EU-Vietnam Free Trade Agreement: A Half-Decade of Success and Challenges

Strategic Insights -

The European Union's (EU) Free Trade Agreement with Vietnam, signed in 2019 and in force since August 2020, has been a game-changer for the country. The agreement has paved the way for unprecedented access to the EU market, catalyzed institutional reforms, and attracted high-quality foreign direct investment (FDI). Early expectations have largely materialized, with bilateral trade between the EU and Vietnam reaching approximately $298 billion between August 2020 and May 2025. Vietnam has emerged as the EU's top trading partner in ASEAN and its 16th largest globally.

Key Takeaways:

  • The EVFTA has eliminated 65 per cent of tariffs on EU goods entering Vietnam, with nearly 99 per cent of all tariffs set to be phased out by 2030.
  • Bilateral trade between the EU and Vietnam reached approximately $298 billion between August 2020 and May 2025, accounting for nearly 40 per cent of the total accumulated trade between the two sides since 1995.
  • Registered FDI from the EU has exceeded $35 billion as of mid-2025, with investments flowing into manufacturing, renewable energy, pharmaceuticals, and high-tech industries.
  • The manufacturing sector has been a cornerstone of this transformation, with European firms specializing in automotive components, electronics, and machinery investing in Vietnam as a base for regional operations.
  • The EVFTAs rules of origin provisions have encouraged the development of local supply chains, prompting European companies to invest in upstream industries and collaborate with Vietnamese partners.
  • Renewable energy has seen substantial growth, with projects in wind, solar, and biomass energy proliferating, supported by improved legal frameworks and streamlined investment procedures.
  • High-tech industries, including pharmaceuticals, biotechnology, and IT, have benefited from enhanced intellectual property (IP) protections and regulatory harmonisation under the EVFTA.
  • Vietnam is no longer viewed merely as a low-cost manufacturing destination but as a strategic partner with a stable policy environment and a commitment to international norms.

Statistics:

  • Bilateral trade between the EU and Vietnam reached approximately $298 billion between August 2020 and May 2025.
  • Vietnam has emerged as the EU's top trading partner in ASEAN and its 16th largest globally.
  • Registered FDI from the EU has exceeded $35 billion as of mid-2025.
  • The proportion of businesses citing tariff reductions as a key advantage rose from 29 per cent in 2024 to 61 per cent in 2025.
  • Top-performing firms reported profit increases of up to 25 per cent.

Sources:

  • EuroCham
  • Global Data Point
  • SyndiGate Media Inc.