Vietnam Arrives at Trade Deal with US with 20% Tariff

The president said he had agreed to initial trade terms with Vietnam, the second country to strike a limited deal after Mr. Trump threatened steep tariffs.

· The deal imposes a 20 percent tariff on all imports from Vietnam and a 40 percent tariff on any “transshipping.”

· Trump administration criticisms that countries like Vietnam have become a channel for Chinese manufacturers to bypass U.S. tariffs and funnel goods into the United States.

· Goods imported to the United States from Vietnam that actually originated in China. But it could also apply to Vietnamese products that use a certain amount of Chinese parts.

· The deal could include a lower tariff on goods that are made in Vietnam with fewer Chinese parts and materials, and a higher tariff rate for Vietnamese goods that contain many Chinese components.

· Howard Lutnick, the commerce secretary, wrote on X that “if another country sells their content through products exported by Vietnam to us — they’ll get hit with a 40 percent tariff.”

· Vietnam was soon scheduled to face a 46 percent tariff rate as part of the global tariffs that the Trump administration unveiled on April 2 before pausing those levies for 90 days.

· Initial reaction to the agreement was negative, with business groups expressing concern that tariffs of at least 20 percent will remain in place.

· Vietnam is essential to the U.S. footwear supply chain, especially for athletic shoes,” he said. “Many of these shoes already carry a 20 percent tariff, particularly popular athletic styles.

· Vietnam quickly emerged as one of the most prominent examples of the U.S. effort to redraw the global rules of trade.

· With Vietnam, the new trade pact could encourage more U.S. exports to the country, though it seems unlikely such measures could erase the U.S. trade deficit with Vietnam. The United States imported $136.6 billion of goods from Vietnam in 2024, but it exported only $13.1 billion.

· Vietnam has also stressed that most of its exports, especially involving multinationals including Nike, Samsung and Apple, follow international rules regarding country of origin, adding enough value to products with Chinese parts to have them appropriately labeled “made in Vietnam.”

· It’s not clear how much illegal rerouting Vietnamese officials will be able to catch. Nor is Vietnam eager to embrace a major redrawing of origin rules that will upset relations or reduce commerce with China, its largest trading partner.

[ABS News Service/03.07.2025]

President Trump said on Wednesday (02.07.2025) that the United States had reached a trade deal with Vietnam, one that would roll back some of the punishing tariffs he had issued on Vietnamese products in return for that nation’s agreeing to open its market to American goods.

The preliminary deal will also indirectly affect China, an important trading partner of Vietnam.

“It will be a Great Deal of Cooperation between our two Countries,” Mr. Trump wrote in a post on Truth Social announcing the deal.

According to Mr. Trump, the deal imposes a 20 percent tariff on all imports from Vietnam and a 40 percent tariff on any “transshipping.”

That provision is aimed at addressing Trump administration criticisms that countries like Vietnam have become a channel for Chinese manufacturers to bypass U.S. tariffs and funnel goods into the United States.

Which products would fall under the higher tariff rate is unclear. It could refer to goods imported to the United States from Vietnam that actually originated in China. But it could also apply to Vietnamese products that use a certain amount of Chinese parts. The deal could include a lower tariff on goods that are made in Vietnam with fewer Chinese parts and materials, and a higher tariff rate for Vietnamese goods that contain many Chinese components.

Howard Lutnick, the commerce secretary, wrote on X that “if another country sells their content through products exported by Vietnam to us — they’ll get hit with a 40 percent tariff.”

Vietnam was soon scheduled to face a 46 percent tariff rate as part of the global tariffs that the Trump administration unveiled on April 2 before pausing those levies for 90 days.

Mr. Trump characterized the deal as having Vietnam pay the tariffs even though they will be paid by U.S. importers.

The president added that as part of the agreement, Vietnam would open its market to American businesses, allowing them to export to Vietnam without any tariffs.

The announcement came after Mr. Trump spoke with Vietnam’s general secretary, To Lam, on Wednesday morning.

A statement from the Vietnamese government about the phone call said the two countries had reached a “framework for a fair and balanced reciprocal trade agreement,” one that would give the United States “preferential market access" for American goods.

The statement said Mr. Trump had “affirmed that the United States would significantly reduce reciprocal tariffs on many Vietnamese exports and would continue working with Vietnam to resolve obstacles affecting bilateral trade relations, especially in priority areas for both sides.”

Initial reaction to the agreement was negative, with business groups expressing concern that tariffs of at least 20 percent will remain in place.

“The tariff rates are still quite high compared to what we expected, and many crucial details about the rules of origin for different tariff levels remain unclear,” Phan Thi Thanh Xuan, vice chairwoman of a Vietnam association of handbag and footwear makers, said in an interview.

Matt Priest, president and chief executive of Footwear Distributors and Retailers of America, said tariffs on Vietnam would raise the cost of shoes for American customers.

“Vietnam is essential to the U.S. footwear supply chain, especially for athletic shoes,” he said. “Many of these shoes already carry a 20 percent tariff, particularly popular athletic styles. Piling new tariffs on top of that isn’t just unnecessary — it’s bad economics. The administration should acknowledge the steep footwear duties already in place and avoid adding more strain to American families and businesses.”

The arrangement is the second that Mr. Trump has announced since early April, when he imposed steep tariffs on dozens of countries globally but then abruptly paused them for 90 days to try to negotiate trade deals. Those tariffs are expected to snap back into effect next week.

U.S. officials have been juggling negotiations with more than a dozen trading partners before that deadline. Representatives from Japan, the European Union, Malaysia, South Korea, Indonesia and other governments have been cycling through Washington in recent weeks to try to find an arrangement that would avert higher tariffs.

Vietnam quickly emerged as one of the most prominent examples of the U.S. effort to redraw the global rules of trade. Some White House officials have portrayed the country of 100 million people as little more than a Chinese proxy, although some trade officials say this is inaccurate. Regardless, American trade officials have been pressuring Vietnam to rely less on Chinese partners and buy more goods from the United States.

Many industries in the United States have also accused Vietnam of maintaining high barriers to trade that block American exports, and of manipulating its currency in past years, which gives Vietnamese manufacturers an advantage over American ones.

In filings to the government this year about unfair trade practices globally, American producers of prunes, catfish and kitchen cabinets said that they had been threatened by competition from Vietnam, and that trade cases and tariffs had not been sufficient to protect them.

“For more than two decades, the domestic catfish industry has been decimated by Vietnam’s predatory economic practices, with severe negative consequences for U.S. workers and communities,” the Catfish Farmers of America said in a filing.

Unlike traditional, comprehensive free trade deals that cover many industries and comprise hundreds or thousands of pages, the pacts that the Trump administration is now signing are greatly abbreviated. Trade experts have described them as “framework” agreements, which spell out some concrete changes, like reducing certain tariffs, but merely say other topics will be negotiated in the coming months.

The “deal” the administration announced with Britain in May, for example, rolled back tariffs on some products and detailed some purchasing commitments. But it also listed half a dozen general priorities and said the countries would immediately begin negotiations “to develop and formalize” them, ranging from negotiating digital trade provisions to strengthening their cooperation on economic security.

Similarly, the Vietnam deal had few details. With Vietnam, the new trade pact could encourage more U.S. exports to the country, though it seems unlikely such measures could erase the U.S. trade deficit with Vietnam. The United States imported $136.6 billion of goods from Vietnam in 2024, but it exported only $13.1 billion.

That trade gap between the United States and Vietnam has grown significantly since Mr. Trump’s first term. That’s largely a result of Mr. Trump’s first trade war with China. When the president imposed hefty tariffs on Chinese products, manufacturers started searching for new locations for their overseas factories. Nike, Apple, Foxconn, Mattel and other major brands shifted some of their manufacturing from China to Vietnam in recent years.

Trump officials have also been concerned that Chinese companies are dodging U.S. tariffs on Chinese exports by routing their products through Vietnam and other Southeast Asian countries. Vietnamese officials have promised to do more to police this illicit trade, which represents up to 16 percent of Vietnam’s exports to the United States, according to recent studies.

Chinese investment in Vietnam has been growing rapidly in the past few years, but overall, South Korean companies (including LG and Samsung) are still Vietnam’s biggest foreign investors, and many of the Chinese imports coming into Vietnam are machines for making products in Vietnam, not just raw materials.

Vietnam has also stressed that most of its exports, especially involving multinationals including Nike, Samsung and Apple, follow international rules regarding country of origin, adding enough value to products with Chinese parts to have them appropriately labeled “made in Vietnam.”

For example, in a 2022 case scrutinized by U.S. Customs and Border patrol regarding mountain bikes assembled in Vietnam, U.S. officials ruled that the addition of Chinese wheels, drivetrains and brakes did not strip the bikes of their Vietnamese identity because the frame itself, deemed the “essence” of the bicycle, had been made in Vietnam.

“The ruling shows how a single component can anchor origin even when most other inputs are foreign,” said Ebehi Iyoha, an assistant professor at Harvard Business School.

It’s not clear how much illegal rerouting Vietnamese officials will be able to catch. Nor is Vietnam eager to embrace a major redrawing of origin rules that will upset relations or reduce commerce with China, its largest trading partner.

The two countries’ economies are deeply intertwined, and not just with manufacturing. China is Vietnam’s largest market for agricultural, forestry and fishery exports, adding to Beijing’s leverage should it decide to punish Hanoi for its deal with Washington.

During a visit to Vietnam in April, the Chinese president, Xi Jinping, called on Vietnam to oppose “unilateral bullying.” Many analysts saw this as warning to avoid siding with the Americans. During Mr. Xi’s visit, China and Vietnam also signed dozens of cooperation agreements, including a pact to integrate their railway industries and other supply chains.