Tariffs imposed on Vietnamese wood furniture exports to the US could pressure furniture production and tighten supply of byproducts, which are used to produce wood pellets in Vietnam.
US president Donald Trump announced tariffs on nearly all US trading partners on 2 April, which took effect on 5 April, with only oil and other energy commodities exempt from the package. This means a sharp 46pc tariff has taken effect on Vietnamese exports, including wood products from the southeast Asian country.
This could weaken US demand for Vietnamese wooden products, which could result in an overall cut in furniture production. Vietnam exported 53,000t of wooden furniture to the US in 2024, from 37,000t a year earlier, mirrored US customs data on furniture exports show. This accounted for nearly 12pc of Vietnam's overall wooden furniture exports last year.
A drop in Vietnamese furniture exports and manufacturing would result in less process residues — such as sawdust and wood chips — made available for pellet producers. Manufacturers in southern Vietnam, which typically cater for the South Korean market, would be particularly affected because they use furniture residues as a key feedstock.
But wood pellets sold to Japan, which are usually more expensive and certified for Japan's feed-in tariff market, mainly use wood chips from lumber processing as raw material. And trade data suggest that Vietnam does not export any lumber to the US, meaning there should be little impact on lumber-based wood pellet production.
A drop in furniture residues would add to the pressure on an already-tight raw material market in Vietnam since the start of the year. A shortage in raw materials had caused a backlog in wood pellet loadings from before the Tet holiday in January. And unfavourable weather conditions have disrupted feedstock supply since February.
It is still unclear whether the tariffs could be removed in the near future. Vietnam's secretary general of the ruling Communist Party To Lam proposed in a call with Trump on 4 April to remove all tariffs on US products. Trump posted on social media platform Truth that he looks "forward to a meeting in the near future".
Impact on other biomass markets
Other biomass market participants in Asia, such as palm kernel shell (PKS) traders, are also monitoring the impact from US tariffs. The most immediate risk faced is the uncertainty of foreign exchange rate fluctuations, which could hamper trading activity.
But PKS traders and sellers said it was too early to determine an impact from tariffs and they have not seen any significant changes in the market, especially after the recent Idul Fitri holiday in Indonesia and Malaysia.
