FDI Attraction: Fierce Competition Among Vietnam, India, Thailand, Mexico Under the Shadow of US Tariffs

The United States’ decision to impose tariffs of up to 46% on certain goods originating from Vietnam has triggered significant shifts in global supply chains and raised questions about Vietnam’s position in the global competition for fdi attraction. In this context, countries like India, Thailand, and Mexico have emerged as formidable competitors, seeking to seize the investment opportunities that Vietnam may lose.

Vietnam: A Setback Or An Opportunity To Reposition?

For many years, Vietnam has been an attractive destination for multinational companies as part of the “China +1” strategy, thanks to its stable political environment, low labor costs, and extensive free trade agreements. However, the high U.S. tariffs imposed due to concerns over origin fraud are significantly diminishing Vietnam’s appeal, especially for investors producing goods for export to the U.S.—the largest export market for Vietnam.

A large portion of Vietnam’s FDI is directed toward the U.S. market. Therefore, the tariff risks could lead foreign companies to delay expansion plans or shift focus to other countries.

Nevertheless, Vietnam’s fundamentals remain strong. With a young workforce, an expanding middle class, and a stable macroeconomic environment, Vietnam can still attract FDI if it can promptly localize supply chains, enhance origin transparency, and diversify export markets through CPTPP, EVFTA, and RCEP agreements.

FDI Potential Comparison Among Competitors In The Region And Globally

To better visualize the relative position of Vietnam in today’s FDI competition, the table below summarizes key figures:

India: The Sleeping Giant Awakens

India has long been expected to be an “FDI superpower” but has been hindered by complex administrative procedures and limited infrastructure. However, in recent years, the country has made significant reforms with policies like “Make in India,” corporate tax cuts, and incentives for key manufacturing sectors.

Unlike Vietnam, India is less dependent on the U.S. market and has a vast domestic market with over 1.4 billion people, making it particularly attractive to global investors. Moreover, the ongoing U.S.-China tensions have made India a preferred destination for high-tech industries, such as semiconductors and advanced manufacturing.

However, to truly break through, India still needs to improve logistics, land management, and labor market flexibility.

Thailand: Stability, Efficiency, And A Technology-Driven Focus

Thailand has long been an FDI hotspot in ASEAN, especially in sectors such as automotive, electronics, and industrial equipment. The country boasts a developed infrastructure, skilled labor, and policies focusing on high-tech industries through the Eastern Economic Corridor (EEC).

Thailand is also benefiting in the short term from not being subject to U.S. tariffs, allowing its exporters to maintain cost advantages in the U.S. market. With membership in multiple trade agreements, Thailand continues to be a safe choice for businesses looking for stability and medium-scale manufacturing.

However, its long-term challenge lies in an aging workforce and a slowdown in domestic consumption growth.

Mexico: The Rising Star Of Nearshoring

In the wake of the decoupling from China, Mexico has emerged as a prime destination, thanks to its geographical advantage adjacent to the U.S. and benefits from trade agreements such as USMCA.

From automotive and agricultural products to electronics and medical devices, Mexico is attracting diverse FDI flows from both the U.S. and Asia. The ability to avoid high tariffs and reduce shipping costs makes Mexico an ideal production hub for the North American market.

Despite risks related to domestic politics and security, Mexico’s geographical proximity, integrated supply chains, and favorable policies allow it to maintain a leading competitive position in this period.

The FDI Map Is Changing Rapidly

The U.S. tariff measures on Vietnam in 2025 signal that the global investment environment is shifting. Vietnam can still retain its position if it adopts timely policies, reforms its manufacturing sector, and reduces dependence on a single market.

Meanwhile, India, Thailand, and Mexico each offer unique advantages: India with its vast market size, Thailand with its stability and efficiency, and Mexico with its strategic location next to the U.S. The post-pandemic, post-globalization FDI competition is entering a new phase—intense and unforgiving.

If Vietnam successfully seizes this moment as an opportunity for strategic repositioning, it can continue to maintain its appeal for fdi attraction, evolving beyond a production destination to become a valuable hub in the next generation of global supply chains.