The Vietnamese Dong (VND) has recently plummeted to an unprecedented low against the U.S. Dollar (USD), marking a significant shift in the currency’s value and raising concerns about its economic ripple effects. As of April 3, 2025, this decline reflects broader pressures on emerging market currencies, compounded by global trade uncertainties—most notably, the Trump administration’s tariff policies. In this blog, we’ll dive into the reasons behind the Dong’s fall, its economic implications, and how it ties into the tariff landscape.
The Dong’s Record Low: What’s Happening?
The Vietnamese Dong has been on a downward trajectory, hitting a historic low against the U.S. Dollar. Reports indicate that the currency dropped to levels such as 25,780 VND per USD at Vietcombank, with black market rates reportedly reaching as high as 25,850 VND earlier this year. This continuous decline signals a weakening of the Dong, driven by both domestic and international factors. Unlike past sharp corrections where sell-off transactions spiked, the current market shows a different dynamic—yet the pressure remains undeniable.
Trump Tariffs: A Global Trade Shock
A key driver of this currency turmoil is the Trump administration’s aggressive tariff stance. With reciprocal tariffs imposed on major trading partners, including Vietnam (46% retaliatory tariff based on its 90% average tariff on the U.S.), global trade dynamics are shifting. These tariffs, aimed at balancing trade deficits, have strengthened the U.S. Dollar—evidenced by the Dollar Index hovering around 104.46 recently. For Vietnam, a manufacturing export powerhouse, a stronger Dollar and higher tariffs could make its goods less competitive, further pressuring the Dong.
Here’s a quick look at Vietnam’s tariff situation compared to others:
- Vietnam: 90% average tariff on U.S. → 46% retaliatory tariff
- China: 67% → 34%
- South Korea: 50% → 25%
This tariff escalation risks sparking a broader trade war, with emerging markets like Vietnam bearing the brunt as their currencies weaken against a robust Dollar.
Economic Implications: AI+ Insights
The AI+ perspective highlights that the Dong’s record low against the Dollar is casting a negative shadow over Vietnam’s economic indicators. Here’s why:
- Inflation Risk: A weaker Dong makes imports—often priced in USD—more expensive, driving up costs for goods and services. Vietnam’s consumer price index could see upward pressure, eroding purchasing power.
- Export Challenges: While a cheaper Dong might theoretically boost exports, Trump’s tariffs counteract this advantage, potentially shrinking Vietnam’s trade surplus with the U.S., which hit over $110 billion in 2024.
- Capital Flight: A persistently strong Dollar and economic uncertainty could trigger capital outflows, further straining Vietnam’s foreign exchange reserves, already noted to be below three months’ worth of imports.
The State Bank of Vietnam (SBV) has signaled readiness to intervene by selling Dollars to stabilize the Dong, but with limited reserves, its capacity to cushion the fall may be constrained.
Bitcoin and Risk Assets: A Parallel Struggle
Interestingly, this currency depreciation aligns with pressures on risk assets like Bitcoin. As explored in a previous blog, Trump’s tariffs are pushing investors toward safe-haven assets, sidelining cryptocurrencies and other speculative investments. The Dong’s decline mirrors this risk-off sentiment, as global investors reassess emerging market exposure amid trade war fears.
Looking Ahead: A Manageable Slide or a Deeper Crisis?
Despite the grim short-term outlook, some analysts remain cautiously optimistic. Forecasts suggest the Dong might depreciate by around 3% in 2025, a manageable slide if the SBV adapts its monetary policy flexibly. However, external factors—U.S. inflation dynamics, Federal Reserve rate decisions, and Trump’s trade policies—will dictate the Dong’s fate. For now, Vietnam’s economy faces a delicate balancing act: leveraging its export-driven growth while mitigating the fallout from a weakening currency.
Conclusion
The Vietnamese Dong’s record low against the U.S. Dollar is more than a currency statistic—it’s a symptom of broader economic and geopolitical shifts. Trump’s tariffs, a stronger Dollar, and Vietnam’s own economic vulnerabilities are converging to test the resilience of this Southeast Asian nation. While the immediate impact is negative, the long-term story depends on how Vietnam navigates this storm. Will the Dong stabilize, or is this the start of a deeper economic challenge? As the tariff saga unfolds, all eyes are on Hanoi—and the crypto markets watching from the sidelines.
