Market slows down due to tariffs

“The best negotiation scenario is a 10-15% tariff, and then Vietnamese goods will still be competitive and FDI inflows will still be good. The worst negotiation scenario is a 30-35% tariff,” said Nguyen Xuan Thanh, a lecturer at the Fulbright School of Public Policy and Management, Fulbright University Vietnam, after Vietnam and the US held their first round of tariff negotiations in early May 2025.

Mr. Thanh said that the target scenario is to negotiate a tax rate of 18-22% and then only lose a part of the competitiveness of export goods.

According to Mr. Thanh, although the 20% tax rate is "within reach", this number is still high, negatively affecting the long term, forcing investors to recalculate, because the corresponding tax rate is additional, for example, textile products with a 15% tax must be added by 20%.

On the business side, Mr. Truong Khac Nguyen Minh - Deputy General Director of Prodezi Long An Joint Stock Company said that tenants in the industrial park owned by the Company were also affected by the psychology of waiting for tariffs, production slowed down, but order completion was still maintained.

For FDI investors in the investment decision-making stage, a clear slowdown can be seen. In particular, projects closely linked to the supply chain from China or heavily dependent on output markets such as the United States are the most affected group.

The remaining investors showed a more cautious trend, proactively restructuring their portfolios, looking for safer and more flexible locations to cope with geopolitical risks and trade fluctuations.

There are still more than 50 days (deadline is July 9, 2025) for Vietnam and the US to negotiate tariffs and during this period, tenants are accelerating production ahead of the deadline compared to the order schedule to limit risks, costs and unfavorable tariffs.

At the same time, investors still maintain their interest in the Vietnamese market, which is reflected in new lease contracts of industrial parks.

For example, IDICO Corporation - Joint Stock Company recorded leasing 37.9 hectares of industrial park land through contracts/memorandum of understanding (MOU) in the first quarter of 2025.

In addition, the Company signed a number of leasing agreements in April 2025 thanks to its land fund advantage and diverse customer base. IDICO handed over 11 hectares of land in the first quarter of 2025, mainly from Cau Nghin and Huu Thanh Industrial Parks, all from contracts signed in 2024.

A senior IDICO leader said that after re-evaluating all issues related to tariffs, all of IDICO’s existing tenants are producing normally, without recording any major impacts.

For tenants who have signed contracts and paid deposits but have not yet started production, about 10-15% are looking at policy changes after the 90-day tariff moratorium. For those in the negotiation phase, about 70-80% are committed to continuing this process in the near future.

Mr. Tran Manh Hung - Chairman of the Board of Directors of Saigon VRG Investment Joint Stock Company also informed that at the time the US announced the new tax policy, there were 2 customers who were negotiating and intended to stop the land lease agreement, but then returned to negotiate and signed the contract. The production and business situation of the tenants remained stable, with electricity and water consumption increasing slightly in the first quarter of 2025.

Green industrial park - "passport" for long-term investment

In the new economic picture, industrial real estate will no longer be simply land and factories, but will be part of the ecosystem to attract quality FDI, and ESG criteria are also being strongly applied to increase competitiveness.

According to Mr. Truong Khac Nguyen Minh, in the context of the world facing geopolitical instability, trade protection policies and supply chain restructuring, global businesses are tending to diversify investment locations and seek economies with large openness, stability and proactive green transformation.

ESG criteria are no longer optional, but have become global investment standards. A company, no matter how financially strong, that violates ESG criteria will be removed from the investment portfolio of many international funds.

“Most of the investors we have met are optimistic but cautious, and expect Vietnam to take decisive steps in negotiations with the US and shape a new generation of FDI policy,” Minh said, adding that attracting high-quality capital flows today is no longer simply about providing land or basic infrastructure. New-generation investors, especially those in the global supply chain, always go with an ecosystem of suppliers, technology partners, and require flexible operations.

Therefore, from the beginning, Prodezi Long An has focused on sustainable development strategy and creating added value, while developing an ecological industrial park model, integrating ESG standards and circular economy principles to create an efficient, energy-saving, and environmentally friendly production space.

“I believe that if Vietnam takes drastic action now to build a deep investment ecosystem, the next FDI growth cycle will not only be broader, but also more sustainable, more effective, creating long-term value for the entire economy,” Mr. Minh emphasized.

Similarly, Frasers Property continues to maintain its expansion strategy in Vietnam in the medium and long term. The leader of Frasers Property Vietnam said that this industrial park developer always closely follows market developments, adjusts its investment attraction strategy, and prioritizes industries that are less dependent on the US market such as consumer electronics, semiconductors, data centers, and home electronics, which are in line with the high-tech orientation that Vietnam is pursuing.

Mr. Edwin Tan - Deputy General Director of Frasers Property Vietnam said that the Company is introducing pioneering solutions such as industrial service centers, enriching the industrial ecosystem with sustainable amenities and features, such as solar roofs, electric vehicle charging stations, smart energy management systems supported by artificial intelligence (AI) and full LED lighting.

“This further enhances our appeal to investors who are increasingly ESG-conscious, and aligns with banks’ changing priorities towards sustainable portfolios,” said Edwin Tan, adding that, in essence, our deep real estate expertise will reinforce our long-term commitment to environmental responsibility.

From another perspective, according to Ms. Pham Thuy Duong - Deputy Director of Research and Analysis, Dragon Capital, from its role as a destination for labor-intensive industries such as textiles and footwear, Vietnam is gradually attracting technology giants such as Samsung or Apple, showing its increasingly high position in the global supply chain.

In the context of emerging tariff barriers and increasing regional competition, the new race is no longer low cost, but value-added capacity and commitment to sustainable development.

ESG criteria are no longer optional, but have become global investment standards. A company, no matter how financially strong, that violates ESG criteria will be removed from the investment portfolio of many international funds.