Photo: Thanh Hue/Getty Images
The recent release of U.S. government trade statistics for the first half of 2026 shows that for the first time ever, Vietnam has topped the list of countries with which the U.S. has the largest trade deficit, surging ahead of China, Mexico, and Taiwan. The U.S. deficit with Vietnam for this latest 6 month period reached $126 billion, a whopping 45 percent increase over the same period in 2025. This seems particularly surprising in view of the fact that in August 2025, the Trump administration began to apply reciprocal tariffs on Vietnam of 20 percent (which were then lowered to 10 percent in February 2026 after the Supreme Court overruled the president’s use of the International Emergency Economic Powers Act). What, then, accounts for the explosive growth in Vietnamese exports in the past year, and what implications, if any, does it have for U.S. trade policy?
In light of the administration’s recent report, The Great Transshipment Scam, one might assume the implications are severe. The report takes aim at countries—including Vietnam—for supposedly responding to higher relative tariffs placed by the administration on China in 2025 by passing through illegal transshipments from China. The administration report indeed singles out Vietnam (along with a short list of others) as a “scale leader [in transshipment] with significant economic integration with China.” The administration’s implication is that China is using Vietnam as a platform though which to transship its exports, because they face lower tariffs if “originating” from Vietnam.
However, the latest trade statistics tell another story completely. In fact, just four categories of products (for trade nerds: at the four digit Harmonized Tariff Schedule level), all of them in the electronics sector, account for 87 percent of the growth in Vietnamese exports in 2026 over 2025. That is, of the $37 billion increase in Vietnam exports to the U.S. in the first six months of 2026 over 2025, over $32 billion is accounted for by electronics. These electronics products come primarily from large global tech companies, such as Apple (including Taiwan’s Foxconn, assembling iPhones for Apple), Samsung, LG , Fujitsu and Intel, who are the largest foreign investors in this sector in Vietnam, not Chinese companies.
In contrast, exports in three of the sectors most associated with Chinese investment in Vietnam (i.e., apparel, footwear, and toys), barely budged in 2026 over 2025. Total of imports apparel, the largest of these categories by value, actually declined by about 1 percent in 2026, while imports of footwear and toys increased modestly, and only accounted for 0.07 percent and 0.03 percent of the total increase in Vietnam exports year over year, respectively.
Also counterintuitively, the 2026 export surge from Vietnam cannot be motivated by a desire to avoid tariffs from China. The reason: All of these electronics products are exempted from the Trump administration tariffs applied in 2025 and onward. All of these items enter the United States duty free, whether from China, Vietnam, or any other country.
In addition, this growth in electronic imports is not new, though it has accelerated. It is part of decades-long trend in increasing electronics imports from Vietnam, as covered in previous CSIS analysis, not something that began in 2025 or 2026.
Instead, the rise in electronics imports from Vietnam this past year appears to be part of the global rise in electronics consumption in the past year, driven by the AI boom. It is not possible to quantify the AI connection from simply looking at the Vietnam trade data, but AI is broadly recognized to be driving global trade in electronics, especially from Asia.
In short, the significant rise in Vietnam’s deficit, contrary to some narratives, is not a threat to the U.S. economy. It is also not illicit by an overwhelming margin. Moreover, it has very little to do with Chinese investment in Vietnam, but is rather driven by global multinationals from the United States, Japan, South Korea, and Taiwan. Finally, there is the fact that Vietnam still sits at the low-value end of the electronics supply chain, representing production and jobs that are not economically practical to move the United States.
On the basis of these facts, there is little if any justification for any trade policy crackdown on Vietnam for allegedly being a bad actor, harming U.S. economic interests, or aiding and abetting China’s trade interests. U.S. imports from Vietnam are increasing because U.S. demand for consumer electronics and AI components continues to be strong and is growing robustly. Tariffs or other trade barriers on these imports would simply raise consumer prices and make U.S. AI companies less globally competitive. The administration has said recently it is considering new trade initiatives to promote semiconductor and electronics investment to relocate to the United States, aimed at reducing import reliance. Both the specifics of such a plan and its impact on the United States’ voracious appetite for imports in this sector remain to be seen. But blaming Vietnam or other neighboring countries of China for the these imports, or for the bilateral trade deficits that result, is clearly wrong-headed.
Joseph Damond is a senior associate (non-resident) in the Southeast Asia Program at the Center for Strategic and International Studies (CSIS).
