In its July 1 report, S&P Global noted that domestic manufacturers faced further weakening demand in June, especially in export markets. Panelists cited US-imposed tariffs as a key factor driving the sharp decline in new business from abroad.

The downturn was largely driven by a third straight monthly drop in new orders. While the overall decline remained modest, it was steeper than in May. Export demand saw a particularly pronounced fall, with new overseas business dropping more sharply than total orders. In fact, the contraction in new export orders was the joint-fastest since September 2021, matching the rate recorded in May 2023.

Several respondents pointed directly to the impact of US tariffs as the cause of the export slump, which in turn led firms to scale back employment, purchasing, and inventory levels in June.

Staffing levels fell for the ninth month in a row and at a faster rate than in May, though firms were still able to reduce backlogs of work. Purchasing activity dipped slightly, reversing a similar-sized rise in May, and marking the third monthly reduction in the past four months.

Stocks of both inputs and finished goods also declined more sharply, with the steepest reductions in nine and five months, respectively.

Despite the ongoing demand weakness, manufacturers increased output in June for the second consecutive month, though the pace of growth slowed from May.

Input costs returned to an upward trend in June after falling for the first time in nearly two years in May. The increase in costs was slight and below the series average, and was mainly attributed to material shortages and a depreciation of the Vietnamese dong against the US dollar. As a result, manufacturers raised their selling prices, ending a five-month streak of decline.

Business sentiment showed further signs of recovery from the 44-month low recorded in April, supported by hopes for more stable market conditions and easing trade tensions. However, confidence remained below the series average.

Andrew Harker, economics director at S&P Global Market Intelligence, said, "June saw a worsening of international demand conditions for Vietnamese manufacturers as the impact of tariffs intensified. The steep drop in exports contributed to a further reduction in total new orders and led firms to scale back employment and purchasing.”

"One positive from the latest PMI survey was that firms continued to expand their output, but this is unlikely to continue for long without an improvement in the demand situation. The first half of 2025 has been characterised by volatility and uncertainty, particularly around trade conditions. Business confidence has recovered somewhat in recent months, but positive sentiment is largely based on hopes for a more stable picture going forward. Whether that will indeed be the case remains to be seen," he added.

Vietnam’s April PMI drops to 45.6 amid tariff announcements

VOV.VN - The recent announcement of tariffs by the United States has caused a renewed contraction to hit the Vietnamese manufacturing sector during April, with the country's Manufacturing Purchasing Managers' Index (PMI) falling to 45.6, according to the latest report released by S&P Global.