European firms in Vietnam cautiously optimistic prior to US reciprocal tariffs

THE HANOI TIMES — European businesses in Vietnam are cautiously optimistic despite the global trade upheaval caused by new US tariffs (announced by US President Donald Trump on April 2), expressing confidence in Vietnam’s economic fundamentals and its diplomatic agility.

This sentiment is reflected in the European Chamber of Commerce in Vietnam (EuroCham Vietnam) Q1 Business Confidence Index (BCI), which was conducted just before the US announced new trade measures.

The BCI score, compiled between March 10 and 27, reached 64.6, showing relative confidence but growing caution due to global uncertainties. The index highlighted a "wait-and-see" approach, with many firms anticipating external shocks even though the extent of the tariffs was not yet known.

According to EuroCham Chairman Bruno Jaspaert, the findings indicate that most European firms did not anticipate such drastic tariff measures and remained confident in Vietnam’s diplomatic ability to navigate global trade tensions. "Around two-thirds of respondents reported a neutral stance, neither overly optimistic nor overly apprehensive.”

Vietnam’s economic resilience, driven by structural reforms, strong global trade integration, and robust GDP forecasts, supported investor sentiment while increasing foreign investment and tourism recovery also played supporting factors.

The survey showed that approximately 39% of respondents expected price pressures related to tariffs and rising operating costs, while 36% expected moderate to significant challenges in market demand and revenue projections.

“Despite this, most businesses had not yet adjusted their investment, hiring, or compliance strategies, reflecting a ‘wait-and-see’ approach in light of the anticipated but then-uncertain trade developments,” Jaspaert said.

Long-term confidence, but focus on reforms

Meanwhile, the rate of European executives recommending Vietnam as an investment destination fell to 68% from 75% in Q4 2024.

Investors called for continued improvements in key areas, with infrastructure development being the top priority (37%), followed by administrative reforms (29%), better visa and work permit processing (24%), and legal clarity and enforcement (21%).

Persistent procedural issues remain challenging with bureaucracy, inconsistent regulations, and visa delays. In particular, 41% of firms reported delays in receiving VAT refunds, with some waiting for more than six months. Other hurdles include import/export red tape and registration inefficiencies.

Ongoing government restructuring received a reserved but hopeful response. Nearly half of respondents (45%) welcomed the digitalization of administrative processes, while 26% favored faster approval times, and 25% decentralized decision-making.

The upcoming National Assembly session in May, expected to include revisions to laws like the Law on Special Consumption Tax and Advertising, has businesses on alert. The new Data Law, set to take effect in July, also triggered concern.

While most firms reported a neutral stance, 30% anticipated difficulties, especially around compliance, data localization costs, and government access to sensitive information. Concerns about restrictions on cross-border data transfers were particularly high, cited by 42% of respondents.

Despite the uncertainty, European firms continue to believe in Vietnam’s potential. “The resilience of Vietnam’s economy is not just built on growth figures but also on its ability to adapt both structurally and diplomatically amid shifting global currents. While recent developments, including trade policy shifts, introduce new complexities, the broader trajectory remains one of engagement and opportunity,” said Jaspaert.

“We are working with policymakers to ensure Vietnam remains a competitive, attractive, and stable environment for European investors,” he added.