Market Digest: Vietnam’s Growing Appetite for U.S. Agricultural Imports

It is no secret that Vietnam is a fast-growing market, with an estimated GDP of $409B and an impressive CAGR of 8.1% over the past five years. Along with this rapid development, the cost of living has increased substantially over the years. According to Vietnam Report, in 2022, with a basic inflation of 2.95%, the consumer price index increased by 3.15%, which was mainly driven by a rise in the price of petroleum and gas. New consumption power in Vietnam is also predicted to thrive, as nearly 75% of the population is expected to become members of the consuming class – whose daily spending power is of at least $11 in purchasing power parity (PPP) terms.

Under these changing circumstances, despite a 1.6% increase in the price of food since 2021, the market value of Vietnam’s food industry is expected to reach $94.37B in 2023, with a forecasted CAGR of 7.88% for the next 5 years. The industry is dominated by the confectionary & snacks and bread & cereal sectors, which comprise approximately 15% market share each.

Due to the rapid development of the food industry, Vietnam has promoted its imports of foreign agricultural commodities to stabilize its ingredients supply. For several major imported products, particularly soybeans and wheat, the United States has long been the leading supplier, along with Canada, Brazil, and others.

Table 1: Imports of selected U.S. agricultural commodities into Vietnam

Nonetheless, the volume supply from the United States tends to fluctuate or slightly slope downward in recent years. The main reason lies in the non-existence of a Free Trade Agreement (FTA) between Vietnam and the United States, which means Vietnam tariff rates on U.S. goods are still based on the Most Favored Nation (MFN) rates. This tariff disadvantage makes it difficult for Vietnamese businesses to import goods from the United States and reduce their competitiveness due to higher selling price in comparison with products from Canada or Australia. Moreover, U.S. products usually bear higher shipping costs in comparison with others.

Table 2: Vietnam’s tariff rates on selected agricultural commodities

Despite the higher price tag, Vietnamese consumers remain interested in U.S. goods, which they see as high-end products with prices to match. This is due to a number of factors, including the strong reputation of U.S. brands for quality and reliability and the perceived status associated with owning U.S. goods. According to the International Trade Administration, Vietnamese consumers who shop online show a preference for U.S. goods, particularly in the technology and electronics categories. This inclination stems from a lack of confidence in local e-commerce platforms, leading them to opt for established and trustworthy sites like Amazon and Rakuten.

During the Covid pandemic, a surge in demand for organic F&B products was recorded among Vietnamese consumers due to the rise of middle-income class and higher importance placed on health concerns. The USDA reported a doubling of imports of U.S. organic agricultural products into Vietnam in 2020 to meet the shortage in domestic supply. The USDA Organic seal is widely acknowledged as the most popular and credible certification for organic products by Vietnamese consumers. Even though consumers are willing to pay premiums for organic products, pricing remains a hurdle, particularly for the middle-class segment, which finds it challenging to afford organic alternatives for all food items. Consequently, the additional spending has shifted towards products like baby infant milk powder, dairy, and fresh fruits and vegetables.

The current landscape in Vietnam demonstrates promising opportunities for imported agricultural products. Despite import difficulties with the United States, Vietnamese consumers exhibit strong interest in organic produce and other premium American goods.

What we can do

The above insights were consolidated based on our recent North Dakota Trade Mission in Vietnam in November 2023. To further promote U.S. agricultural commodities in the Vietnamese market, North Dakota Trade Office, in collaboration with Tractus, hosted a trade mission focused on soybeans, pulses, and grains. Over four days, Tractus successfully organized a market overview with regional experts; 51 quality business meetings; and several site visits distributed across a range of activities covering sealine shipment, production assembly, storage, and distribution in Vietnam to address all aspects of the value chain for U.S. agricultural products in Vietnam.

Tractus has more than 25 years of experience promoting global trade and investment. Our economic development experts have supported hundreds of trade missions to facilitate exports and partnerships. Contact us today to learn more about how Tractus can help accelerate trade for your country.

Authored by

Nhi Nguyen is a research analyst based in Vietnam.