Vietnam has reportedly cut a new tariff deal with the United States, one week before the US government’s 90-day moratorium on sweeping tariff measures was due to expire on July 9.
In a late-night post to his social media platform Truth Social, President Donald Trump revealed the deal’s broad strokes: 20 percent tariffs on all goods imported from Vietnam, and a 40 percent tariff on all “transshipping” activities.
The initial reciprocal tariff on Vietnam unveiled on April 2 had been levied at 46 percent.
President Trump labelled the newly negotiated terms a “Great Deal of Cooperation between [the] two Countries” which would enable “total access” to the Vietnamese market for trade.
On the other side of the Pacific Ocean, an official statement from Vietnamese state media reported the break in quieter terms, noting the “two countries’ negotiation delegations [had] reached a Joint Statement on a fair, balanced, reciprocal trade agreement” which alluded to Vietnam’s “commitment to granting preferential market access for U.S. goods.”
The US is Vietnam’s second largest trading partner and primary export destination, with a bilateral relationship dating back to 1995.
Meanwhile, Vietnam ranks as the US’ eighth largest trading partner, with a services export sector which has nearly doubled across the decade from 2012 to 2022. Note that talk of the “US trade deficit” applies to the trade of goods only – not these expanded US services exports.
As with all foreign policy announcements made via social media, the scope and material terms remain hazy – and the enforcement details matter.
With the United States Trade Representative heading into its July 4th Independence Day holiday weekend, it could be weeks before policy detail emerges.
Notably, “transshipping” – understood as a way of targeting the movement of Chinese goods through third-party countries in the Southeast Asian region – remains an elusory term as businesses continue to search through the fog for clarity on investment and supply chain decisions.
A litmus test for Southeast Asia
For operators on the ground in Vietnam, it’s a business-as-usual holding pattern as a level of hypernormalization sets in with regards to tariffs.
It’s unclear which export sectors specifically fall within the remit of the reciprocal tariffs.
The American Chamber of Commerce in HCMC says there’s been a lot of preparatory shipment to the United States across the past few weeks from smaller companies anticipating the July 9 tariff rate, but no major decisions affecting supply chains in the uncertain business environment.
The global trade uncertainty comes at a time when Vietnam is pursuing a deeply reformist domestic policy agenda to streamline bureaucratic processes for improved foreign direct investment, amid an ambitious 8 percent GDP growth rate target.
This week’s “once-in-a-century” provincial merger, which included consolidation of Ho Chi Minh City into an economic hub with ambitions of becoming Southeast Asia’s emerging megacity, was just one in a string of domestic developments paving the way for better investment access.
Travis Mitchell, Executive Director of the American Chamber of Commerce in Vietnam, says the domestic regulatory environment is moving in the right direction, even if the global tariff environment remains inconclusive.
“Everything is relative. So we have a trade deal – sort of – but we have no idea what our neighbors are doing. And that’s the biggest issue,” he says.
“Transshippments could be the number one issue in all of Southeast Asia. I think the US are kind of using this as a litmus test to see how this goes. And then based on how this goes we’ll see familiar frameworks across the region.”
Mitchell suggests one good thing about the new deal will be its positive impact on FDI.
“I think one thing that hasn’t really been talked about enough is the opportunity for American investment into Vietnam for American goods,” Mitchell notes.
“We have to wait for clarity on definitions. We need clarity on policies, how it’s implemented, time frame, and what our neighbors get. There’s so many moving pieces right now. That’s why it’s hard to say if it’s a full success or failure because we just don’t know. Clarity is nowhere.”
Vietnam’s flexible diplomacy: bamboo break or successful flex?
Asked whether criticisms that the new announcement was a bad deal for Vietnam were valid, Mitchell remained optimistic it was a sign of successful bamboo diplomacy in action.
“Vietnam prioritized certainty over everything else so that businesses can plan: they’re very skilled in trade negotiations – very, very skilled. So I have a hard time believing that this would be a terrible deal,” Mitchell says.