to increased import costs; however, Vietnam could gain market share from China due to the higher US tariff imposed on Chinese goods. Overall, we expect that the gains from trade diversion will surpass the losses from reduced demand. We estimate that a 54% tariff on China and 10% on all other countries could lift Vietnam’s GDP by 1.7%, while a 125% tariff on China and 10% on all other countries could boost Vietnam’s GDP 2.5% in 2025.

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