Vietnamese leaders, during their recent visit to the United States, made a deliberate effort to clarify one key issue. Faced with allegations of serving as a “transshipment hub” for Chinese goods, Hanoi rushed to assert its neutrality, seeking to convince U.S. officials that it has not been shielding China from American trade scrutiny.

During the United Nations General Assembly, Vietnamese leadership granted an exclusive interview to Bloomberg, explicitly denying that Vietnam has allowed Chinese products to transit through its territory into the U.S. market or provided cover for China’s exports. At the same time, officials signaled that a bilateral trade agreement between the two nations is “very close” to conclusion.

Why the urgency in self-clarification? The U.S. has long suspected Vietnam of functioning as a conduit for Chinese goods. In April last year, Washington imposed reciprocal tariffs, placing Vietnam under threat of punitive duties as high as 46%. Subsequent negotiations led to a framework reducing the rate to 20%, but with a stringent condition: goods deemed “transshipped” through a third country would face a 40% tariff. This very definition of “transshipment” has remained the central obstacle in negotiations for nearly a year.

The root of the issue lies in tariff differentials. Chinese goods entering the U.S. face an effective average tariff of around 23.2%, while Vietnamese imports are subject to only 6.5%. For identical products, direct shipment versus routing through Vietnam creates a substantial cost advantage—fueling a sharp rise in Vietnam’s trade surplus with the U.S., which has now surpassed China to become America’s largest source of trade deficit.

Yet Vietnam’s manufacturing boom hinges precisely on a three-way supply chain: Chinese intermediate inputs, Vietnamese assembly and processing, and final export to the United States. China remains Vietnam’s top import partner, while U.S. exports account for roughly 30% of Vietnam’s GDP. Disruption at any link in this chain would severely destabilize the economy.

Thus, while Vietnamese officials state they “do not accept transshipment,” the crux lies in defining what constitutes transshipment. From the U.S. perspective, two scenarios qualify: first, Chinese goods rebranded without meaningful modification; second, minimal assembly or repackaging in Vietnam that adds negligible value, yet still results in a “Made in Vietnam” label.

Reality on the ground in Vietnam often involves products designed in Shenzhen, tooling produced in Dongguan, assembled using components sourced from China in Bac Ninh, and shipped out of Haiphong port under a Vietnamese certificate of origin. Whether such practices constitute transshipment depends entirely on the threshold set by U.S. authorities for local value-added content. Setting the bar too high could jeopardize the operations of numerous compliant factories.

In June, Vietnam’s General Department of Customs intensified scrutiny on 18 categories of high-risk goods. By August, the National Assembly passed amendments to the Customs Law, aiming to extend digital oversight across entire supply chains—set to take effect by 2027. Yet enforcement capability and political will remain distinct issues. Strict implementation would force many Chinese-owned enterprises to restructure their supply networks, potentially undermining Vietnam’s attractiveness as an investment destination.

Meanwhile, the U.S. retains strategic options: three ongoing Section 301 investigations targeting Vietnam, with findings expected in November—potentially paving the way for additional tariffs.

Vietnamese leadership has also offered a diplomatic opening, expressing willingness to increase purchases of advanced U.S. goods such as aircraft, hoping to trade procurement for policy flexibility. However, even large-scale buys of Boeing planes and agricultural commodities cannot offset a trade surplus exceeding $100 billion. What Washington truly seeks is enforceable rules governing supply chain integrity and origin certification.

Vietnam, unwilling to take sides, finds itself caught between two powerful partners. China’s Ministry of Commerce has publicly stated opposition to any arrangement that compromises Beijing’s interests. With neither side easily alienated, the phrase “very close” to agreement remains far from a concrete outcome.

Original article: toutiao.com/article/1877091351815303/

Disclaimer: The views expressed in this article are those of the author alone.