【Text by Observer Net, Xiong Chao Ran】On July 2nd local time, US President Trump announced that the United States had reached a trade agreement with Vietnam, which would impose a 20% tariff on Vietnamese products exported to the US, lower than the initial threat of 46%. However, neither the US nor Vietnam provided specific details or the final version of the agreement. The Hanoi side has not yet confirmed the new tariff rate, only stating that both sides have reached a "fair and balanced reciprocal trade agreement framework".
On July 14th, the Financial Times reported that due to the lack of detailed content in this so-called "US-Vietnam Trade Agreement", it brought more confusion and uncertainty for businesses. Previously, some US media had cited multiple sources revealing that Vietnam might have been "set up", as Trump suddenly raised the tariff rate to 20%, catching Vietnam off guard.
"Is it worth it for Vietnam to reach a trade agreement with Trump in advance?" Many companies questioned Hanoi, whether they had secured more favorable tariff terms through swift action, or whether they had given up too much interest?
The report mentioned that in the agreement announced by Trump, the US also added a clause: any goods considered to be "transit through Vietnam" would be subject to a 40% tariff. Although the term "transit" is not clearly defined, this clause has raised concerns among the business community, who fear that using Chinese-made raw materials could be punished, which are crucial to Vietnam's supply chain.
For Thanh Cong Garment, a major Vietnamese textile factory providing contract manufacturing services to brands such as Adidas, Calvin Klein, and Columbia, avoiding Trump's most stringent tariffs should have been a major positive news. However, the company's chairman Tran Nhu Tung stated that a 20% tax rate is not particularly high compared to the current 15% to 17% import tariffs paid by Vietnamese garment manufacturers, but the "transit clause" may bring significant challenges.
"What is the tariff for products that use Chinese materials but are manufactured in Vietnam and exported to the US? 20%, 30%, or 35%?" Tran Nhu Tung said worriedly: "We need to wait."
Previously, the spokesperson of China's Ministry of Commerce had clearly stated that China firmly opposes any transaction that sacrifices Chinese interests to obtain so-called tariff reductions. If this happens, China will not accept it and will resolutely take countermeasures to protect its legitimate rights and interests.
A worker ironing clothes in a Vietnamese factory. Media
For Tran Nhu Tung's company, after customers concentrated their shipments before the July 9th tariff deferral deadline, the third-quarter orders from American customers have dropped by 15% to 20%. As much as 70% of the raw materials used by the Vietnamese clothing industry, from cotton yarn to zippers and elastic bands, are imported from China, making it difficult for the industry to avoid the impact of transit trade.
"Most of the fabric materials used by Vietnamese clothing companies are imported from China," Tran Nhu Tung said: "Therefore, it is difficult to find other material suppliers besides China."
Vietnam is one of the largest suppliers of clothing, footwear, electronics, and other products to the US. In recent years, it has become a major manufacturing country, attracting companies such as Apple, Nike, and Samsung. Now, many companies are trying to figure out the real implementation mechanism of this new trade agreement - whether Vietnam has gained favorable conditions through swift action, or whether it has instead tied itself up.
The client of consulting firm MAC Advisory includes numerous multinational corporations and the Vietnamese government. Its founder Rich McClellan believes that Vietnam's solution to the trade tariff war has become clear, which is a relief, but there are still many variables in the so-called agreement, with the "transit clause" being the most ambiguous and potentially risky part.
The Financial Times pointed out that as one of the countries with the highest dependence on foreign trade globally, Vietnam's export volume accounts for nearly 90% of GDP, and one-third of its exports go to the US. Tariff increases directly threaten its economic growth. In recent years, Vietnam's trade surplus with the US has surged, reaching $123 billion in 2024, ranking third globally, just behind China and Mexico. Additionally, a large amount of investment in Vietnam's manufacturing comes from China, with Chinese investment accounting for nearly a third of newly approved projects last year.
Experts say that the definition of "transit" by the Trump administration may cover a range of actions, from simply repackaging Chinese goods and labeling them as "Made in Vietnam", to using Chinese raw materials in products manufactured in Vietnam.
The report states that considering the Trump administration's attempt to isolate China, the business community is concerned that the US may expand the scope of the "transit clause", which could severely impact Vietnam - a country where many enterprises rely on Chinese raw materials and components. If forced to "de-Chinize", it may be difficult to achieve.
A US businessman based in Hanoi bluntly said: "This is unrealistic, because it doesn't take into account how global supply chains operate. This is not only impossible for Vietnam, but for all countries as well."
Additionally, another major unknown is how Vietnam's tariff rates will compare with neighboring countries, which is crucial for Vietnam to maintain its competitive advantage as a manufacturing hub. The Trump administration has set a new deadline of August 1st, requiring countries to reach an agreement with the US.
On July 2nd local time, US President Trump announced a "tiered tariff agreement" with Vietnam, stating on social media that goods exported from Vietnam to the US would be subject to a 20% tariff, while any goods considered to be "transiting through Vietnam" would be subject to a 40% tariff.
Bloomberg noted that this move would target products containing Chinese or other country parts that are transited through Vietnam or only undergo simple assembly before being exported to the US. This approach follows similar provisions in the existing US-Mexico and Canada trade agreements.
Later that evening, VNA reported that General Secretary of the Communist Party of Vietnam, Truong Tan Sang, called Trump to discuss relations between the US and Vietnam and issues related to tariff negotiations. Trump emphasized that the US would continue to cooperate with Vietnam to address issues affecting bilateral trade. Truong Tan Sang suggested that the US quickly recognize Vietnam's market economy status and lift some US export restrictions on high-tech products to Vietnam.
However, it was later found that "things were not that simple." According to a report by Politico on July 10th, Vietnam was likely "set up". Four sources revealed that actually, before Trump announced the news, the Vietnamese negotiation team had believed that the agreed tariff rate was around 11%, but at the last minute, Trump unilaterally raised it to 20%, catching Vietnam off guard.
In fact, Reuters had previously noted that although the Vietnamese government expressed its congratulations in a statement on reaching a joint consensus on the trade framework, it did not confirm the specific tariff levels. What products would be subject to the 20% tariff that Trump mentioned, whether the total tariff rate for some products would be higher or lower, remains unknown.
Although the details of the agreement are still unclear, especially the definition and implementation standards of the so-called "transit", on July 3rd, US media outlets such as the New York Times and Washington Post pointed out that this clause clearly targeted China. Economists and regional analysts believe that the relevant clauses of the US-Vietnam trade agreement highlight one of the core goals of the Trump administration in Asia: curbing trade with China and pushing China out of the supply chain.
A clothing store in Hanoi, Vietnam. Visual China
The report argues that this politicization of normal trade issues and malicious exclusion of China poses a great challenge for Vietnam, which is adjacent to China's border and has deeply integrated industrial chains. Pham The Anh, head of the Department of Economics at the University of National Economics in Hanoi, added that this will also "anger" China, Vietnam's largest trading partner. He said that Vietnam has always been cautious in negotiations, but now "is in a difficult position."
Huong Le Thu, deputy director of the Asia program at the non-governmental organization International Crisis Group (ICG), expressed concern, saying, "Vietnam is walking a tightrope (a very thin line)... Any mechanism is easily able to anger China." China has repeatedly warned that if its interests are threatened, there will be consequences.
"The 'trade truce' between Washington and Beijing may continue for now, but China is increasingly wary of what is happening elsewhere: the US is trying to achieve transactions that may isolate Chinese companies from the global supply chain."
Bloomberg once published an article stating that US officials are currently deepening negotiations with major trade partners in Asia and Europe to push for new agreements, which will include content targeting China, or ensure that the other party commits to following the US in opposing China in the trade field.
Is the trade agreement between the US and Vietnam aimed at China? Will it affect China? Will it harm the interests of Chinese exporters? How will China respond?
On July 3rd, the spokesperson for the Ministry of Commerce of China, He Yongqian, responded to related questions, pointing out that the US imposing so-called "reciprocal tariffs" on global trade partners is a typical unilateral bullying practice, which China has consistently opposed. China has noticed the situation and is conducting an assessment. China's position has always been consistent: we welcome all parties to resolve trade disputes with the US through equal consultations, but resolutely oppose any party achieving transactions by sacrificing Chinese interests. If this happens, China will resolutely take countermeasures to protect its legitimate rights and interests.
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