Sourcing in Vietnam in 2025: A Strategic Destination.

In recent years, Vietnam has established itself as a compelling alternative to China in industrial sourcing. Its skilled workforce, competitive production costs, and numerous international trade agreements make it an attractive destination for companies aiming to diversify their supply chains. Rising trade tensions between the U.S. and China, coupled with increased foreign investments, further enhance Vietnam’s strategic position.

In our series analyzing the impacts of Trump's policies on ASEAN economies, we've highlighted the promising opportunities emerging in this region. Positioned at the heart of Southeast Asia, Vietnam stands out as a key player due to its robust economic growth and business-friendly environment.

Sourcing in Vietnam

Key advantages of sourcing in Vietnam

The primary advantage of Vietnam lies in its skilled and competitively priced workforce, significantly cheaper compared to China. Government policies supportive of industrial growth have helped maintain an average annual manufacturing GDP growth rate above 6%. According to the Bank for Investment and Development of Vietnam (BIDV), the country's overall economic growth could reach between 7.5% and 8% by 2025.

Access to international markets is another major advantage for Vietnam.

• In August 2020, the EU-Vietnam Free Trade Agreement (EVFTA) came into force, aiming to progressively eliminate 99% of customs duties on Vietnamese products destined for the European market. This agreement provides European companies privileged access to a market of over 100 million people and ensures favorable tariff conditions for Vietnamese exporters, particularly in manufacturing, textiles, and agricultural sectors. By aligning production standards to European norms, the EVFTA also encourages Vietnamese companies to enhance product quality, making Vietnam especially attractive to European businesses.

• In October 2024, a new bilateral free trade agreement was signed between France and Vietnam, further strengthening economic relations between the two countries. This agreement simplifies customs and administrative procedures and facilitates French investments in strategic sectors such as aerospace, energy, and infrastructure.

• Most recently, in March 2025, new discussions between the United States and Vietnam led to strategic agreements aimed at strengthening bilateral trade relations and preventing the imposition of new tariffs by the Trump administration, especially due to Vietnam's trade surplus with the United States. These discussions covered agreements on purchasing American liquefied natural gas and adjusting tariffs on certain imports, reflecting a mutual commitment to deepening economic ties.

Significant Foreign Investments

Vietnam is experiencing a growing influx of foreign investments, particularly from China. Numerous Chinese companies have established manufacturing facilities in Vietnam to bypass American and European tariffs, significantly boosting the Vietnamese industrial sector, although local enterprises sometimes face increased competition.

In addition to China, Japan and South Korea play essential roles in Vietnam's industrial development. Japan is among the leading foreign investors, operating factories specialized in electronics, automotive manufacturing, and precision mechanics—Toyota and Honda, for instance, maintain major production lines in the country. South Korea is also a significant contributor, with Samsung employing tens of thousands of Vietnamese workers in its smartphone manufacturing plants. The Korean presence extends across various industries such as fashion, electronics, and industrial chemistry, thus strengthening Vietnam’s overall manufacturing ecosystem.

As specialists in sourcing within Vietnam, it's impressive to see the substantial presence of Japanese and Korean companies in the country. In technical sectors like electronics and precision mechanics, these foreign enterprises significantly enhance Vietnam’s appeal by making complex technologies accessible locally. They adhere to rigorous international standards, raising the quality bar across the entire industrial landscape. Their production primarily serves high-value-added markets, thereby reinforcing Vietnam’s strategic position within global supply chains.

Environmental and Social Aspects of Sourcing in Vietnam

Vietnam is progressively integrating environmental and social criteria into its industrial policies. Driven by increasing European and American market demands for social and environmental responsibility, many Vietnamese factories are adopting sustainable practices such as using recycled materials, effectively managing industrial waste, and reducing their carbon footprint. Various initiatives, particularly in industrial zones and technology parks, aim to strengthen these environmental and social commitments, attracting companies mindful of their global impact.

During our sourcing missions, we have engaged directly with local stakeholders committed to responsible practices and identified suppliers already implementing sustainability measures. These initiatives clearly reflect Vietnam's ambition—and that of its manufacturers—to establish themselves as sustainable players within global supply chains.

Vietnam vs. China: A Strategic Comparison

Recent geopolitical events, diplomatic tensions, and the disruptions caused by the COVID years have significantly reshaped global supply chains, prompting many companies to adopt the "China +1" strategy, increasingly turning to Vietnam. This approach aims to diversify supply sources by integrating suppliers outside of China alongside traditional Chinese suppliers.

While Vietnam is gaining prominence, notable differences between the two countries remain. China continues to be the "world's factory," boasting extensive production capacities and advanced vertical integration. Its industrial ecosystem is considerably more developed, with a greater number of factories and optimized supply chains enabling shorter production lead times, economies of scale, and heightened competition that drives prices downward. Consequently, although Vietnam’s labor costs are lower, its industrial capacity limitations and material availability issues remain noticeable in certain sectors.

An example from our sourcing experience in Vietnam is the tooling cost for stamped metal parts. At certain manufacturers, mold development costs were found to be up to three times higher compared to China. This disparity arises from Chinese manufacturers' decades of expertise and easier access to advanced machining and heat treatment technologies. Vietnam, in contrast, possesses more limited tooling expertise, resulting in higher labor costs or the necessity of importing costly tooling solutions directly from China. Additionally, China produces a substantial share of its own steel and components, whereas Vietnam frequently relies on imports.

However, Vietnam is rapidly catching up. The previously mentioned trade agreements could significantly accelerate Vietnam’s competitiveness, potentially enabling it to surpass China in specific Western markets. Nevertheless, successfully executing sourcing projects in Vietnam requires deep familiarity with the local industrial environment.

In conclusion, despite certain constraints related to its still-developing industrial ecosystem and notable dependence on China for specific materials and technical expertise, Vietnam remains an essential strategic destination for companies seeking to diversify and secure their supply chains. With its competitive workforce, growing integration into international markets, and significant progress in sustainability, Vietnam is well-positioned to strengthen its role at the heart of global manufacturing trade in the coming years. However, successfully conducting sourcing projects in Vietnam requires a solid understanding of local dynamics and an approach tailored to on-the-ground realities.