Vietnam's export-driven economy grew a stronger-than-expected 8% in the second quarter of 2025, beating the 6.9% expansion in the first three months of the year.

This was the strongest year-on-year growth rate since the second quarter of 2022 and was led by an 18% increase in exports. The Southeast Asian nation’s gross domestic product rose 7.5% in the first half of 2025 – its best performance in more than a decade.

US President Donald Trump said on July 2 that Vietnam would face a 20% tariff on its exports to the US, avoiding a threatened 46% he announced early this April. The US will apply a 40% tariff on goods transhipped via Vietnam while the trade-dependent economy places zero tariffs on US goods imported from the US.

While details of the US-Vietnam trade deal have not been announced, Trump threatened an additional 10% tariff on countries aligning themselves with the “anti-American policies of Brics”.

The announcement, which did not elaborate on any specific policy of Brics, came while the group was holding its 17th summit in Brazil’s Rio de Janeiro. Vietnamese Prime Minister Pham Minh Chinh attended the meeting as Vietnam is now a partner country of the economic bloc. Brics includes the original members, Brazil, Russia, India, China, and South Africa, and has expanded to include Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates.

Exports up 14.2%

In the first half of 2025, Vietnam’s final consumption rose 8% year-on-year, while fixed investment increased 8%, exports 14.2%, and imports 16%. The country's GDP growth target for the year is 8%, which the government considered a “tough task” in view of Trump’s trade policies.

Vietnam’s monthly data for this June showed a rising inflation rate, faster industrial production growth, and weaker retail sales growth. The US, Vietnam's biggest export market, is concerned about China using Vietnam as a backdoor entry for its exports, which could explain the 40% tariff on “transshipments”.

Negotiations between the US and its trading partners are due to end this week, and the world is waiting to hear what duties the Trump administration will impose. Moody’s ( Moody's Analytics ) says that until those details are known, uncertainty clouds growth prospects for the world economy.

Industrial output revs up

Vietnam’s Industrial production growth in June accelerated to 10.8% from a year ago, compared with an upwardly revised 9.6% in May. “Industrial output is hovering around levels seen in the second half of last year,” Moody’s notes. “Whether these solid results can last will hinge on global growth, which in turn depends on what tariffs the US applies to its other trading partners.”

The 20% tariff on Vietnam suggests that industrial output will lose traction in the months ahead, Moody’s adds.

Meanwhile, nominal goods exports rose 16.3% year-on-year in June after rising 17% in May. Imports rose 20.2% after climbing 14.1% a month earlier. The goods trade surplus was US$2.8 billion, up from US$600 million in May, according to official data.

Retail sales rose 8.3% from a year ago after gaining 10.2% in May. The domestic economy is losing steam but still tracking well. Rising international visitor numbers should benefit retailers and service providers this year. Tourist arrivals climbed 17.1% from a year ago, far from May's 6.3% jump.

Inflation leaves room for rate cuts

As for inflation in Vietnam, prices in June rose 3.6% year-on-year after climbing 3.2% in May. Inflation eased in the food and beverages segment. Core inflation, which excludes food and energy managed by state agencies, rose to 3.5% from 3.3%.

Moody’s says inflation is likely to stay below the Vietnamese government's target of 4.5% to 5% this year, leaving room for stimulatory rate cuts should they be needed.

It notes that Vietnam’s currency weakness is an issue to watch. The Vietnamese dong has lost about 10% of its value against the US dollar in the last two years. A weakening currency translates into higher input costs for manufacturers.

“The State Bank of Vietnam will allow moderate currency weakness, as that would support exports amid global growth concerns,” Moody's says.

“After phenomenal growth in the first half of the year, Vietnam faces mounting challenges in the second half. Prior to news of the US-Vietnam trade deal, our forecast was for growth to slow to 6% in 2025 from 7.1% in 2024.”