Viet Nam recorded economic growth of 8.02 percent in 2025, its highest since 2011, with total exports reaching USD 475 billion, up 17 percent from the previous year. Exports to the United States even surged by 28 percent to USD 153.2 billion, generating a record trade surplus of nearly USD 134 billion with Washington (three times the 2018 level).
These figures make Viet Nam appear to be the perfect answer to a long-standing question: who can replace China in the global supply chain?
But the data behind them tells a more complex story. Viet Nam did not grow by separating itself from China. Rather, it grew by becoming part of a production chain that shifted out of China.
Not a Replacement, but an Extension
Data from the Lowy Institute, which uses trade value-added data, concludes that Viet Nam's position in the global supply chain is more accurately described as a complementary extension of China's vast production network, rather than its competitor.
As Viet Nam's exports to the United States surged after 2018, its imports from China rose in parallel. This pattern became even more evident in 2025. Viet Nam's imports from China jumped by nearly 30 percent in a single year, reaching USD 186 billion.
Viet Nam's imports from China increased by almost 30 percent within one year, reaching USD 186 billion. Of Viet Nam's total imports, 93.6 percent consisted of production inputs: raw materials, components, and machinery.
China supplies the components, Viet Nam assembles them, and the finished products are then shipped to the United States and Europe. That is how the model works.
Importantly, this is not a simple transshipment scheme. The Lowy Institute notes that Viet Nam's total imports grew by 19 percent in 2025, almost in line with exports, which grew by 17 percent.
This pattern indicates that Viet Nam's share of domestic value-added has not been diluted. What has changed is only the composition of import sources: China has displaced South Korea, not Viet Nam's own contribution.
The Industrial Depth Behind Viet Nam's Export Boom
What distinguishes Viet Nam from being merely a rerouting channel is the evidence of industrialization on the ground.
Manufacturing GDP grew by 10 percent in 2025. Viet Nam added 265,000 new industrial jobs. Consumer electronics production expanded by 21 percent, far outpacing the garment and footwear sectors. Monthly employee wages increased by 6 percent.
Realized FDI reached USD 27.62 billion in 2025, the highest level in five years, with 82.8 percent absorbed by the manufacturing and processing sectors. Investment did not come from China alone. South Korea, Taiwan, and Japan collectively invested around USD 7 billion per year in Viet Nam over the past several years.
As a result, Nike manufactures more than half of its footwear in Viet Nam, Adidas sources nearly 40 percent of its global output from the country, and Intel operates one of its largest chip assembly facilities in Ho Chi Minh City with an investment of USD 1.5 billion. Foxconn, Apple's main manufacturing partner, continues to expand its facilities in Bac Giang.
Success Creates New Pressures
However, Viet Nam's rapidly expanding trade surplus has also complicated its position. The Trump administration imposed a 20 percent tariff on Viet Namese goods starting in August 2025, after previously threatening a 46 percent tariff in April 2025.
One of the main reasons behind the pressure was Washington's suspicion that Viet Nam was being used as a channel for Chinese goods seeking to avoid higher tariffs. In response, the United States imposed a separate 40 percent tariff on goods suspected of passing through such arrangements.
This pressure has exposed a long-standing structural vulnerability: most multinational companies operating in Viet Nam still source their components from China, while Viet Nam largely serves as the final assembly point.
As of June 2026, the enforcement mechanism for the 40 percent tariff is already in effect, but the criteria remain unclear. There is no official threshold specifying how much Chinese content would cause a product to be classified as transshipment.
Companies are required to demonstrate substantial transformation through detailed production documentation, but the exact standards have yet to be defined.
The Challenge of Moving Up the Value Chain
Viet Nam is aware that this model has its limits. In 2025, General Secretary Tô Lâm openly warned that the country was "stuck at the lowest end of the value chain" and required major structural reforms.
The government's answer is to enter the semiconductor industry, a sector that has long been dominated by economies such as Taiwan, South Korea, and the United States.
In March 2025, Viet Nam approved the construction of its first wafer fabrication plant, valued at USD 500 million and scheduled to begin operations before 2030. It is not an advanced chip foundry on the scale of TSMC, but it marks Viet Nam's entry into the chip production phase rather than remaining solely in assembly.
That door opened wider after the Trump administration removed Viet Nam from the U.S. export control list that had previously grouped the country alongside China and Russia, restricting access to strategic technologies, including advanced semiconductor manufacturing equipment.
The world may have found an alternative to "Made in China." For now, however, that alternative still cannot function without China itself.
