In a VinaCapital Economist’s Note last month, Chief Economist Michael Koklari floated the idea of Vietnam buying and then storing LNG as a means to placate Trump administration officials ruffled by Vietnam’s huge trade surplus with the country.
“We have also heard from energy industry executives that Vietnam could quickly start importing around US$35 billion a year of LNG by using floating storage regasification units (FSRU) ships since the construction of proper LNG terminals will likely take years,” he said.
Indeed, this fits within a broader US-LNG-imports-for-tariff-relief narrative that has gained traction among key decision makers, trade industry officials, and foreign investors. However, whereas it might seem like a good idea in theory, in reality, this strategy may prove to be problematic for a range of reasons.
Firstly, Vietnam doesn’t have a lot of money. Total state budget revenue last year was just US$84.9 billion, with these funds allocated to projects like roads and railways and airports and hospitals and schools, the kind of infrastructure Vietnam needs to grow and develop its economy.
That is to say, that if it were to look at publicly financing a reduction in its trade surplus it would likely need to cut spending on some of these projects.
The alternative would be to raise taxes, or electricity prices in the case of LNG. However, neither of these are politically particularly popular options.
That said, to make a sizable dent in its surplus, which was over US$123 billion or about one-and-a-half times Vietnam’s 2024 budget revenue last year, it would probably need to do all three.
Of course, the alternative would be to finance LNG purchases through the private sector.
However, in principle, businesses using LNG are free to negotiate import agreements with whomever they choose, and cost is usually a key consideration.
Moreover, the import of more LNG from the US isn’t only being pursued by Vietnam. The EU, in particular, has been vocal about its ability and intention to do the same. As demand increases, it’s fair to assume that prices will rise, making LNG from the US less attractive for price-sensitive buyers.
Of course, the government does have options here. It can direct state-owned enterprises to buy from US producers, it can use energy security legislation to limit market access to other suppliers, or it could tie up imports from elsewhere in red tape.
This, however, would likely have broader implications for future private sector energy investments, particularly from foreign firms.
As it stands, thus far, the only sign that the government might use some sort of policy intervention was a cut to LNG import tariffs earlier this month from 5 percent to 2 percent.
But with no free trade agreement with the US, under World Trade Organisation most-favoured nation commitments, this applies to all other members of the supranational body.
This means that LNG from other key producers, like Qatar, Australia, and Russia, will also benefit from the cut.
All of that said, there is one much bigger issue: Vietnam, right now, doesn’t really need any LNG from the US or anywhere else, for that matter.
Indeed, LNG as a key power source for Vietnam has been on the table for years. As a matter of fact, according to the PDP7, gas-fired thermal power (LPG and LNG) was supposed to account for just shy of 16 percent of Vietnam’s energy supply by this year.
The reality is, however, that in the first quarter of 2025, gas turbines were responsible for just 6.4 percent of Vietnam’s electricity supply and none of that was generated by LNG.
In fact, according to the Energy Institute Statistical Review of World Energy 2024, Vietnam consumed just 7.2 billion cubic metres of natural gas in 2023. This translates to about 5.22 million metric tons, which, if it were all imported LNG, would be worth about US$4 billion.
Incidentally, US$35 billion worth of LNG would equate to about 44 million metric tons, about half of the 89.2 million metric tons, the US exported last year.
That is to say, for this to be a realistic proposition, Vietnam needs to significantly scale up its LNG use cases, most notably the development of LNG-fired power plants, and the US may need to scale up its LNG production too.
That’s not to say Vietnam doesn’t need any LNG at all.
Notably, the Nhon Trach 3 and 4 power plants in Dong Nai are reportedly set to come online this year in June and September, respectively. Although these operational dates have already been revised three times with Reuters citing industry sources earlier this year as suggesting 2026 or 2027 might be more likely.
That aside, this could add another million tons a year to Vietnam’s consumption, but relative to the size of Vietnam’s surplus, that’s really only another drop in the bucket.
On that note, as far as other LNG power plants go, most key projects are stalled at various stages of development related to price negotiations and government guarantees among a host of bureaucratic hurdles.
That is to say, with only minimal demand for LNG, any deal would be largely symbolic. Although, this aesthetic value framed as a public win for the Trump Administration, may be enough to move the needle on US tariffs.
That said, there are not a lot of signs that the Trump administration will accept deals without corresponding action, with Koklari, in the aforementioned Economist’s Note, saying as much.
“We have heard from secondary sources that… US trade officials will not be assuaged by promises to make purchases at some future date.”
So, where does that leave it?
The reality is, the amount of LNG Vietnam would need to buy to make a meaningful cut in its trade surplus is well beyond what it can actually afford or what it actually needs.
With this in mind, banking on an LNG deal to see that 46 percent tariff cut may not be entirely prudent. Moreover, if it is seriously on the table and it does turn out to be what it takes, then Vietnam may have some tough choices ahead.