Chinese Firms in Vietnam Hit by Threat: New Investments Halted as Tariffs Loom Over Potential Closure

Despite the U.S. temporarily halting its retaliatory tariffs for 90 days, numerous factories have already canceled their orders and abandoned plans for expansion.

Xiong Xinshun, who runs a hardware store in northern Vietnam, often finds himself spending long hours alone in his deserted shop nowadays. His thoughts are consumed with worrying about whom the U.S. tariffs might harm and to what extent.

After relocating from his home country of China, this 24-year-old individual earns a living by providing adhesive materials, electronic parts, and various products to businesses located in the city of Bac Ninh.

However, numerous localized Chinese clients in Vietnam are now encountering a crisis due to US President Donald Trump's confrontational trade strategies, which pose a risk of disrupting Vietnam’s extensive export industry.

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"Chinese companies here are waiting, observing for the next two months," Shi said as he made a pot of tea. "They're afraid, yes they're afraid."

These are fraught and ambiguous times for enterprises in Bac Ninh. With a population nearing 250,000, the city has become a bustling manufacturing center in recent years, attracting numerous Chinese producers seeking a duty-free pathway to the US market.

Currently, this pathway might be shut down. Early in April, Trump declared intentions to impose a 46 percent duty on goods coming from Vietnam — among the highest tariffs under his proposed "reciprocal" tax scheme.

If the tariffs remain at 46 percent, it will undoubtedly be challenging for small, low-margin sellers such as those in the textiles industry.

Dan Martin, an advisor for businesses based in Hanoi

Although Washington has temporarily halted the reciprocal duties for 90 days, these measures remain in place and could still impact Vietnamese exports. The tariffs will be reinstated in July unless Hanoi reaches an agreement with Washington.

Local enterprises are already experiencing the impacts. Although certain plants have experienced a brief surge in order quantities During the 90-day grace period, other Chinese firms have halted their growth initiatives or pulled out of Vietnam altogether, according to analysts and local business operators.

Shi, who comes from a family running an independent business organizing events for Chinese investors aiming to establish operations in Bac Ninh, mentioned that several of these clients might go under if the US tariffs come back this summer.

Should the tariffs remain at 46 percent, it will undoubtedly pose significant challenges for small, low-profit margin businesses such as textile manufacturers," stated Dan Martin, an international business consultant based in Hanoi working with Dezan Shira & Associates. "This situation has the potential to create substantial problems.

Xiao Hao, a barber who relocated to Bac Ninh from central China’s Hunan province in April, mentioned that everyone is currently discussing tariffs in the city. He added with a sigh, “Of course, what Trump is doing affects all of us.”

Vietnamese-based Chinese exporters face limited choices. A significant number of these companies have made substantial investments to establish operations in the Southeast Asian country since 2018, following then-President Trump’s initiation of a trade conflict with China early into his second year in office.

And going back to China won’t assist most companies since Washington has imposed even higher tariffs on Chinese products. reached an overall effectiveness of up to as much as 156 percent in numerous sectors, although certain products have been excluded.

Currently, many enterprises in Bac Ninh are remaining cautious and eagerly awaiting to see whether Hanoi will be successful in persuading Washington to eliminate—or at least reduce—the reciprocal tariffs imposed on Vietnam.

Swiftly moving to advocate for a deal, the Vietnamese government had Deputy Prime Minister Ho Duc Phoc meet with U.S. Treasury Secretary Scott Bessent on April 10. This initial discussion marked their agreement to start official talks between the two nations.

Hanoi has apparently presented Washington with several concessions aimed at obtaining tariff reductions, which include lowering tariffs on U.S. goods like automobiles and liquefied natural gas, along with approving Elon Musk’s Starlink satellite internet service.

Although both governments have not officially announced an agreement, several Chinese investors in Bac Ninh anticipate that the 46 percent tariff could be reduced by at least fifty percent.

However, Vietnam’s strong ties with China might pose complications. During President Xi Jinping’s meeting with officials in Hanoi last month, Trump believed that the two nations could have been talking about how to utilize the US.

Beijing, for its part, has encouraged its trading partners not to enter into agreements with the US at the cost of China's interests.

In the end, US tariffs on Vietnam "will decrease, yet I haven't heard about any specific amount," stated Carl Thayer, an emeritus professor of politics from the University of New South Wales in Australia. His research primarily centers on Southeast Asia.

The last figure will hold significant importance. Experts indicated that a 46 percent tariff could erase the profit margins of numerous Chinese businesses operating in Vietnam. However, a slightly reduced rate might cause discomfort for several enterprises yet remain manageable for bigger entities, according to Martin.

Additional aspects of a possible agreement might significantly affect exporters in Bac Ninh, including U.S. rules about defining products as Vietnam-made.

Washington has raised concerns several times regarding Chinese firms utilizing Vietnam as a transit point for Made-in-China products destined for the U.S., enabling these entities to circumvent American tariffs aimed at imports from China.

However, it is more typical for Vietnamese factories to enhance incomplete Chinese merchandise, thereby classifying them as Made-in-Vietnam items, according to analysts.

At present, for products to be categorized as Vietnamese under U.S. customs rules, they must contain at least 30 percent local content. Discussions suggest that Washington might increase this requirement; however, it remains uncertain how much importance U.S. officials place on this policy, as mentioned by Martin.

If the local content rules are tightened, it could cause another wave of upheaval in global supply chains, given the sheer number of Chinese exporters operating factories overseas.

In April, Goldman Sachs projected that 20 percent of the Chinese manufacturers they monitored were utilizing overseas plants—particularly in Southeast Asia and Mexico—to lower their tariff expenses.

Currently, most Chinese-owned firms in Vietnam intend to maintain their regular operations but have paused any new investment endeavors pending the conclusion of the tariff discussions, according to analysts.

As much as I'd like to emphasize, changing your orders isn’t quite simple,” stated Adam McCarty, who serves as the chief economist at Mekong Economics in Hanoi.

At the heart of Bac Ninh, one can observe Chinese businessmen frequently entering and exiting local hotels and conducting meetings at numerous open-air cafés throughout the city.

Employees at Goertek, a Chinese manufacturer of electronic components operating a large facility with green and white buildings on the outskirts, reported that operations were proceeding as usual.

Liu Wenping, who leads a local metal trading company, mentioned that their enterprise was managing well, although several customers were facing difficulties. He stated, "There has been significant impact, and many individuals have left."

Ming Ying, who works at a Vietnamese firm assisting Chinese entrepreneurs in establishing local businesses, mentioned that they have been fielding fewer queries recently than in early 2024. This decline can be attributed to investors' concerns over the tariffs.

Several Chinese firms have factored in tariffs ranging from 20 to 30 percent, assuming they can manage the additional expenses, according to Liu Jie, CEO of an offshore branding firm with branches in Hanoi.

However, Liu mentioned that he was aware of a Chinese group consisting of 1,000 people who decided against their planned investigative trip to Vietnam since they had abandoned plans for establishing a factory there.

According to Liu, producers in Bac Ninh have responded variably to recent developments. Some are hastening their U.S. orders to capitalize on the 90-day tariff suspension, whereas others have decided to cancel their orders instead.

According to Chinese customs information, there have been significant increases in deliveries to Vietnam before the tariffs took effect, as manufacturers hurried to expedite their orders. In March, exports of computer components rose by 125 percent compared to the previous year.

If the U.S. proceeds with tariffs on Vietnam, Chinese firms in the nation could endure by restructuring their supply chains to exclude America, according to Martin. Alternatively, they might focus on markets such as Asia or Europe instead of the United States.

However, Wu Lingyun, who serves as both Shi's uncle and the general manager of the family events business, stated that "the United States remains the primary market" for companies based in Bac Ninh.

He asked why Chinese companies are coming to Vietnam," she explained. "They're here for reasons similar to those of Apple, Microsoft, and Tesla—the profit margins are somewhat better.

Additional reporting by Mia Nulimaimaiti and Kandy Wong was provided.