Two Years of Data

The EU-Vietnam Free Trade Agreement entered into force in August 2020, with tariff reductions staged over a ten-year period. By January 2026, five years of implementation have produced sufficient data to assess its real impact on bilateral trade, investment flows, and regulatory convergence.

Trade Volume Analysis

Bilateral trade between Vietnam and the EU reached $68.5 billion in 2025, up from $49.2 billion in 2020 — a compound annual growth rate of 6.8%. Vietnamese exports to the EU grew to $47.8 billion, while imports from the EU reached $20.7 billion. The trade surplus has widened, a pattern that has drawn occasional commentary from European policymakers but has not yet triggered formal trade defence measures.

The product composition of exports has shifted modestly. Textiles and footwear remain the largest categories, but electronics, machinery, and furniture have grown faster on a percentage basis. This reflects both the gradual tariff phase-out — electronics components now face near-zero duties under most EU tariff lines — and the relocation of manufacturing capacity to Vietnam by EU-headquartered firms seeking to diversify supply chains.

Imports from the EU are dominated by machinery, aircraft, pharmaceuticals, and chemicals. German automotive components, French aircraft and spirits, and Dutch agricultural products constitute the leading categories. The growth in imports has been slower than export growth, reflecting the structural reality that Vietnam's manufacturing model relies heavily on imported capital goods and intermediate inputs.

Tariff Utilisation and Rules of Origin

The utilisation rate of EVFTA preferences — the share of eligible exports that actually claim the preferential tariff — has improved from 28% in 2021 to 42% in 2025. This is below the utilisation rates seen in ASEAN's agreements with China and South Korea, and significantly below the rates for agreements such as CPTPP. The gap reflects persistent challenges in rules-of-origin compliance, certification capacity, and awareness among smaller exporters.

The rules of origin under EVFTA are product-specific and, in many cases, require a change in tariff classification rather than a simple regional value content threshold. For textiles, this means that fabric must be woven or knitted within Vietnam or the EU to qualify — a requirement that has proven difficult for enterprises relying on imported fabric from China or Taiwan. The textile sector has responded with increased investment in local dyeing, weaving, and finishing capacity, but the transition is incomplete.

The European Commission has published guidance on cumulation — the treatment of inputs from ASEAN countries and other FTA partners — but Vietnamese customs authorities have adopted a cautious interpretation. Exporters seeking to rely on extended cumulation should obtain advance rulings from the General Department of Customs to avoid disputes at the border.

Investment Flows from Europe

European FDI into Vietnam totalled $2.8 billion in 2025, representing 11% of total registered capital. The Netherlands, Luxembourg, and Germany were the largest sources. Much of this capital is routed through Dutch or Luxembourg holding structures, meaning the ultimate beneficial ownership is geographically dispersed.

Sectorally, European investment is concentrated in renewable energy, manufacturing, and logistics. Orsted's offshore wind feasibility studies, Siemens' industrial automation partnerships, and DB Schenker's warehousing expansions illustrate the breadth of activity. The Investment Protection Agreement (IPA) that accompanies the EVFTA has not yet been ratified by all EU member states, meaning that investor-state dispute settlement mechanisms remain unavailable.

Regulatory Convergence

The EVFTA contains extensive commitments on regulatory transparency, technical standards, and sanitary and phytosanitary measures. Implementation has been uneven. Vietnam has aligned portions of its food safety and product standards framework with EU norms, but full convergence is not expected before 2030.

Intellectual property protections have been strengthened, with patent term extensions for pharmaceutical products and enhanced border enforcement for counterfeit goods. The Ministry of Science and Technology has issued circulars implementing these commitments, but enforcement at the provincial level remains inconsistent.

Government procurement provisions, which grant EU firms conditional access to Vietnamese public tenders above specified thresholds, have seen limited uptake. Language requirements, bidding security deposits, and preference for domestic suppliers in certain categories have limited the practical access available to European bidders.

Practical Implications for Enterprises

For Vietnamese exporters, the EVFTA presents a genuine cost advantage in the EU market, but capturing that advantage requires investment in compliance infrastructure. Enterprises should audit their supply chains against product-specific origin requirements, obtain authorised economic operator status where possible, and maintain robust documentation.

For European investors, the agreement provides tariff certainty and a framework for regulatory dialogue, but it does not eliminate the operational challenges of doing business in Vietnam. Labour regulations, land use rights, and the pace of administrative reform remain significant factors in investment decisions.

Conclusion

The EVFTA has delivered measurable benefits to bilateral trade and investment, but its full potential remains unrealised. Tariff utilisation rates, rules-of-origin compliance, and regulatory convergence all have room for improvement. Enterprises that invest in understanding and operationalising the agreement's provisions will capture a disproportionate share of the available benefits.