Vietnam emerges as Asean’s top next-gen trade hub on resilient manufacturing, export growth
The government is boosting investment, given ambitious reforms and growth targets for 2026
[HO CHI MINH CITY] Vietnam’s growing competitiveness relative to other countries in the region is helping to fuel its rise as one of the top global manufacturing powerhouses.
The country’s position was recently bolstered by its ranking as the second-most promising next-generation trade hub – behind the United Arab Emirates – in a report released on Wednesday (Nov 5) by Allianz Research.
The Germany-headquartered trade analysis team credited Vietnam’s rise to its surging exports and a new tariff agreement with the US, which solidifies its role at the centre of Asia’s manufacturing re-route.
The report, Old trade routes for new trade wars?, said the country’s increasing number of free trade agreements, lower labour costs, and diversified export basket have all contributed to its growing influence.
In addition, Vietnam is benefiting from broader regional shifts, such as the offshoring of manufacturing from China and the regionalisation of trade.
Indeed, despite a challenging global economic environment marked by rising tariffs, shifting supply chains, and geopolitical tensions, Vietnam’s export sector has remained resilient.
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Merchandise shipments rose 17.5 per cent year on year to US$42.1 billion in October, according to preliminary data provided by the Vietnamese government’s statistics body on Thursday.
In the first 10 months of 2025, Vietnam’s total exports and imports climbed 16.2 per cent and 18.6 per cent, to US$391 billion and US$371.4 billion, respectively.
However, on a month-on-month basis, merchandise exports last month contracted by 3.5 per cent in seasonally adjusted terms, a sign that the effects of higher tariffs from the US are beginning to have a more pronounced impact on Vietnam’s economy.
In July, the US, which remains as Vietnam’s largest export market, confirmed a trade agreement under which it will impose a softer 20 per cent tariff on imports from the South-east Asian nation, a significant reduction from the previously threatened 46 per cent levy.
Still at risk
Last month, the US indicated that duties on certain products could be lifted as part of ongoing trade negotiations with Vietnam.
Adam Ahmad Samdin, an economist at Oxford Economics, noted that export growth next year is still at risk of further drags from the possibility of the US’ additional sectoral tariffs and the lack of clarity around the definition of “transhipment”.
However, he said the impact of tariffs could also be partially offset by sustained demand for artificial intelligence-related infrastructure, which is expected to continue into 2026.
Meanwhile, Vietnam’s manufacturing sector showed signs of strengthening at the start of 2025’s fourth quarter. In October, the Vietnam Manufacturing Purchasing Managers’ Index (PMI) from S&P Global rose sharply to 54.5, from 50.4 in September.
This marked improvement reflects accelerated growth in output and new orders, especially with a pickup in new export orders for the first time in a year.
Behind Vietnam, Malaysia took third place in Allianz Research’s ranking of next-generation trade hubs, benefiting from strong connectivity, efficiency and innovation.
It slipped from second place due to the drag of high US tariffs, which have slowed export growth and reduced its trade potential score.
The report pointed out that, further down the list, Thailand (#8), Indonesia (#11) and the Philippines (#13) face challenges as intermediate manufacturing hubs, hindered by gaps in infrastructure and manufacturing investment and connectivity that prevent them from becoming multi-modal trade centres.
Tourism boom and investment push
Tourism has been another bright spot for Vietnam’s economy this year. International arrivals surged by 22.1 per cent year on year to 1.7 million in October. This follows a 19.5 per cent rise in September, and reflects growing interest in Vietnam as a tourist destination.
Visitors from Asia – particularly China, Malaysia, and Cambodia – accounted for a significant portion of the increase. European arrivals were also up by nearly 35 per cent, with notable growth from Russia, the UK, France and Germany.
In the year to date, Vietnam has welcomed 17.2 million foreign visitors, an increase of 21.5 per cent over the same period in 2024.
“Tourism should continue to support domestic spending,” said Oxford Economics’ Samdin, though he believes momentum in private consumption has peaked, since inflation-adjusted wage growth has slowed.
Vietnam’s inflation rate eased to 3.25 per cent in October 2025, down slightly from a three-month high of 3.38 per cent in the preceding month. This is also well below the State Bank of Vietnam’s target range of between 4.5 and 5 per cent.
Retail sales growth also slowed to 7.2 per cent year on year in October, down from a more than two-year high of 11.3 per cent in September. On a monthly basis, sales increased by just 0.2 per cent, a sharp decline from the 2 per cent growth seen in the previous month.
Despite the moderation in retail activity, Samdin expects private consumption momentum to remain solid next year. It is supported by a strong government-driven investment push, underpinned by ambitious reforms and growth targets set at double-digit rates from 2026.
Disbursed investment from the state budget in October surged by over 29 per cent year on year, maintaining the strong momentum seen in Q3. Meanwhile, the ongoing 10th session of the National Assembly has proposed a fiscal deficit of 4.2 per cent of gross domestic product for next year, up from 3.1 per cent in 2024, signalling a firm commitment to increasing spending to drive economic growth.
Foreign investment is also flowing into Vietnam at a rapid pace. From January to October this year, foreign direct investment (FDI) increased by 8.8 per cent year on year, reaching US$21.3 billion – the highest level for any 10-month period since at least 2007.
Additionally, FDI pledges, which represent future inflows, grew by 15.6 per cent to US$31.52 billion, indicating strong investor confidence in Vietnam’s long-term economic outlook.
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