Thai Son S.P. Co. garment manufacturing facility in Thu Duc, Ho Chi Minh, Vietnam, on June 21, 2025.
Daniel Ceng | Anadolu | Getty Photographs
U.S. President Donald Trump introduced a commerce pact with Vietnam on Wednesday, however its scant particulars have left economists questioning about what it might imply for the circulate of Chinese language items rerouted by means of the nation.
Trump stated Wednesday there could be a 20% tariff on items from Vietnam and a 40% “transshipping” tariff on items originating abroad and transferred to Vietnam for closing cargo to the U.S.
Chinese language producers have used transshipping to sidestep the hefty tariffs on its direct shipments to the US, utilizing Vietnam as a significant transshipment hub.
White Home commerce advisor Peter Navarro alleged that round one-third of Vietnam’s exports are rerouted from China and described Vietnam as “basically a colony of communist China” in a interview with Fox Information in April.
The most recent deal is an obvious strike in opposition to such rerouted shipments from China, stated Yao Jin, an affiliate professor of provide chain administration at Miami College.
However implementing focused levies on transshipments might be a troublesome activity for Hanoi, because it should outline the scope of what would qualify as “made in Vietnam” and what constitutes transshipment.
“If it solely applies to pure transshipments — items despatched from China to the US through Vietnamese ports, with none native meeting — then there ought to hardly be any affect on Vietnam,” Frederic Neumann, chief Asia economist at HSBC Financial institution instructed CNBC on Friday.
Nonetheless, if the 40% tariff applies to “all Vietnamese items with even a minimal share of Chinese language parts, the disruptions could possibly be vital,” Neumann stated.
Equally, Dan Wang, China director at Eurasia Group, stated “it’s unclear how this may work — presumably the burden falls to Hanoi on the issuance of guidelines of origin certificates — and what degree of Chinese language parts, if that’s the metric, might be deemed an excessive amount of.”
As extra Chinese language producers moved their manufacturing to Vietnam since Trump’s first time period, Vietnam’s commerce surplus with the U.S. greater than tripled to a document excessive of $123.5 billion final 12 months from lower than $40 billion in 2018, in line with the U.S. Census Bureau.
Template for others?
The settlement made Vietnam the most recent nation, after the U.Ok. and China, to safe some commerce aid from Trump and can probably function an vital reference for different Southeast Asian nations of their ongoing commerce negotiations, analysts stated.
Many international locations are racing to succeed in commerce offers with the U.S. earlier than the 90-day pause expires on July 9, when Trump’s “reciprocal” tariffs are poised to take impact.
Many Southeast Asian nations had benefited from the final U.S.-China commerce struggle throughout Trump’s first time period by serving as various manufacturing and export hubs.
Extra commerce offers might be decided by a rustic’s personal judgment of its publicity to the U.S. and China markets, the extent of transshipment exercise in that nation, and the implications for native industries, stated Lynn Track, chief China economist at ING.
Shipments from China to many Southeast Asian international locations this 12 months rose to a document excessive, Chinese language customs knowledge confirmed, as exporters diverted cargo to various markets to promote to the native markets or transship to the U.S.
If the Vietnam and U.Ok. commerce offers are any indication, the US’ future offers with different international locations will probably contain measures to rein in transshipment, elevated buy commitments of U.S. items and “provisions aimed toward pressuring China,” Stephen Olson, former U.S. commerce negotiator and present visiting senior fellow on the ISEAS-Yusof Ishak Institute, instructed CNBC.
The strict safety necessities for metal and prescribed drugs within the U.S.-U.Ok. deal are broadly seen as an try and squeeze China out of the British provide chain.
China holds hearth
China pushed again in opposition to the U.S.-Vietnam commerce deal on Thursday over issues that the Trump administration would use its ongoing tariff negotiations with third international locations to curb its exports.
The nation’s commerce ministry stated Thursday that it was “conducting an evaluation” of the settlement, urging different international locations to not search a cope with Washington on the expense of China’s pursuits.
China will probably see Washington as utilizing “reciprocal tariff negotiations to get third international locations to attempt to squeeze China out of provide chains,” Olson added. He expects Beijing will stress international locations to not accede to U.S. calls for and push again in opposition to that follow in negotiations with Washington.
That stated, Beijing will probably maintain off from taking any concrete motion till particulars of the deal are clarified, consultants stated, whereas ready to see how different international locations’ commerce offers form up.
“Flipping the desk over a single Vietnam commerce deal could be unwise,” ING’s Track stated.
The U.S. and China have in latest days walked again a slew of restrictive measures in opposition to one another in honor of the commerce consensus reached in Geneva, Switzerland, in Could. Washington has since lifted export restrictions on ethane, chip-design software program and jet engine elements, whereas Beijing is ready to fast-track approvals for uncommon earths exports.
Either side reached a commerce framework final month following talks in London, which stays in impact till mid-August, with Chinese language items presently going through tariffs of round 55%.
The U.S.-Vietnam deal additionally implies that the last word tariffs on Chinese language items are unlikely to fall below that 40% threshold, in line with Nick Marro, principal economist on the Economist Intelligence Unit, as decrease duties on direct cargo from China might encourage corporations to shift manufacturing again there, undermining the Trump administration’s broader goal of curbing China’s industrial capability.
