Vietnam recorded an economic growth of 8.02% in 2025, the best since 2011, and total exports reached $475 billion, a rise of 17% in comparison with the previous yr. Exports to the United States increased by up to twenty-eight%, to USD 153.2 billion, generating a record trade surplus with Washington of just about USD 134 billion (thrice greater than in 2018).
These numbers make Vietnam appear to be the right answer to a long-standing query: Who can replace China in the worldwide supply chain?
But the information behind them tells a more complex story. Vietnam didn’t develop by separating from China. Rather, it developed by becoming a part of a production chain that moved out of China.
Not a alternative, but an extension
Data from the Lowy Institute, which uses trade value-added data, show Vietnam’s position in the worldwide supply chain could be more accurately described as a complementary extension of China’s vast production network, quite than a competitor.
As Vietnam’s exports to the United States increased after 2018, imports from China increased in parallel. This pattern became much more visible in 2025. Vietnam’s imports from China increased by almost 30% in a single yr, reaching $186 billion.
Vietnam’s imports from China increased by almost 30% in a single yr, reaching $186 billion. Vietnam’s total imports consisted of 93.6 percent of production inputs: raw materials, components and machinery.
China supplies the components, Vietnam assembles them, and the finished products are then shipped to the United States and Europe. This is how this model works.
Importantly, this just isn’t a straightforward transhipment scheme. The Lowy Institute notes that Vietnam’s total imports increased by 19% in 2025, almost as much as its exports, which increased by 17%.
This pattern indicates that Vietnam’s share of domestic value added has not been diluted. Only the composition of import sources has modified: China has replaced South Korea, not Vietnam’s own contribution.
The industry depth behind Vietnam’s export boom
What separates Vietnam from being merely a diversionary conduit is the evidence of industrialization on the bottom.
The manufacturing sector’s GDP increased by 10 percent in 2025. Vietnam created 265,000 recent manufacturing jobs. Consumer electronics production grew by 21 percent, far outpacing the clothing and footwear sectors. Employees’ monthly remuneration increased by 6%.
Realized FDI reached USD 27.62 billion in 2025, the best level in five years, of which 82.8 percent absorbed the manufacturing and processing sectors. Investments didn’t come exclusively from China. South Korea, Taiwan and Japan have collectively invested about $7 billion annually in Vietnam over the past few years.
As a result, Nike produces greater than half of its footwear in Vietnam, Adidas sources almost 40 percent of its global production from the country, and Intel operates one among the most important chip assembly plants in Ho Chi Minh City with an investment of $1.5 billion. Foxconn, Apple’s predominant manufacturing partner, continues to expand its facilities in Bac Giang.
Success creates recent pressure
However, Vietnam’s rapidly growing trade surplus has also complicated its situation. The Trump administration imposed a 20 percent tariff on Vietnamese goods starting in August 2025, after previously threatening to impose a 46 percent tariff in April 2025.
One of the predominant reasons for the pressure was Washington’s suspicion that Vietnam was getting used as a conduit for Chinese goods to avoid higher tariffs. In response, the United States imposed a separate 40 percent tariff on goods suspected of passing through such arrangements.
These pressures have exposed a long-standing structural weakness: most multinational firms operating in Vietnam proceed to source their components from China, while Vietnam largely serves as the ultimate assembly point.
A 40% tariff enforcement mechanism has been in place since June 2026, but the factors remain unclear. There isn’t any official threshold for the way much Chinese content would lead to a product being classified as transhipment.
Companies are required to reveal significant transformation through detailed production documentation, but the precise standards haven’t yet been defined.
The challenge of moving up the worth chain
Vietnam is aware that this model has its limitations. In 2025, Secretary-General Tô Lâm openly warned that the country was “stuck at the bottom end of the worth chain” and required major structural reforms.
The government’s response is to enter the semiconductor industry, a sector long dominated by economies akin to Taiwan, South Korea and the United States.
In March 2025, Vietnam approved the development of its first $500 million wafer manufacturing plant, scheduled to start operations in 2030. It just isn’t a complicated chip foundry on the dimensions of TSMC, however it marks Vietnam’s entry into chip production quite than remaining solely in assembly.
That door opened wider after the Trump administration removed Vietnam from the U.S. export control list that previously included the country alongside China and Russia, limiting access to strategic technologies including advanced semiconductor manufacturing equipment.
Perhaps the world has found a substitute for “Made in China”. For now, nonetheless, this alternative still cannot function without China itself.
