BAC Ninh, Vietnam, just north of Hanoi, has changed quickly as factories moved into the region and foreign investors poured in. Once known for its rice fields and the city’s centuries-old Quan Ho folk songs, Bac Ninh is now one of Vietnam’s busiest factory zones, with signs above shops and Chinese and Korean dishes showing the breadth of new arrivals.
Vietnam’s factory growth has been hastened by President Donald Trump’s tariff hikes, a shift that reshaped where companies build and where supply chains land. The economy has profited from friction between Washington and Beijing as factories shifted out of China, joining earlier waves of foreign investment by Japanese and South Korean companies that made Vietnam a manufacturing hub, according to the report.
The early momentum has shown how Vietnam can benefit from global disruption. Bac Ninh’s first major boom began around 2008 when Samsung built its first phone factory there, turning Vietnam into Samsung’s largest offshore manufacturing base. Now, Chinese companies are pouring in as they diversify factory locations to skirt U.S. tariffs and other trade restrictions, the report said.
After Hanoi and Beijing normalized ties in the 1990s, inflows of Chinese investment began to pick up, with Chinese firms using Vietnam’s electronics supply chain, labor force, and local government support. The report also described the use of Chinese-speaking intermediaries to smooth paperwork and logistics.
Vietnam’s leaders have been building capacity to keep up, including an expansion of transport links. The report said a highway to the Chinese border has cut travel time by more than an hour. It also said a railway plan is intended to connect Hanoi to Haiphong—Vietnam’s largest seaport—and then to the border town of Lao Cai.
The expansion effort is also taking shape in industrial zones tied to higher-tech manufacturing. On Dec. 19, Bac Ninh broke ground on an industrial zone expansion for high-tech manufacturing, including electronics, pharmaceuticals and clean energy. The project was described as part of a nationwide push: Vietnam launched 234 major projects worth more than $129 billion just weeks before a January National Party Congress, when leaders are set to decide the country’s political leadership and economic direction.
In Bac Ninh, the report described signs of both investment and the friction that comes with rapid scaling. In the downtown area, a convenience store bears the name Tmall, after Alibaba’s flagship online marketplace, while Chinese-language advertising targets investors, and Chinese and Vietnamese language schools have opened to help locals and visitors communicate.
Still, the “China plus one” approach of shifting factories out of China and into alternatives is colliding with limits on labor and logistics. Labor costs have jumped 10%–15% since 2024, Peng, an employee at a telecoms equipment company that moved from Shenzhen, said in an on-the-record quote, adding that “It is becoming difficult to recruit workers.” Peng gave only one name because he said he was not authorized to speak to the media. He also said costs were expected to keep rising.
Business leaders interviewed in the report pointed to structural gaps that make fast replication difficult. Jacob Rothman, co-founder and CEO of China-based Velong Enterprises, which makes grill tools and kitchen gadgets and has shifted some production to Southeast Asian countries including Cambodia and Vietnam, said China had created “the best manufacturing ecosystem” and that “You can’t recreate that overnight.” Brian Bourke, global chief commercial officer at U.S.-based SEKO Logistics, said Vietnam still lags China in infrastructure and logistics capabilities.
Those gaps are surfacing in boomtowns as firms try to recruit and retain workers. The report said state media described companies trying to lure workers with higher wages and bonuses, a box of instant noodles on a first day, and bus fares for those commuting from another city.
Competition among Southeast Asian rivals is also shaping what happens next. Vietnam’s biggest export market remains the United States, and in 2024 the country ran a $123.5 billion surplus with the U.S., the report said. That surplus helped push Trump to threaten a 46% import tax on Vietnamese goods before settling on 20%, according to the report.
The two countries have been working toward a deal to keep most tariffs at 20%, and Vietnam offered broad preferential access for U.S. products, the White House said in October, the report added. So far, Vietnam has absorbed the tariffs, running a trade surplus of $121.6 billion in January-November 2025.
An October agreement between Trump and Chinese leader Xi Jinping to a year-long trade truce and lower average tariffs on Chinese exports to the U.S. to about 47% eased some concerns, but uncertainty remains. Frederic Neumann, chief Asia economist at HSBC, said persisting uncertainty over tariffs and other trade restrictions means companies are not only shifting factories out of China, but also spreading production across several countries.
Even with lower U.S. tariffs on China, the report said the cost calculation still favors moving to Southeast Asia, where manufacturing inefficiencies add only about 10% in cost. But it warned that while large corporations can shift production more easily, smaller firms may struggle to fit factories with expensive equipment into a new location.
Rothman said the broader relocation trend continues. He told the report: “(The) race to move outside of China is still happening, and it’s accelerating.”
Vietnam is still attracting investment despite those worries. The report said cumulative foreign investment topped $28.5 billion as of September, up 15% from last year, but it also said manufacturers were hedging bets amid scrutiny of Vietnam’s role as a hub for tariff-dodging transshipments. Bourke said one of SEKO Logistics’ customers shifted some furniture making to India and did not want to “put all their eggs in Vietnam.”
Elsewhere in the region, governments have been promoting alternative manufacturing bases. The report cited Indonesia and the Philippines as competitors and said that in the Philippines a new law allows foreign investors to lease private land for up to 99 years to attract long-term commercial and industrial investment.
Vietnam’s longer-term goal is to climb higher in the manufacturing value chain as it tries to become rich by 2045 and Asia’s next “tiger economy,” following export powerhouses like South Korea and Taiwan. The report said the country aims to shift from low-cost assembly work to manufacture higher-value products including electronics and clean energy equipment, offering incentives such as tax breaks on imported machinery and discounted rents to help factory suppliers upgrade and modernize.
The report also said that about a third of Vietnam’s factories still use non-automated equipment and only about 10% use robots on their production lines. As Vietnam announces hundreds of projects, Prime Minister Pham Minh Chinh framed the challenge in a call to scale, saying Vietnam must “reach far into the ocean, delve deep underground and soar high into space.”