Vietnam Faces 20% Tariff on U.S. Exports in New Trade Deal

U.S. President Donald Trump announced a new trade deal with Vietnam, just days before the July 9 deadline for new trade agreements. The deal involves a 20% tariff on Vietnamese exports to the U.S., with goods deemed to have been transshipped through Vietnam facing a 40% levy. In exchange, Trump asserted that Vietnam will eliminate all tariffs on U.S. goods and open its market to American products, highlighting U.S.-made SUVs as a potential addition to Vietnam’s roads.

Vietnam’s leader, To Lam, General Secretary of the Communist Party of Vietnam, reportedly discussed the tariff negotiations with Trump. According to Vietnamese state media, the U.S. will significantly reduce reciprocal tariffs on many Vietnamese imports, and Trump valued Vietnam’s pledge to grant preferential market access for U.S. goods, including large-engine vehicles. To Lam also urged Washington to lift export restrictions on certain high-tech goods.

This agreement positions Vietnam as one of the few governments to reach a trade accord with the U.S. since April 2. However, the details of the U.S.-Vietnam trade agreement remain unclear. The interpretation of transshipment, a practice where goods are moved from one vessel to another before reaching their final destination, is particularly murky. The Trump administration has accused Vietnam of being a backdoor for Chinese goods to evade U.S. tariffs, a claim that adds complexity to the agreement.

Vietnam has become a crucial manufacturing hub for global supply chains, with companies like Apple and Nintendo moving final assembly of their products to the country. These components often come from Chinese suppliers, but Vietnam-based manufacturers are adding value through final assembly before shipping the goods to the U.S. The terms of the agreement are still being developed, and the details could shift between Trump’s announcement and the formalization of the deal through an executive order, a process that could take weeks.

The agreement’s specifics will be crucial, as the tariff rate could vary significantly depending on the product and manufacturing process, ranging from lower rates to as high as 40%. The uncertainty surrounding the deal is expected to persist for some time. Additionally, a significant increase in purchases of American SUVs by Vietnamese consumers may be challenging, given the average monthly income of a Vietnamese worker is about $320, significantly less than that of an average American worker.

Vietnam’s biggest imports from the U.S. are computers and electronic products, and machinery and instruments, which support its electronics manufacturing sector. The 20% tariff, while less severe than the initially proposed 46% rate, still marks an escalation in trade tensions between the U.S. and Vietnam. It is double the baseline 10% tariff rate imposed on all imports, and Vietnam is highly exposed to the U.S., with 30% of its exports headed there.