Trump’s Trade War Created This Boomtown in Vietnam. Now Tariffs Could Topple It.

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In less than a decade, a manufacturing powerhouse has emerged in northern Vietnam. Thousands of acres of land have been reclaimed from the ocean to create a new economic zone and a deep-water port designed to handle exports directly to the United States. Today, Haiphong has one of the busiest ports in the world, exporting more than $26 billion worth of products. This is how Haiphong became the center of Vietnam's economic growth and how Trump's new trade policies could threaten its progress.

Haiphong Under Trump’s First Term

Haiphong is located on the northern coast of Vietnam and is home to one of the country's main ports. It is also close to Shenzhen, a major Chinese technology hub. After Trump imposed tariffs in his first term, investment in the region increased as companies sought a manufacturing alternative to China.

Companies such as LG Electronics and Pegatron, one of Apple's main suppliers, shifted some of their production out of China to Haiphong around 2018. Deep C, a company that rents land and pre-made factories, spent billions transforming secluded fishing areas into vast industrial zones. This attracted more than 170 clients, including Pegatron and Foxconn. One business leader even described Trump as "one of my best salesmen ever" because his tariff policies encouraged foreign companies to consider investing in Vietnam.

Infrastructure Expansion

The influx of foreign investment triggered a massive expansion of infrastructure, creating more channels for goods to pass through. In 2018, a new deep-water port began operations with direct access to the South China Sea, through which one-third of global trade passes. That same year, an expressway connecting Haiphong directly to Shenzhen was completed, reducing travel time to approximately 12 hours. The result was an economic boom. In 2019, just before the pandemic, Haiphong's economy grew by more than 17%, more than double the national growth rate. Today, the city’s economic growth continues to surpass the rest of Vietnam.

Vietnam and Trump Tariffs Today

With this manufacturing boom came a surge in trade, especially with the United States. In 2018, Vietnam had the sixth-largest trade surplus with the U.S. Today, it has risen to third place, surpassing Germany. Some analysts argue that Chinese companies are using Vietnam as a backdoor to avoid U.S. tariffs. The increase in Vietnam's exports to the U.S. closely mirrors its rising imports from China in the same product categories.

The second Trump administration has taken a stricter approach, focusing more on reducing Chinese imports into the U.S. Some experts predict that Trump will find a reason to impose tariffs on Vietnam. The uncertainty surrounding potential tariffs creates difficulties for businesses planning their expansions. Without a clear understanding of future trade policies, companies may freeze investments and hold onto cash, which could slow global economic growth.

Vietnam’s Future

In the long term, Vietnam's strong economic foundation positions it to become the next global manufacturing hub. The country has free trade agreements with more than 25 countries, which could help redirect exports to other markets if U.S. tariffs become a challenge. Today, Vietnam is one of the fastest-growing economies in the region, with several major infrastructure projects in Haiphong still underway.

Six additional berths are under construction at Haiphong's Deep C port. A railway project, worth more than $8 billion and partially funded by Beijing, will ultimately connect Haiphong to China, making trade between the two nations more efficient. The railway is expected to be completed by 2030.

With Trump's return to office, companies must become even more flexible. The most optimal supply chain is not necessarily the cheapest but the most adaptable. Businesses need to be able to shift production between locations like China, Vietnam, and Mexico depending on trade policies. This requires greater investment in production capabilities but also provides resilience against trade disruptions.

These investments could help companies in Haiphong weather the coming challenges and allow Vietnam's economy to remain strong, even in the face of President Trump's zero-sum approach to trade.