HANOI: Vietnam's economy is showing signs of slowing growth as revealed by official data released on Sunday. The report indicates that the export-reliant economy is confronting significant challenges following the imposition of substantial tariffs by the United States. Specifically, Vietnam's gross domestic product (GDP) increased by 6.93 percent in the first quarter of the year, a noticeable decline from the more robust annual growth rate of 7.55 percent recorded in the last quarter of 2022, according to the National Statistics Office.

Exports and foreign investments in manufacturing have traditionally been the powerhouses driving Vietnam's economic engine. However, these vital sectors may be under increasing pressure since U.S. President Donald Trump announced a staggering 46 percent tariff on goods exported from Vietnam to the United States. This significant tariff hike is expected to have far-reaching impacts on the country's economic landscape, which has relied heavily on its trade relationship with the U.S.

Furthermore, the data reveals that industrial production, a key component of Vietnam's economy, grew by 7.8 percent in the first quarter compared to the same period last year, but this figure marks a decline from an impressive 11.5 percent growth rate observed in the previous quarter. Such a slowdown raises concerns about the sustainability of growth in the manufacturing sector.

On the export front, there was a glimpse of positive news as exports grew by an impressive annual rate of 10.6 percent during the March quarter, which is an acceleration from the 7.9 percent growth seen in the final quarter of 2022. This increase in exports suggests that while challenges loom, there remains some resilience in Vietnam's export capabilities.

In light of these developments, Prime Minister Pham Minh Chinh has maintained that the government's ambitious target for economic growth of at least 8 percent this year remains unchanged. However, analysts at the research firm BMI have expressed concerns that the new U.S. tariffs could be more damaging than previously anticipated. In a recent note, BMI projected that GDP growth might fall short of their earlier estimate of 7.4 percent by as much as 3 percentage points, highlighting the potential severity of the situation.

“This will significantly damage Vietnam’s current FDI/export-based growth model, which heavily relies on exports to the U.S.,” BMI stated, underscoring the vulnerability of the Vietnamese economy to external shocks.

Economic activity in Vietnam historically sees a slowdown in the first quarter due to disruptions caused by the week-long Lunar New Year celebrations, which can affect production and consumption patterns. This year, however, investment consultants have noted that uncertainties surrounding the tariff announcement may have exacerbated the slowdown, leading many companies to postpone critical investment decisions.

A survey conducted among U.S. manufacturers operating in Vietnam in February revealed a grim outlook, with many anticipating layoffs and operational disruptions if tariffs were enacted. These sentiments reflect the growing apprehension among businesses directly impacted by the trade policy changes.

Additionally, the statistics office reported that Vietnam's consumer prices rose by 3.13 percent in March compared to the same month last year, indicating potential inflationary pressures that could further complicate the economic landscape.