Vietnam and the United States have signed off on a Framework Agreement outlining the structure of a tariff and trade deal which locks in Vietnam’s reciprocal tariff rate at 20 per cent, months after a July 2 announcement revealed the negotiation’s broad strokes to highly anticipatory markets.
The Joint Statement from both countries for an “Agreement on Reciprocal, Fair, and Balanced Trade” was unveiled on October 26, hoping to “provide both countries’ exporters unprecedented access to each other’s markets.”
It comes ahead of a pivotal hearing in the US Supreme Court on November 5 which will determine whether a U.S. president can use emergency powers to impose tariffs without congressional approval.
The outcome of that case — Learning Resources v Trump — could shift the dial on the entire reciprocal tariff ordeal which has tempered global trade relations since this year’s “Liberation Day” announcement in April 2025.
Meanwhile, the Framework Agreement between both countries marks important diplomatic progress towards securing negotiations, which are expected to continue into the end of 2025 as both countries prepare their domestic environments for implementation.
The Framework Agreement: What’s included, and what’s new?
The joint statement issued by official US White House and Vietnamese Ministry of Industry and Trade sources indicates the final agreed reciprocal tariff rate will be 20 per cent on all “goods originating from Viet Nam.”
The US has agreed to a zero per cent reciprocal tariff on certain specific goods, referencing a list drawn up in “Annex III to Executive Order 14346” which is still being finalized. Early commentary suggests targeted goods will belong to four sectors: aviation, agriculture, critical natural resources and pharmaceuticals.
Here’s a breakdown of what’s captured by the framework agreement:
- 20 per cent reciprocal tariff on Vietnamese goods, with select goods exempted;
- Vietnam to address non-tariff barriers to US industrial exports by accepting vehicles built to US motor vehicle safety and emissions standards; import licenses for medical devices; streamlining regulatory approvals for pharmaceutical products; and implementing obligations under international intellectual property treaties;
- Vietnam to address non-tariff barriers to US agricultural products regarding regulatory oversight and certificates;
- Finalizing commitments on digital trade, services and investment;
- Engagement on intellectual property, labor, environment, customs and trade;
- Strengthened cooperation towards enhanced supply chain resilience;
- Commercial deals in agriculture, aerospace and energy which include an agreement by Vietnam Airlines to purchase 50 Boeing aircraft valued at over USD $8 billion.
A fact sheet from the United States Trade Representative (USTR) narrates the agreement in more American terms. There’s a reference to “Confronting State-Owned Enterprises” and the distortionary market behaviors commonly leveled at countries such as China in a bid aimed at “Liberating America from unfair trade practices.”
More critically examined, the structure of the framework and its attempts to align both countries’ IP, labor, environment and regulatory practices effectively means an “upgrade” of Vietnam’s policy and regulatory environment to meet US and international standards will be required to meet the demands of the trade deal.
In global trade terms, these bilateral trade agreements are an example of how domestic trade behaviors in one country become opened up to influence by other countries.
Regional competitiveness: How does Vietnam compare to its neighbors?
Vietnam’s final reciprocal tariff rate had been the source of months of speculation, with experts suggesting in July that the result of the country’s protracted negotiations would become a “litmus test” for Asia.
That’s because the picture of what a “good deal” looks like only emerges once you have a context to compare it with.
In the same weekend the Vietnam framework agreement was announced, the US officially published the details of trade deals with Malaysia and Cambodia, and a similarly structured framework agreement with Thailand which confirm all three neighboring countries’ reciprocal tariff rates will be maintained at 19 per cent.
While some might consider Vietnam’s slightly higher tariff rate of 20 per cent a suboptimal outcome, analysts suggest the 1 per cent difference means little in view of the longer-term strategic shift towards Vietnam as a critical node in the global supply chain architecture.
Rod Y, Director of Asia Pacific Global Industrial Sales at global supply chain firm PSA BDP, says the framework agreement marks a structural shift beyond tariffs: “It’s about aligning regulatory regimes, reinforcing supply-chain resilience, and embedding Vietnam more deeply into the U.S. industrial ecosystem.”
Unresolved issues: The 40 per cent transshipment levy
One issue which has been left undisturbed in the final framework agreement is any mention of a “40% Tariff on any Transshipping” — first referenced in a late-night post by the US President to his social media platform Truth Social on July 2.
The elusive “transshipping” term had been the source of much initial business uncertainty, understood as a way to address concerns Chinese goods were being transported through third-party countries in Southeast Asia to circumvent a prohibitive trade environment between the US and China.
Travis Mitchell, Executive Director of the American Chamber of Commerce in Vietnam, called the transshipment issue the leading issue for southeast Asia in July.
Now, with the certainty of Vietnam’s framework agreement in hand, the AmCham Executive Director says an observed shift in production by its members away from other markets, especially China, to Vietnam indicates a level of “resilience” which must be maintained and invested in.
Speaking at a meeting with Ho Chi Minh City authorities and business leaders in late October, Mitchell reiterated that transparency and consistency in financial, labor and infrastructure policies will be key in navigating the new trade landscape.
“While new U.S. tariffs pose challenges, AmCham urges greater domestic policy predictability — including timely licensing, consistent tax and fee policies, and streamlined customs procedures — to maintain investor confidence.”