Vietnam's Export Boom to the U.S.: The Role of Chinese Firms

July 17, 2026

Vietnam's Export Boom to the U.S.: The Role of Chinese Firms

Chris A. Avalos, Trang Hoang, and Eva Van Leemput

In recent years, Vietnam has attracted considerable attention as a potential major beneficiary of the 2018-19 U.S.-China tariff increases, reflecting substantial trade diversion as exports shifted away from China (Alfaro and Chor, 2023; Freund et al., 2024). As shown in the left panel of Figure 1, U.S. imports from China declined sharply after the 2018-19 tariffs, while imports from Vietnam tripled by 2025.

The rapid expansion of Vietnam's exports to the U.S., however, does not necessarily imply that the gains accrued primarily to domestically owned Vietnamese firms. Instead, part of the increase may reflect the growing role of Chinese firms that relocated production to Vietnam in response to changing tariff incentives. Such relocation would be expected to increase not only exports from Vietnam to the U.S., but also imports from China, as newly established Chinese-owned firms source intermediate inputs from their existing supplier networks in China. Consistent with this mechanism, the right panel of Figure 1 shows that Vietnam's rising exports to the U.S. were accompanied by a disproportionate increase in Vietnamese imports from China relative to imports from the rest of the world, raising questions about the extent to which Chinese firms contributed to Vietnam's export boom.¹

We examine the extent to which Chinese-owned firms benefited from the trade diversion induced by the U.S.-China tariffs. This question has become increasingly important amid concerns that Chinese firms may be using third countries as a conduit to maintain access to the U.S. market. While transshipment through Vietnam has received considerable attention, existing evidence suggests its quantitative importance is limited (Freund et al., 2024; Iyoha et al., 2025). In contrast, much less is known about the role of FDI and the relocation of production by Chinese firms shifting operations to Vietnam in response to U.S. tariffs.

Addressing this question is challenging due to data limitations, particularly regarding firms' foreign ownership.² In this note, we leverage a unique feature of the Vietnamese firm-level data, which identify the source country of inward foreign direct investment (FDI) for foreign-invested firms. In addition, using a unique firm identifier, we merge these data with transaction-level trade data from Panjiva, allowing us to directly examine how Vietnam's export boom differed across ownership groups.

Using these data, we establish three key facts about the role of Chinese and other foreign firms in Vietnam's export boom to the U.S. following the 2018-19 tariffs. First, Vietnam has seen a sharp increase in FDI from China in recent years. Second, much of Vietnam's export boom to the U.S. following the 2018-2019 tariff hikes has been driven by exports through Chinese-owned firms. Third, we provide evidence suggesting that not only Chinese firms relocated production from China to Vietnam but also non-Chinese firms previously operating in China also shifted production to Vietnam in response to higher U.S. tariffs.

All told, these patterns suggest that part of the observed trade diversion toward Vietnam reflects the relocation of production and supply chains, particularly by Chinese firms. More broadly, our findings imply that the effectiveness of U.S. trade policy aimed at reducing dependence on China may be limited by the ability of firms to reallocate production across countries.

Fact 1: Chinese growing FDI presence in Vietnam

In the aftermath of the 2018-19 tariffs, China's presence in Vietnam has increased significantly. Using project-level greenfield FDI data from fDi Markets, Figure 2 plots the cumulative amount of FDI across selected manufacturing sectors exposed to U.S. tariffs: manufacturing and industrial goods, IT and communications, and high-tech electronics and equipment.³ As shown in the left panel, South Korea has long been the largest source of FDI into Vietnam, and this position was already well established prior to the 2018-19 U.S.-China tariff hikes. In contrast, Chinese FDI climbed markedly after the tariffs were imposed, exhibiting a clear break from its pre-tariff trend. This acceleration is particularly striking relative to the more stable investment patterns of FDI from other major source countries, suggesting that Chinese firms responded to the tariff-induced incentives rather than to broader structural factors, such as the gradual relocation of production to lower-cost economies.

The right panel of Figure 2 presents the sectoral cumulative FDI into Vietnam from 2018 onward, highlighting the period following the U.S.-China tariff hikes. China has emerged as the largest source of FDI during this period. Notably, Chinese investment in manufacturing and industrial goods-the sectors most exposed to U.S. tariffs-has increased more relative to other source countries, consistent with firms relocating production in response to changing trade incentives.

Consistent with the FDI evidence, Vietnamese firm-level data also point to a substantial increase in China's corporate presence in Vietnam. Table 1 reports the number of foreign-owned firms in Vietnam by source country in 2018 and 2023.⁴ While the number of firms increased across several major source countries, the expansion was particularly pronounced among Chinese-owned firms, whose presence more than doubled over this period.⁵ As a result, Chinese-owned firms accounted for 15 percent of all foreign-owned firms in Vietnam by 2023, up notably from 9 percent in 2018.

Table 1: Number of FDI Firms by main investor country

All told, these data highlight the rapid expansion of Chinese direct investment in Vietnam in the wake of the 2018-19 tariffs. This pattern is consistent with Chinese firms responding to tariff incentives to relocate production to Vietnam. For the next set of facts, we combine the firm-level data with Vietnamese export data to examine Vietnam's exports to the U.S. and imports from China.

Fact 2: Vietnam's export growth to U.S. led by Chinese FDI firms

We begin by examining the contribution of different types of firms to Vietnam's exports to the U.S. following the 2018-19 tariffs. Specifically, we classify firms into three ownership types: Chinese FDI firms, other foreign FDI firms, and domestic Vietnamese firms.

Using this classification, we decompose Vietnam's exports to the U.S. by firm type across two periods: the immediate aftermath of the U.S.-China tariff hikes (2018-2019) and the subsequent years (2020-2023).⁶ The left panel of Figure 3 presents the results. During the 2018-19 period, other foreign FDI firms accounted for the largest share of Vietnam's exports to the U.S., representing approximately 56 percent of total exports.⁷ Domestic Vietnamese firms accounted for roughly 33 percent, while Chinese FDI firms represented only 11 percent of exports.

Since then, the composition of Vietnam's exports to the U.S. by firm type has shifted markedly. Strikingly, the share of exports attributable to Chinese FDI firms more than doubled, rising from 11 percent to 25 percent. This increase is consistent with the earlier evidence of a sharp rise in Chinese investment in Vietnam following the U.S.-China tariff hikes.

The expansion of exports to the U.S. by Chinese firms has been accompanied by a decline in the export share of both domestic Vietnamese firms and other foreign FDI firms. The decline was particularly pronounced among domestic firms, whose share of exports fell from 33 percent to 23 percent. By contrast, the share accounted for by other foreign FDI firms declined more modestly, to 52 percent.

Next, we examine the contribution of different firm types to Vietnam's imports from China using the same ownership classifications and time periods. The right panel of Figure 3 presents the results. During the 2018-19 period, domestic Vietnamese firms accounted for the largest share of imports from China, representing approximately 46 percent of the total. Other foreign-invested firms accounted for an additional 43 percent, while Chinese-owned firms represented only 11 percent of imports.

As with Vietnam's exports to the U.S., the composition of imports from China shifted markedly over the subsequent 2020-2023 period. Most notably, the share of imports from China attributable to Chinese FDI firms doubled. At the same time, the import share of domestic Vietnamese firms declined significantly, while the share accounted for by other foreign FDI firms remained broadly unchanged. These patterns mirror the changes observed on the export side, where Chinese-owned firms also substantially increased their share of Vietnam's exports to the U.S.

Taken together, the evidence points to a growing role for Chinese-owned firms in Vietnam's trade with both the U.S. and China. More broadly, these findings suggest that the effectiveness of U.S. tariff policies aimed at reducing dependence on China may be attenuated when production is relocated across borders through foreign direct investment while supply-chain linkages to China remain intact.

Fact 3: Foreign firms are shifting production from China to Vietnam

The 2018-19 U.S.-China tariff hikes created incentives not only for Chinese firms to relocate production outside of China, but also for any foreign firms with operations in China to do the same. While our data do not allow us to directly identify whether foreign firms shifted production from China to Vietnam, we assess this possibility indirectly. Specifically, we compare newly established and pre-existing foreign-invested firms in Vietnam following the tariff hikes, examining both their exports to the U.S. market and their import sourcing from China.

The idea is that firms from countries such as South Korea were not subject to U.S. tariffs and thus had no incentive to relocate production to Vietnam. However, South Korean multinationals with operations in China did face incentives to shift production out of China. We therefore compare newly established foreign-owned firms in Vietnam with pre-existing foreign-owned firms. To the extent that newly established firms reflect post-tariff relocation decisions, differences in their trade patterns can provide indirect evidence of supply-chain relocation following the tariff hikes.

The left panel of Figure 4 shows the dependence on U.S. exports by Chinese and other foreign FDI firms and how they compare across existing and newly established FDI firms.⁸ There are several takeaways. First, Chinese-owned firms exhibit a higher overall dependence on the U.S. market than other firms. Second, newly established FDI firms are more reliant on the U.S. market than their longer-established counterparts. This pattern holds not only for Chinese-owned firms but also for other foreign-owned firms.

The stronger U.S. export orientation of newly established Chinese-owned firms is not surprising. Chinese firms faced the largest incentive to establish new operations outside China following the 2018-19 U.S.-China tariff hikes. However, the fact that a similar pattern is also observed among other foreign-owned firms suggests that the response extended beyond Chinese firms alone.

We perform the same decomposition for Vietnam's imports from China. The results reveal a similar pattern (right panel of Figure 4). Chinese-owned firms source a substantially larger share of their imports from China, reflecting their closer integration with Chinese supply chains.

We also find that newly established foreign-invested firms exhibit a greater reliance on Chinese imports than longer-established firms. This pattern is present for both Chinese-owned andf other foreign-owned firms. These findings suggest that firms relocating production to Vietnam did not sever their links with China. Rather, while production shifted geographically, many firms continued to rely on Chinese suppliers for intermediate inputs, pointing to the persistence of China-centered supply chains despite the relocation of final-stage production.

All told, while not definitive, these findings are consistent with a broader relocation of production and supply chains to Vietnam following the tariff hikes, beyond Chinese-owned firms alone. However, all these firms continue to rely heavily on inputs from China, suggesting that production has moved, but supply chains remain closely tied to China.

Conclusion

We document the growing role of Chinese-owned firms in Vietnam following the 2018-19 U.S.-China tariff hikes. Chinese-owned firms account for a disproportionate share of Vietnam's export boom to the U.S., consistent with Chinese firms relocating production to Vietnam in response to higher U.S. tariffs on China. We also provide evidence consistent with a broader relocation of foreign-owned firms-beyond Chinese-owned firms-that moved operations from China to Vietnam in response to tariff incentives.

These findings suggest that higher U.S. tariffs on China may have redirected the geographic location of production without fully severing dependence on China. As a result, bilateral trade data exaggerate the extent to which tariffs have achieved the U.S. objective to reduce dependence on China. More broadly, they highlight the growing complexity of trade policy in a world characterized by deeply integrated supply chains and multinational firms that can reallocate production across countries in response to changing trade barriers.

References

Alfaro, Laura, and Davin Chor, "Global Supply Chains: The Looming 'Great Reallocation'," National Bureau of Economic Research Working Paper No. 31661, 2023.

Aristizabal-Ramirez, Maria, Chris A. Avalos, Emma Rosenbaum, and Eva Van Leemput, "Mexico in U.S. Supply Chains: Lessons from 2018-19 Tariffs," FEDS Notes, Board of Governors of the Federal Reserve System, 2026.

Freund, Caroline, Aaditya Mattoo, Alen Mulabdic, and Michele Ruta, "Is U.S. Trade Policy Reshaping Global Supply Chains?," Journal of International Economics, 152, 104011, 2024.

Hoang, Trang T., and Gordon Lewis, "As the U.S. Is Derisking from China, Other Foreign U.S. Suppliers Are Relying More on Chinese Imports," FEDS Notes, Board of Governors of the Federal Reserve System, 2024.

Iyoha, Ebehi, Edmund Malesky, Jaya Wen, Sung-Ju Wu, and Bo Feng, "Exports in Disguise? Trade Rerouting during the U.S.-China Trade War," Harvard Business School Working Paper No. 24-072, 2025.

Appendix

This note draws on three primary data sources.

1. Financial Times - fDi Markets database

The Financial Times' fDi Markets database provides project-level information on cross-border greenfield foreign direct investment (FDI), including the source and destination countries of each investment project. The database also classifies projects into broad sectors: Metals, Minerals, Coal, oil & gas, Renewable energy, Wood products; Food and Beverages, Consumer products, Textiles, Industrial equipment, Building materials, Chemicals, Plastics, Rubber, Ceramics & glass, Paper, printing & packaging; Electronic components, Semiconductors, Consumer electronics, Business machines & equipment; Automotive components, Automotive OEM, Non-automotive transport OEM, Engines & turbines, Aerospace, Space & defense, Transportation & Warehousing; Pharmaceuticals, Medical devices, Biotechnology, Healthcare; Leisure & entertainment, Hotels & tourism; Software & IT services, Communications; Financial services, Business services, Real estate.

2. Vietnam Enterprise Survey (VES)

The Vietnam Enterprise Survey (VES) is an annual census of formally registered firms conducted by Vietnam's General Statistics Office (GSO). The survey provides detailed firm-level information on ownership structure, industry classification, employment, revenues, assets, capital, and other operational characteristics. A key feature of the data is the identification of foreign ownership and the source country of foreign investors, allowing firms to be classified by ownership type and country of origin.

3. S&P Global's Panjiva Supply Chain Intelligence Database for Vietnam

S&P Global's Panjiva Supply Chain Intelligence Database provides transaction-level information on nearly all Vietnamese import and export transactions between 2018 and 2021 at the 8-digit HS product level. The data record individual shipments and include detailed information on trading firms, products, shipment values, quantities, origins, and destinations.