Politics ASIA, CHINA, DEFENSE, GEOPOLITICS, HE YONGQIAN, ISEAS YUSOF ISHAK INSTITUTE, MEXICO, NGUYEN KHAC GIANG, NORTH AMERICA, SOUTH CHINA SEA DISPUTE, STEPHEN OLSON, TRADE, TRUMP, UNITED STATES, US, US-CHINA RELATIONS, VIETNAM, WASHINGTON Dante Raeburn July 7, 2025 0 Comments

Vietnam’s Tariff Deal: A Boon or a Burden?

Vietnam’s initial tariff agreement raised stock prices for clothing manufacturers.
The deal primarily aims to mitigate tariffs while penalizing Chinese transshipments.
Concerns arise over the ambiguous nature of what defines transshipment goods.
Vietnam’s economy is heavily reliant on both US exports and Chinese imports.
Trade relations with the US could strain Vietnam’s ties with China.

Initial Optimism Turns to Caution over Tariff Details

Vietnam’s recent agreement with the United States, making it only the second nation to secure a tariff deal, initially sparked excitement. Textile and manufacturing stocks surged, backed by hopes of benefiting the booming manufacturing sector. But that enthusiasm quickly turned into caution, as the specifics of the deal began to emerge, showing that the implications could extend beyond just Vietnam to its powerful neighbor, China.

Understanding Transshipments and Their Impacts

The deal substitutes a hefty 46% potential tariff with a lesser 20% for many Vietnamese goods, which may seem favorable. Yet, it also enforces a 40% tariff on transshipments—goods allegedly rerouted from China through Vietnam to dodge tariffs. This definition of transshipment is particularly troubling for Vietnamese businesses, with many experts echoing concerns about the ambiguity of the term may lead to unintended consequences for their exports.

The Fine Balance between US and China Relations

Vietnam’s economy remains delicately balanced, closely tied to both the US and China. With US exports forming about 30% of Vietnam’s GDP and China as its main import partner, this deal could put Vietnam in a precarious position, social and economic ties notwithstanding. While there could be a silver lining if US firms decide to establish operations in Vietnam, companies are for now pausing major decisions as they await more clarity on how these tariffs will be enforced and what that means for their business.

In summary, Vietnam’s deal with the US presents a complex mix of opportunity and risk. While the initial optimism is tempered by concerns over how tariffs on transshipments are enforced, the implications for US-China dynamics add another layer of complexity. Vietnam’s strategic balancing act between these two powerful nations will be crucial in navigating the future of its trade relations.