Introduction
Vietnam’s free trade agreements have positioned the country as a major global manufacturing and trade hub. With 18 active and planned FTAs, Vietnam provides lower tariffs, expanded market access, and stronger intellectual property protections, making it an attractive destination for US and EU businesses.
While the EU-Vietnam Free Trade Agreement (EVFTA) offers direct advantages for European companies, US businesses can also benefit by leveraging Vietnam’s trade deals to access global markets. This article explores the key benefits of the agreements and how they create opportunities for international companies.
Overview of Vietnam’s Free Trade Agreements
Vietnam is a member of several major free trade agreements that facilitate global commerce. These agreements allow businesses to reduce costs, streamline trade operations, and expand market reach.
Key Trade Agreements Benefiting US and EU Companies
EU-Vietnam Free Trade Agreement (EVFTA)
- Eliminates 99% of tariffs between the EU and Vietnam.
- Reduces costs on exports and imports for European businesses.
- Improves market access to Vietnam’s service sectors, including finance, telecommunications, and logistics.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
- Expands Vietnam’s trade with major economies in the Asia-Pacific region.
- Reduces tariffs on manufactured goods, electronics, and industrial components.
ASEAN Free Trade Area (AFTA)
- Provides duty-free trade within ASEAN nations, boosting Vietnam’s role as a key regional supplier.
- Supports regional supply chain development with major economies.
Regional Comprehensive Economic Partnership (RCEP)
- Connects Vietnam with China, Japan, South Korea, Australia, and New Zealand, expanding its trade network.
- Strengthens Vietnam’s position as a low-cost production hub for global businesses.
How EU Companies Benefit from Vietnam’s Free Trade Agreements
The EVFTA, which came into effect in August 2020, has provided significant advantages to European businesses by:
- Removing 65% of tariffs on EU exports to Vietnam, with the remainder to be phased out by 2030.
- Improving European companies’ access to Vietnam’s growing consumer market.
- Strengthening intellectual property protections, reducing risks for businesses in pharmaceuticals, technology, and consumer goods.
For EU manufacturers, Vietnam’s free trade agreements create an opportunity to set up production hubs, reduce supply chain costs, and export to Asian markets more easily.
How US Companies Benefit from Vietnam’s Free Trade Agreements
Although the US does not have a direct free trade agreement with Vietnam, American businesses can still benefit through:
- Regional supply chain expansion, using Vietnam as a base to export to markets covered under RCEP, AFTA, and CPTPP.
- Lower production costs for goods destined for Europe under EVFTA, helping US companies compete in the EU market.
- Improved trade relations between the US and Vietnam, which have led to stronger economic partnerships.
Vietnam remains a preferred alternative to China for manufacturing, helping US businesses reduce dependency on Chinese supply chains while benefiting from Vietnam’s trade deals.
Strategic Advantages for US and EU Companies
Lower Tariffs and Cost Savings: reducing or eliminate tariffs, lowering costs for businesses that import and export goods.
Expanded Market Access: With access to ASEAN, the EU, and the Asia-Pacific region, businesses operating in Vietnam can reach multiple high-growth markets with fewer trade barriers.
Diversified Manufacturing Base: As companies shift supply chains away from China, Vietnam has become a key production hub for industries including electronics, CNC metal machining, textiles, and automotive components.
Strong Economic Growth and Consumer Demand: Vietnam’s GDP continues to grow, supported by a rising middle class and strong domestic demand. Businesses investing in Vietnam benefit from both export opportunities and a rapidly expanding consumer market.
Conclusion: Why US and EU Companies Should Leverage Vietnam’s Free Trade Agreements
The free trade agreements create unmatched opportunities for global companies. Whether through direct tariff reductions under EVFTA for European firms or regional supply chain benefits for US manufacturers, Vietnam remains a top destination for outsourcing and investment. For more information regards to recently US trade tariff on Vietnam, read US Section 301 Tariffs
Key Takeaways
- Vietnam’s free trade agreements reduce tariffs, improve market access, and strengthen trade relations.
- EVFTA provides European businesses with direct cost advantages.
- US companies can benefit by using Vietnam as a manufacturing and export base to other global markets.
- Vietnam’s role as a major outsourcing destination continues to grow, offering cost savings and supply chain diversification.
More insight can be found at Compliance & Supply Chain in Vietnam.
