Thu Duc, Vietnam — A new trade agreement announced by U.S. President Donald Trump has raised eyebrows among economists, particularly in light of its potential effects on the flow of goods from China through Vietnam. The deal, which specifies a 20% tariff on goods exported from Vietnam and a much steeper 40% tariff on items transshipped from other countries, aims to address concerns about China’s influence on Vietnamese trade.
Analysts have noted that many Chinese manufacturers utilize Vietnam as a transshipment point to avoid hefty tariffs linked to direct imports to the United States. According to Peter Navarro, a White House trade advisor, approximately one-third of Vietnam’s exports may originate from China. Navarro previously stated that Vietnam operates under conditions reminiscent of a “colony” in reference to its economic ties with China.
Yao Jin, an associate professor of supply chain management at Miami University, observed that the recent agreement could significantly target the rerouted shipments from China. However, the challenge lies in defining what qualifies as goods “made in Vietnam” versus those subject to transshipment tariffs. Frederic Neumann, the chief Asia economist at HSBC, suggested that if the 40% tariff only applies to pure transshipments—goods shipped from China to the U.S. without any local assembly—it might have minimal impact on Vietnam’s economy. Conversely, if it affects products containing even a small percentage of Chinese components, it could disrupt the market significantly.
Dan Wang, a director at Eurasia Group, echoed similar concerns, emphasizing the uncertainty surrounding the implementation of rules regarding the origin of goods. The responsibility of determining how much Chinese content is permissible may fall heavily on the Vietnamese government, complicating compliance.
In recent years, Vietnam’s trade surplus with the U.S. has surged, fueled by Chinese manufacturers relocating their operations to Vietnam. This trade surplus skyrocketed to a record $123.5 billion by 2025, a substantial increase from less than $40 billion in 2018. The latest pact stands as a pivotal moment for Vietnam, offering a semblance of trade relief similar to arrangements made with countries like the United Kingdom and China, and may set a precedent for other Southeast Asian nations in their trade strategies.
Countries across Southeast Asia are racing to establish trade agreements with the U.S. before Trump’s upcoming tariffs take effect on July 9. Many of these nations have already benefited from their roles as alternative manufacturing hubs amid the U.S.-China trade tensions.
As shipments from China to Southeast Asia reached historic highs this year, exporters are actively seeking alternative channels to either access local markets or to reroute goods to the U.S. This trend underscores the complex dynamics in play as countries assess their reliance on both the Chinese and U.S. markets. Lynn Song, the chief China economist at ING, noted that the potential for new trade agreements will depend on each nation’s evaluation of its economic ties and the nature of transshipment activities.
In a counter-response to the U.S.-Vietnam trade agreement, China expressed skepticism over the implications of the deal. The Chinese commerce ministry indicated it is reviewing the agreement and urged other nations not to strike deals with Washington that might undermine China’s economic interests. Some experts predict that Beijing will press countries to resist U.S. demands, particularly as other nations navigate their own trade negotiations with the U.S.
As discussions continue, experts emphasize the need for clarity on the specifics of the deal. There is a recognition that drastic actions stemming from a single trade agreement may not be prudent. Recent efforts by the U.S. and China to dial back restrictive measures hint at a broader desire for stability in trade relations—an important context as both nations strive to balance their respective economic strategies against one another.
Ultimately, the situation remains fluid, with the U.S.-Vietnam trade agreement likely to impact not only bilateral relations but also the broader geopolitical landscape as nations reckon with the realities of global trade.