The U.S. countervailing duty tax of 46% on goods exported from Vietnam is creating significant challenges for businesses. These difficulties not only affect cash flow and production capacity but also disrupt relationships with international customers. This article will analyze the challenges Vietnamese companies face, their preparation measures, and the necessary recommendations to overcome this issue.
Challenges Faced by Businesses Before U.S. Countervailing Duty Tax
Mr. Đỗ Ngọc Hưng, Head of the Vietnamese Trade Office in the U.S. (Ministry of Industry and Trade), stated that the U.S. countervailing duty tax of 46% on Vietnamese exports is quite high compared to other regional countries and competitors. However, certain goods such as steel, aluminum, automobiles, pharmaceuticals, semiconductors, wood, gold, and energy are exempt from this tax. He emphasized that this decree reflects the U.S. government’s stance on tightening trade policies to reduce the prolonged trade deficit. According to him, this issue is no longer purely economic, as it has become a national security threat. The tax will remain in effect until the U.S. President deems the trade imbalance has been managed.
Exported Goods On Their Way to the U.S.: High Risk of Loss
When goods are already exported and on their way or arriving at U.S. ports without clearance from customers, there is a high risk of rejection. This situation means businesses cannot recover payment for their goods and may have to return the items, incurring additional costs like shipping, storage, and insurance.
Inventory Surges When Partners Stop Receiving Goods
Many companies have completed their production orders but are instructed by partners to halt exports. This results in a sharp increase in inventory, disrupting financial plans and factory operations. As a result, cash flow is blocked while businesses still need to pay wages, warehouse rent, maintenance costs, and bank interest.
Frozen Raw Materials, No New Orders
Businesses that have prepared raw materials for the next 2–3 months of production are left with unused inventory when new orders are canceled. This results in a double loss for businesses: they lose orders and have capital tied up in unsold goods.
High Costs and Long Time to Shift Markets
To adapt, businesses must find alternative markets outside the U.S. However, this process requires a long time and significant costs, from changing business strategies to rebuilding distribution networks.
Risk of Shifting Production to Competing Countries
One of the biggest long-term risks is that multinational corporations may move production from Vietnam to competitor countries with lower taxes, such as Malaysia, Bangladesh, India, Indonesia, or Thailand. This directly threatens Vietnam’s position in the global supply chain.
The U.S. is Vietnam’s Largest Export Market
Losing market share in the U.S. – the largest export market for Vietnam for many years – will not only cause direct revenue losses for businesses but also lead to severe consequences for the national economy. The U.S. is the main consumer market for many key exports from Vietnam, such as timber, textiles, seafood, electronics, and footwear. Losing orders or reducing transaction volumes in this market means a sharp decrease in foreign exchange earnings, causing an imbalance in the trade balance.
The Double Impact on Global Growth and Export Demand
The high countervailing duty tax from the U.S. not only impacts bilateral trade but also creates a ripple effect, reducing global GDP growth. As import costs increase, U.S. consumers are likely to cut spending, particularly on goods from developing countries. This leads to a decrease in demand for imports, shrinking the market for Vietnam’s export sectors. A global slowdown will negatively affect supply chains, reducing domestic investment and jobs. Ultimately, Vietnam’s economy faces a double pressure: market loss and declining growth momentum.
Foreign Direct Investment (FDI) Flows Shift
The U.S. countervailing duty tax will create an unstable trade environment, reducing foreign investors’ confidence in Vietnam. Multinational corporations may consider shifting FDI flows to countries with lower risks and clearer trade policies. This puts Vietnam at risk of losing golden opportunities to attract investment in manufacturing, processing, and high-tech sectors. A reduction in FDI slows down the country’s economic modernization process, posing a long-term concern about the nation’s competitiveness.
Currency Exchange Rate Affected Negatively
The decline in export revenue and the reduction of FDI flows will decrease foreign currency supply, thereby putting pressure on the VND/USD exchange rate. When the exchange rate fluctuates sharply, especially in an upward direction, businesses that import raw materials will face higher costs, raising production costs. This creates a negative cycle: increased costs → higher prices → decreased purchasing power → reduced profits. Furthermore, exchange rate instability can make investors and trading partners hesitant to engage with Vietnamese businesses. Without timely exchange rate stabilization policies, inflation and macroeconomic imbalances may occur.
What Preparations Have Businesses Made to Cope with U.S. Countervailing Duty Tax?
Temporary Production Cost Reductions
Businesses are striving to reduce production costs to maintain operations. However, this reduction only achieves a small portion and is insufficient to offset the losses caused by the U.S. countervailing duty tax of 46%. Meeting the demands of the U.S. market with such high taxes is nearly impossible.
Shifting Markets and Diversifying Partners
In response to the U.S. countervailing duty tax, businesses need to quickly diversify markets and reduce reliance on the U.S. market. Gradually shifting to other markets is a crucial strategy to maintain long-term stability, safeguard revenue, and mitigate risks from harsh trade policies.
What Support Do Businesses Need from the Government?
Financial Support and Tax Policies
Businesses need financial support, including preferential loans and special assistance packages from the government. The government can also apply tax exemptions or tax refunds for businesses severely affected by the countervailing duty tax.
Legal Advice and Trade Promotion
Businesses require support from experts in legal and trade advisory services. Particularly for orders that have not yet been delivered, measures to protect rights and strengthen connections with customers should be enhanced to minimize risks.
Promoting Trade Activities
To minimize the impact of the U.S. countervailing duty tax, the government needs to promote trade activities and expand export markets. Supporting businesses to participate in international trade fairs will create opportunities to showcase products in more countries. This is an important solution to reduce dependence on the U.S. market, where trade barriers are increasing. Simultaneously, diversifying markets helps businesses enhance their resilience to global fluctuations. The government’s support is a key factor in helping businesses sustain production and export growth in this challenging context.
Conclusion
The U.S. countervailing duty tax is a significant challenge for Vietnamese businesses, but it is not insurmountable. Businesses need government support, including financial solutions, legal advice, and trade promotion measures. Meanwhile, shifting focus and diversifying markets will help businesses maintain growth in the face of this adversity.
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