Vietnam has ascended to become China’s third-largest export destination for the first time, surpassing Japan in 2024, Bloomberg reports.
This significant shift in trade dynamics reflects the impact of US tariffs on global supply chains and the resulting efforts of companies to diversify their operations while maintaining reliance on Chinese manufacturing for crucial components.
Chinese customs data released Monday revealed that exports to Vietnam surged by nearly 18% in 2024, reaching a record $162 billion. This figure eclipsed the $152 billion in exports to Japan, previously China’s third-largest export market. The surge was largely driven by a dramatic increase in the shipment of parts and components to Vietnam, where they are assembled and then re-exported to the United States and other international markets.
Electronics components, including screen modules and computer memory, were among the fastest-growing export categories from China to Vietnam. Data from November 2024 showed these items making up eight of the ten top growth sectors. This highlights Vietnam’s role as a key assembly hub for products destined for global consumers.
The rerouting of trade, while potentially increasing costs for some businesses and consumers, has been a boon for Vietnam. The Southeast Asian nation has witnessed a surge in foreign investment as companies look to establish supply chain alternatives to China. Leading electronics giants like Samsung, Luxshare Precision, and Hon Hai have invested billions in Vietnam in recent years, focusing on assembly of devices such as AirPods and MacBooks.
The artificial intelligence (AI) boom and US export restrictions targeting AI chips have further fueled investment in Vietnam. While these restrictions limit China’s ability to directly manufacture certain components, Chinese companies have adapted by supplying key components, including integrated circuits and printed circuit boards to Vietnam. Hon Hai, for instance, began production of Nvidia AI graphics cards in Vietnam last year, utilizing these key components sourced from China. The majority of the finished products were then shipped to American customers.
This activity has contributed to a record trade surplus for Vietnam with the US, a trend that could draw scrutiny from the incoming administration of President-elect Donald Trump. Trump has previously voiced concerns about trade imbalances with Vietnam and even referred to the nation as a “trade abuser” in 2019.
The US has already started pushing back against the re-routing strategy, with the Biden administration implementing tariffs on solar panels manufactured in Vietnam and other Southeast Asian countries late last year. These tariffs were largely targeted at Chinese companies that had established manufacturing operations in these countries to circumvent existing US levies.
