Vietnam-US Trade and Investment Relations: Q1 2025 Update

Since Vietnam and the US established diplomatic relations in 1995, shared strategic and economic interests have propelled both countries to expand their cooperation across numerous issues. We discuss bilateral trade and investment relations between Vietnam and the US and prospects in light of their recently formed Comprehensive Strategic Partnership.

After the unexpected announcement of a 46 percent tariff rate on Vietnamese imports, President Donald Trump’s administration has decided to pause its reciprocal tariff plan for most trading partners for 90 days. Despite recent challenges and uncertainties, the economic relationship between the United States and Vietnam has continued to strengthen, as is evident in the significant growth of trade, investment, and bilateral agreements. Vietnam counts the US as its second-largest trade partner and primary export destination, whereas the US ranks Vietnam as its eighth-largest trading partner.

In this article, we look at the latest data on Vietnam-US two-way trade and investment and provide an overview of their various bilateral tax and investment treaties.

Diplomatic relations

Vietnam established diplomatic relations with the US in 1995, marking a significant milestone in the bilateral relationship. Following the normalization of relations, the two countries quickly moved to expand their cooperation across various sectors. The first official visit of a high-ranking Vietnamese official to the US occurred soon after, setting the stage for enhanced diplomatic and economic exchanges.

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Diplomatic representations were established in both countries, with the US opening its embassy in Hanoi and Vietnam establishing its embassy in Washington, D.C. Significant progress was made when the first resident Ambassador of the US to Vietnam was appointed in 1997, cementing the diplomatic presence.

Important milestones in the relationship include high-level visits and agreements aimed at strengthening ties. For example, in 2000, President Bill Clinton’s visit to Vietnam was a historic event that paved the way for increased cooperation. The establishment of a Consulate General in Ho Chi Minh City further enhanced the US presence and engagement in Vietnam.

The bilateral relationship saw a major boost in 2013 when the two countries signed a comprehensive partnership agreement, highlighting their commitment to deepening cooperation in various fields, such as trade, education, and security. This was followed by the historic visit of General Secretary Nguyen Phu Trong to the US in 2015, marking the first visit by a top Vietnamese leader to the country since normalization.

In September 2023, Vietnam’s General Secretary Nguyen Phu Trong and US President Joe Biden convened in Hanoi to advance their nations’ relationship to a Comprehensive Strategic Partnership, highlighting peace, cooperation, and sustainable development. The US expressed its support for Vietnam’s development as a strong, independent, and prosperous nation.

Trade and investment

Vietnam and the US have established strong trade ties that have seen substantial growth over time, bolstered by numerous significant developments further enhancing their economic relationship.

Vietnam-US trade data

In 2024, US goods trade with Vietnam totaled approximately US$149.6 billion, as reported by the Office of the US Trade Representative (USTR). US exports to Vietnam totaled US$13.1 billion, representing a 32.9 percent increase of US$3.2 billion compared to 2023.

Meanwhile, imports from Vietnam to the US totaled US$136.6 billion, representing a 19.3 percent increase (US$22.1 billion) from the previous year. Consequently, the US goods trade deficit with Vietnam expanded to US$123.5 billion in 2024, representing an 18.1 percent increase (US$18.9 billion) over 2023.

Services trade

According to the USTR, in 2022, the US saw a notable increase in its services exports to Vietnam, totaling an estimated US$2.4 billion. This figure marked a significant rise of 26.1 percent, equivalent to US$502 million, compared to 2021, and a substantial 48 percent increase from the levels seen in 2012. Key sectors driving these exports included travel, transportation, and financial services, highlighting growing opportunities in these fields within the Vietnamese market.

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Concurrently, US imports of services from Vietnam also experienced a robust growth trajectory in 2022. Imports totaled approximately US$874 million, reflecting an 88.0 percent increase, or US$409 million, from 2021 levels and a solid 25 percent rise from 2012. This surge underscores Vietnam’s expanding capabilities in delivering services that meet U.S. demand, thereby strengthening bilateral economic ties.

The upward trend in services trade between Vietnam and the US signifies a deepening economic relationship, where both cs benefit from enhanced cooperation and mutual exchange. As Vietnam continues to advance its services sector capabilities, particularly in areas like travel, transportation, and financial services, opportunities for further growth and collaboration between the two countries are expected to flourish.

American direct investments into Vietnam 

Foreign direct investment (FDI) is vital for Vietnam’s economic growth, leading the government to adopt policies that promote export-oriented manufacturing. The US serves as a key source for potentially large-scale investments.

As per a Thematic report, by the end of April 2024, American businesses had invested over US$12 billion in Vietnam, spanning more than 1,300 projects. This positioned the US as the 11th largest investor in Vietnam by investment value.

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While Vietnam-US trade relations are strong, US foreign direct investment (FDI) in Vietnam is relatively small compared to the US$6.58 trillion U.S. FDI into Asia and ASEAN markets (up to 2022). According to a June 2024 report published by Guotai Junan Securities (Vietnam) Corp, using VCCI data, U.S. firms were invested in 17 out of 21 sub-sectors in Vietnam. The accommodation and food service industry accounted for 42.3 percent of the total registered capital, while manufacturing and processing accounted for 20.3 percent. The largest U.S. FDI project in Vietnam is Winvest Investment’s US$4.1 billion venture in Ba Ria – Vung Tau, a 5-star resort and entertainment venture established in 2007.

Prominent US companies such as Citigroup, Apple, Intel, Nike, Chevron, Ford, Coca-Cola, and KFC have long-term investments and operations in Vietnam.

Bilateral trade, investment, and tax treaties

US-Vietnam Trade and Investment Framework Agreement (TIFA)

In 2007, Vietnam and the US entered into a Trade and Investment Framework Agreement (TIFA), establishing a strategic framework and principles for discussions on trade and investment issues between the two countries.

The agreement led to the creation of the US-Vietnam Council on Trade and Investment. This council includes representatives from both parties and is co-chaired by the Office of the US Trade Representative (USTR) and Vietnam’s Ministry of Trade. The council is vested with the power to:

1. Monitor trade and investments between parties, identify opportunities for expanding trade and investments, and identify relevant issues that may be appropriate for negotiation in an appropriate forum.
2. Consider specific trade and investment matters of interest to the parties,s including issues under the Bilateral Trade Agreement.
3. Identify and work to remove impediments to trade and investment between the parties.
4. Establish ad-hoc working groups on specific issues, where appropriate and agreed upon by the parties, to facilitate its work.
5. Seek the advice of the business community and civil society, where appropriate, on matters related to the council’s work.

Bilateral Trade Agreement (BTA)

Vietnam and the US signed a BTA in 2001, which took almost 5 years to negotiate, committing both countries to ensure fair market access for each other’s products, businesses, and nationals.

The BTA granted Vietnam “conditional most favored nation (MFN) trade status,” also known as “normal trade relations” (NTR). On December 29, 2006, President George W. Bush conferred permanent normal trade relations (PNTR) status on Vietnam, a crucial step in Vietnam’s accession to the World Trade Organization (WTO).

This significantly lowered tariffs on Vietnamese products. In return, Vietnam pledged to reform its trade and investment regulations to create a fairer environment for US businesses and products, with many commitments being phased in over several years to accommodate Vietnam’s economic transition.

Nevertheless, it must be noted that shortly after extending NTR status to Vietnam in 2001, the US government designated Vietnam as a “nonmarket economy” (NME) for the purposes of antidumping and countervailing duty (AD/CVD) cases – a designation that the Vietnamese government has long sought to remove. The US Department of Commerce will complete its review in late July this year.

Vietnam-US double taxation treaty

In 2015, Vietnam and the US signed a double taxation treaty that was ratified by Vietnam but not by the US due to changes in its own tax code in 2020, necessitating a renegotiation of the treaty.

The agreement covers US federal income taxes levied under the Internal Revenue Code (excluding social security and unemployment taxes), as well as US federal taxes imposed on the investment income of foreign private foundations. Additionally, it addresses Vietnam’s personal income tax and business income tax.

The treaty outlines regulations on capital gains taxes and withholding taxes on dividends, interest, and royalties, and specifies the limitation of benefits.

Conclusion

Despite the impressive trade figures, US FDI in Vietnam remains modest compared to its overall investment in Asia. However, top US firms in critical sectors, textiles, and consumer-facing industries have established a strong presence in Vietnam, contributing to its national economic development and showcasing the potential for future investment opportunities.

As Vietnam and the US continue to build on their Comprehensive Strategic Partnership, the outlook for their economic relationship is promising. Should the momentum of strengthening trade, investment, and diplomatic relations persist, both nations stand to realize shared growth and prosperity in the future.

(This article was originally published June 12, 2024. It was last updated April 8, 2025, with inputs from Vu Nguyen Hanh.)

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