Vietnam’s northern Bac Ninh province, a factory owned by IBE Electronics stands as a testament to the shifting dynamics of global manufacturing. Counting major players like U.S.-based electric vehicle (EV) giant Tesla among its clients, the company has become a symbol of a growing trend: the migration of manufacturing from China to Southeast Asia. The trend, driven by rising tariffs on Chinese goods and ongoing trade tensions between the United States and China, has spurred a surge of foreign investment into Vietnam as businesses seek to mitigate the impact of hefty U.S. tariffs.
IBE Electronics, founded two decades ago by Ms. Angel Xu and her husband in Shenzhen, China, began as a local enterprise catering to domestic clients. But as China cemented its status as a manufacturing powerhouse, IBE attracted a range of American clients eager to capitalize on Shenzhen’s high production capacity and cost-effective operations. Yet, when tariffs began to rise on Chinese imports in 2018 amid a U.S.-China trade war, IBE was prompted to find alternatives. Today, Vietnam has emerged as one of the primary beneficiaries of this migration, and Bac Ninh province, home to IBE’s factory, symbolizes Vietnam’s potential as a new global manufacturing hub.
IBE’s decision to relocate to Vietnam was influenced largely by proximity and cost considerations. In 2019, facing steep U.S. tariffs on Chinese goods, IBE sought a nearby alternative. According to Ms. Xu, the company ultimately chose Vietnam because of its geographical closeness to China, which facilitated an efficient move. “We thought about which country would be better. Then we chose Vietnam because it is close to China,” Xu shared, highlighting the ease of transition due to similar time zones and regional connections.
The relocation, which took about six months to complete, enabled IBE to keep costs manageable for its U.S. clients. Without this move, Ms. Xu explained, “US customers would have had to pay 25 percent in tariffs.” IBE’s factory in Bac Ninh now plays a pivotal role in its operations, particularly as tariffs on Chinese goods continue to increase, making Vietnam a more attractive location for manufacturers targeting the U.S. market.
Vietnam has experienced significant foreign direct investment inflows, particularly from Chinese companies relocating production to evade U.S. tariffs. According to recent data from Vietnam’s government, Chinese investment reached nearly USD 4.5 billion, a 78 percent year-on-year increase. Companies from around the world, including U.S. firms, are increasingly looking to Vietnam as a manufacturing base, with Bac Ninh and neighboring provinces benefiting the most.
For Vietnam, this influx represents a promising opportunity to accelerate economic growth. Alongside the rise in foreign investment, exports to the U.S. have surged. Vietnamese exports of computer and electronics components, a sector boosted by demand from U.S. markets, reached USD 13 billion in just the first seven months of the year—a 50 percent increase from the same period last year. This robust export growth has propelled Vietnam to new prominence within the global supply chain.
U.S.-China trade tensions continue to grow, with tariffs remaining a defining feature of the bilateral relationship. In May, the U.S. announced an increase in tariffs on Chinese semiconductor imports, raising them from 25 percent to 50 percent by 2025. This was compounded by a wave of tariffs imposed on September 27, which included a 100 percent duty on Chinese electric vehicles and a 25 to 50 percent duty on various critical components like solar cells, EV batteries, steel, and aluminum.
Vietnam’s attractiveness as a manufacturing location is bolstered by these increased tariffs on Chinese goods. By establishing operations in Vietnam, companies such as IBE Electronics can effectively bypass these tariffs and provide more cost-effective products to U.S. consumers. However, even with these advantages, challenges remain.
While Vietnam offers a tariff-free route to the U.S. market, IBE and other companies face unique operational challenges. Vietnam’s manufacturing ecosystem is still developing, and its supporting industries—such as logistics, packaging, and supply chain services—lag behind China’s mature infrastructure. According to Ms. Xu, IBE experiences a two-week delay in production at its Vietnam plant compared to its Chinese facility, primarily due to supply chain bottlenecks and limited resources. Additionally, Ms. Xu noted that shipping from Vietnam incurs a 5 percent higher cost than from China.
These logistical issues mean that although Vietnam has positioned itself as an attractive alternative, it will need to enhance its infrastructure to retain and attract high-caliber manufacturers. Vietnam is keenly aware of these challenges, and both government and private sector stakeholders are making concerted efforts to boost the country’s competitiveness.
Recognizing the advantages and vulnerabilities brought by the shift in global manufacturing, Vietnam is taking decisive steps to consolidate its status as an emerging manufacturing powerhouse. Vietnamese leaders have expressed a commitment to reforming the country’s business environment, with initiatives aimed at reducing bureaucratic red tape, improving labor standards, and investing in green technology. In recent speeches, top officials underscored their dedication to creating a business-friendly environment, pledging to streamline administrative processes and cultivate sustainable practices across industries.
Vietnam is also prioritizing investment in infrastructure, with projects underway to enhance its transportation network, energy grid, and industrial zones. The government’s emphasis on sustainable manufacturing aims to attract environmentally conscious foreign investors and positions Vietnam as a responsible player within the global supply chain. This long-term vision could provide the stability companies like IBE need to continue expanding their operations in the country.
The future of the U.S.-China trade war remains uncertain. With tariffs on Chinese goods unlikely to abate anytime soon, companies must weigh the potential risks associated with further geopolitical escalations. Political analysts have speculated that, regardless of the outcome of the upcoming U.S. presidential election, the trade conflict is likely to continue, possibly in new forms. Democratic nominee Kamala Harris has indicated that she will maintain a firm stance on China, while her Republican opponent, former President Donald Trump, has hinted at plans to raise tariffs on Chinese imports to 60 percent or more if elected.
Under a possible second Trump administration, additional tariffs across a broader spectrum of goods may affect multiple countries, potentially extending to Vietnam if trade policies shift toward a more protectionist stance. For Ms. Xu and other business leaders, this potential risk means that relying solely on Vietnam may not be sufficient. “Many more Chinese companies will come to Vietnam in the future,” Ms. Xu said, “but we are also worried about tariffs on Vietnam as well, so that’s why we need to have a facility in the U.S.”
To mitigate these risks, IBE Electronics plans to expand its workforce in Vietnam, doubling its current headcount of 700 employees, while simultaneously exploring new operational bases. This dual strategy reflects a cautious optimism within Vietnam’s manufacturing sector, where firms are readying themselves to adapt to potential shifts in U.S. trade policies.
As China advances into higher-value industries like semiconductor design and artificial intelligence, Vietnam is positioned to take over a greater share of lower-value, assembly-focused manufacturing. Mr. Michael Kokalari, Chief Economist at VinaCapital, argues that Vietnam is primed to step into the roles that China is vacating. “With China shifting its focus to higher value-added products, Vietnam can fill the void left in the assembly part of the manufacturing process,” he said.
Vietnam’s comparative advantage in labor-intensive production could allow it to occupy a niche within the global supply chain, reinforcing its appeal to manufacturers looking for cost-effective alternatives to China. Furthermore, Vietnam’s emphasis on sustainability could attract companies in sectors that prioritize environmental, social, and governance (ESG) compliance. This focus aligns with shifting consumer preferences and corporate commitments toward greener supply chains, making Vietnam an appealing option for firms beyond those simply seeking tariff relief.
