EU-Vietnam Trade Dynamics and Investment Opportunities: Strategic Sectoral Exposure to Vietnamese Equities

The EU-Vietnam Free Trade Agreement (EVFTA), which entered into force in August 2020, has reshaped trade and investment dynamics between the two regions. By eliminating 99% of tariffs and streamlining non-tariff barriers, the agreement has catalyzed a surge in Vietnamese exports to the EU, with bilateral trade reaching €67 billion in 2024—making Vietnam the EU's largest trading partner in Southeast Asia EU trade relations with Viet Nam^[1]. However, this growth has come with challenges, including a widening EU trade deficit of €42.5 billion in 2024, prompting calls for regulatory reforms to address administrative hurdles for EU agricultural exports As trade deficit grows, EU to urge Vietnam to remove barriers^[2]. For investors, the EVFTA's sectoral impacts present both opportunities and risks, particularly in electronics, textiles, and agriculture—sectors where Vietnamese equities are poised for strategic exposure.

Electronics: A Manufacturing Powerhouse

Vietnam's electronics sector has emerged as a cornerstone of its export-driven economy, with the EVFTA amplifying its competitive edge. By 2024, electronics exports to the EU had surged by nearly 50% since the agreement's implementation, driven by reduced tariffs and streamlined supply chains Four years on, the EVFTA continues to boost Vietnamese exports but opportunities remain for European firms^[3]. Key players like FPT Corporation (HoSE: FPT) and VinAI (a subsidiary of Vingroup) are leveraging the EVFTA to expand their global footprint. FPT, a leader in IT services and digital transformation, reported a 22% year-on-year revenue increase in Q2 2025, buoyed by demand for its cloud and AI solutions in EU markets Top 10 Tech Companies in Vietnam to Watch in 2025^[4]. VinAI, meanwhile, is capitalizing on Vietnam's growing automotive technology sector, with its AI-driven manufacturing solutions gaining traction in European partnerships.

The sector's growth is further supported by €28 billion in EU FDI across 2,450 projects, with high-tech manufacturing accounting for 40% of inflows EU-Vietnam Free Trade Agreement: Key Provisions and Implications for FDI^[5]. However, challenges persist, including complex customs procedures and the need for SMEs to navigate rules of origin. EuroCham's Q2 2025 Business Confidence Index noted that 61% of electronics firms cited tariff reductions as a key benefit, but 37% highlighted customs valuation issues as a barrier EuroCham Vietnam Business Confidence Index Q2 2025^[6].

Textiles: Navigating Rules of Origin

Vietnam's textile and apparel industry, a traditional export powerhouse, has seen a 43.4% growth in EU exports under the EVFTA, with the country becoming the EU's sixth-largest supplier in this sector EVFTA generates positive outcomes after 5 years of implementation^[7]. Companies like Viet Tien Garment Corporation (HoSE: VTC) and Hoa Tho Textile (HoSE: HTX) have expanded their EU market share, with Viet Tien reporting a 35% revenue increase in 2024. The EVFTA's phased elimination of tariffs—100% for textiles within seven years—has made Vietnamese garments more competitive against rivals like Bangladesh and Cambodia TTWTO VCCI - Opening opportunities for Vietnam's textile and garment industry to the EU market^[8].

Yet, the sector faces headwinds. The EU's “fabric forward” rule of origin requires textiles to use locally sourced materials, complicating production for firms reliant on imported inputs. Additionally, sustainability regulations, such as the EU's Green Claims Directive, demand costly investments in eco-friendly practices. Despite these challenges, the sector remains a strategic bet for investors, with EuroCham estimating that 78% of textile firms expect improved business conditions over the next five years EVFTA – A strategic lever in global value chain^[9].

Agriculture: Expanding Market Access

Vietnam's agricultural exports to the EU have also benefited from the EVFTA, with coffee, rice, and seafood seeing significant growth. In 2023, coffee exports alone reached $1.66 billion, driven by reduced tariffs and increased EU demand for specialty blends 4 years of implementing the EVFTA Agreement: Vietnam Trade Cooperation^[10]. Companies like Lavender Coffee and Phuc Long Coffee are capitalizing on this trend, with Lavender's stock price rising 18% in 2025 amid expanded EU distribution channels. Seafood producers, including Vina Tuna and Mai Linh Group, have similarly expanded their EU presence, with exports growing by 85.2% in 2024 Vietnam Export Growth Driven by Electronics, Agriculture Trade Surplus Booms^[11].

However, the sector is not without risks. The EU's stringent food safety standards and the Carbon Border Adjustment Mechanism (CBAM) require Vietnamese firms to invest in traceability and carbon-neutral practices. For instance, rice exporters must now comply with EU regulations on pesticide residues, a challenge for smaller producers. Despite these hurdles, the EVFTA's phased tariff reductions—fully eliminating duties on 90% of agricultural products by 2027—position the sector for long-term growth EU-Vietnam Free Trade Agreement: business impacts^[12].

Investment Climate and FDI Inflows

The EVFTA has bolstered Vietnam's appeal as an FDI destination, with the EU becoming the sixth-largest investor in the country. By 2024, EU investments in high-tech manufacturing and green energy reached €28 billion, with firms like Siemens and BASF expanding operations in Vietnam Five Years of the EVFTA: Impacts on Vietnam’s FDI^[13]. The Ho Chi Minh Stock Index (VN-Index) has mirrored this optimism, rising 33.75% year-to-date in 2025, driven by sectoral outperformance in electronics and agriculture Vietnam Ho Chi Minh Stock Index - Quote - Chart - Historical Data^[14].

Yet, regulatory inconsistencies and infrastructure bottlenecks remain concerns. EuroCham's Q2 2025 report highlighted that 28% of firms called for more consistent customs guidelines, while 37% cited valuation disputes as a barrier to growth EVFTA boosts Vietnamese exports, but EU firms face challenges^[15]. Addressing these issues will be critical to unlocking the EVFTA's full potential.

Challenges and the Path Forward

While the EVFTA has unlocked significant opportunities, its success hinges on resolving implementation challenges. Unmet labor rights commitments, such as restrictions on independent trade unions, have drawn criticism from human rights groups EU-Vietnam Trade Agreement Has Failed to Promote Rights^[16]. Additionally, the pending ratification of the EU-Vietnam Investment Protection Agreement (EVIPA) by 18 EU member states remains a hurdle for long-term investor confidence EVFTA after 5 years: A springboard for EU-Vietnam strategic ties^[17].

For investors, a strategic approach is essential. Sectors with strong FDI inflows and regulatory clarity—such as electronics and agriculture—offer the most immediate upside, while textiles require careful navigation of rules of origin and sustainability costs. As Vietnam continues to reform its legal framework and digitalize trade processes, the EVFTA's long-term impact on Vietnamese equities will likely be profound.