With 46% tariff shark in the tank, Vietnam businesses must broaden their markets

The fish, trying to evade the shark, would keep moving and remain fresh until the vessel reached shore.

A similar "small shark" has just appeared in the economy.

U.S. President Donald Trump has announced new import tariffs targeting countries that have large trade surpluses with his country.

The tariffs serve as a negotiation tool in the U.S.'s relations with various countries, including allies.

Vietnamese goods now face import tariffs of 46%, and key export sectors like wood, textiles, footwear, and electronics will suffer severely as a result.

Vietnamese businesses cannot rely solely on government negotiations to deal with the tariffs; they need to take the initiative, explore new markets and increase their competitiveness.

As a company focused on cross-border trade and investment, we follow one rule: never rely on a single market.

In today's unpredictable business climate, having a backup plan is no longer optional - it is imperative.

This urgency is especially true for Vietnam, over 30% of whose exports go to the U.S. alone.

To reduce vulnerability, businesses must diversify. Besides established destinations like Japan, South Korea, China, and the EU, they should also explore emerging markets in Latin America and Africa.

But instead of spreading their resources thin, they should focus on markets with high potential and fewer barriers to entry.

Among these options, trade with the EU stands out. This article focuses on the EU as a viable alternative, along with other ways to soften the blow from U.S. tariffs.

Containers at the Port of Los Angeles, California, U.S., Oct. 17, 2024. Photo by Reuters

The EU is a major economic bloc with 27 countries, 450 million people and a sixth of global GDP.

It is the world's second largest importer after the U.S. and the source of 40% of global FDI.

Thanks to the EU-Vietnam Free Trade Agreement, new export opportunities have opened up, but Vietnam has not yet fully tapped into them.

There are several strategies that can help, including shifting exports from the U.S. to the EU, using the EU as a transit hub to reach nearby markets like the U.K., Turkey and Eastern Europe, and importing technology and goods from the EU.

Others include attracting EU investment into Vietnam and engaging in strategic partnerships, mergers, and acquisitions.

Besides, Vietnamese businesses can make use of EU trade promotion programs, financial support, and investment initiatives, particularly in clean energy and technology.

From my experience in expanding into foreign markets, acquiring a local company is often the smartest move.

Rather than starting from scratch, a takeover provides legal status, brand recognition, an existing customer base, and infrastructure.

This approach speeds up entry and lowers risks. Many EU firms are open to acquisition at reasonable prices.

Entering the EU market, however, is no easy task. Companies must meet strict technical standards, navigate complex environmental, labor and food safety regulations, face high compliance costs, and compete with countries that already have deep trade ties with the EU.

But backing away from the EU now would mean losing a valuable trade partner while also remaining vulnerable to unstable trade policies.

Vietnam must view this as both a challenge and an opportunity. By aiming higher and meeting EU standards, Vietnam can leverage its unique position as one of only four Asian countries with a comprehensive FTA with the EU besides Japan, South Korea and Singapore.

For long-term growth, Vietnam can also learn from the way China, South Korea and Japan operate. Their global success relies on coordination between government, embassies, industry trade groups, and large corporations.

They move as a team, with a shared strategy and strong support system.

China's overseas expansion strategy is a good example. Large companies lead the way and smaller ones follow. Banks support major acquisitions abroad. Businesses buy local tech firms to speed up innovation.

Investments in ports and logistics cut costs, streamline supply chains and sustain market competitiveness. This has helped China evolve from a manufacturing base to a global technology and finance hub.

South Korean and Japanese companies take a similar approach in the EU. They enter markets in groups, establish industrial zones, form partnerships and share support networks, just as they have done in Vietnam.

These countries also take bold steps to attract foreign investment and technology. They do not wait for investors to come to them. They build infrastructure, launch international campaigns, send representatives overseas, and build trust in their legal systems, workforces, and policies.

If Vietnam wants to draw high-quality investment in technology, clean energy, education, and healthcare, it must act now.

That means opening more reverse investment promotion offices in major financial hubs, connecting global firms to key industrial zones, and proving that Vietnamese companies can deliver long-term value.

Vietnam must lead, not wait to be chosen.

To access new markets, Vietnamese companies must also work together. They need to align with government policies, use available support systems, and build strong networks that allow them to compete globally.

A 46% tariff is no small threat. It is a wake-up call. Companies that move too slowly or fail to adapt may not survive.

But those that take decisive action, fixing supply chains, entering new markets and adopting smarter strategies, can turn this challenge into a real opportunity. The goal is not just to survive, but to drive Vietnam's long-term growth.

*Luu Minh Ngoc is CEO of a trade and investment promotion group in Vietnam and also serves as vice chairman of the Vietnam-Hungary Business Association.