Vietnam's export triumph: How a small nation beat China and India to become America's top trade partner

Vietnam has recorded the largest trade surplus with the United States among all countries in the first half of 2026, according to a TOI report by Chidanand Rajghatta from Washington, citing data from the Wall Street Journal. Vietnam's surplus stood at $114 billion in the first six months of the year, ahead of China, Mexico and Taiwan.

Vietnam ranked third in 2025, behind China ($202 billion) and Mexico ($197 billion), but is now on track to become the largest exporter to the US by that measure.

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Vietnam is a country of around 100 million people, compared with China's population, which is about 14 times larger, and an economy roughly 40 times the size of Vietnam's, at close to $20 trillion versus $500 billion. American imports from Vietnam rose 40% from a year earlier, while imports from China fell from $168 billion to $129 billion over the same period.

Policy shifts trace back to the 1980s

Trade experts attributed Vietnam's trade growth to decades-old economic reforms rather than recent tariff measures. Hanoi launched its Doi Moi reforms in the 1980s, moving away from centrally planned economic policy and opening up to global trade. The United States lifted its trade embargo on Vietnam in 1994 and normalised diplomatic relations in 1995.

A bilateral trade agreement that took effect in 2001 further expanded commercial ties between the two countries. Citing State Department figures, two-way trade rose from $451 million in 1995 to nearly $124 billion by 2023.

Vietnam made export-oriented manufacturing a central part of its economic strategy, joining regional trade arrangements, attracting foreign investment, and building industrial parks and port infrastructure. Citing World Bank data, Vietnam's trade-to-GDP ratio is now close to 170%, among the highest of any economy globally.

"China plus one" shift benefited Vietnam

Several multinational companies adopted a "China plus one" sourcing strategy as Chinese wages rose and US-China trade relations became more strained. Vietnam became a key beneficiary of this shift, owing to its proximity to China's manufacturing base, its integration into Asian supply chains, and its cost competitiveness.

Companies including Samsung, Intel and Foxconn have expanded operations in Vietnam, followed by Apple, Nike and Lululemon. Citing the Wall Street Journal, around 60% of Vietnamese exports to the US now consist of machinery, electronics or appliances. Miami-based TOV Furniture shifted its sourcing mix from 60% China and 25% Vietnam in 2024 to 25% China and 60% Vietnam currently, a change the company attributed to tariffs.

As of June 2026, China's effective US tariff rate stood at 23.2%, compared with 6.5% for Vietnam.

Comparison with India

The report, according to TOI, also compared Vietnam's export performance with India's, pointing out that India's population is roughly 14 times that of Vietnam, while its goods trade surplus with the US stood at $58.4 billion, lower than Vietnam's despite the population difference.

India and Vietnam have different economic structures, with India's large domestic market and services sector meaning that goods-trade figures do not capture the full scope of its US economic relationship. Even so, Vietnam has been more successful at converting foreign investment and labour costs into export-oriented manufacturing tied to US supply chains.

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India has seen growth in electronics exports, including a sharp rise in mobile-phone exports, but has historically had lower participation in global manufacturing supply chains. Citing World Bank data, India's labour-force participation rate is 56.4%, compared with 73% in Vietnam, with 45% of Indian employment still in agriculture. In Vietnam, agriculture's share of employment fell from 65% in 2000 to 25% in 2025, according to the same data. The World Bank was cited as identifying infrastructure, labour-market regulation, compliance requirements and deeper integration into global value chains as areas needing improvement in India.

Vietnam's trajectory, from a country previously in conflict with the US to one of its largest trading partners, reflects a broader shift in global manufacturing and trade patterns following changes in US tariff policy.

(With inputs from Chidanand Rajghatta's TOI report)