Is Trump tariff deal really a win for Vietnam – or a way of punishing China?
"A New Era of Trade Warfare Has Begun for the U.S. and China "Trump claims ‘total reset’ in US-China trade relations after tariff talks in Geneva" Instead of battling over tariffs, Washington and Beijing have turned to a potentially far more harmful strategy: flexing their control over global supply chains. [...]The United States has extended these export controls around the world, even forbidding companies in other countries from selling products to China if they use American parts, technology or software to manufacture them. While some foreign governments have bristled at these rules, many have fallen in line. P - The U.S. and Chinese economies remain deeply integrated, with hundreds of billions of dollars of trade flowing across the Pacific each year. The New York Times P - This system rests on the idea that the United States should be the sole global power whose rules other countries need to abide by. But for China, rare earth minerals are a way to challenge the American assertion of dominance. P - Beijing set up a licensing system that allows it to monitor and approve sales of rare earths, and magnets made from them, to companies worldwide. When Mr. Trump ratcheted up tariffs on China to 145 percent in April, Beijing responded by targeting shipments of rare earths, including pausing many of them. P - In May, American and Chinese officials arranged a meeting in Geneva to try to defuse their trade tensions. The Trump administration had several reasons to try to strike a truce. Companies had been warning of the risk of empty store shelves later this year because of plummeting imports from China, and stock and bond markets were flashing warning signs.But it was China’s rare earth restrictions that appeared to put the most pressure on the United States to reach a resolution. P - Negotiators agreed in Geneva to lower tariffs. As part of the deal, China said it would “suspend or remove the non-tariff countermeasures taken against the United States since April,” according to a joint statement."
Related: Reality Vs Rhetoric — Let’s take Vietnam’s Trade Surplus with the US as an Example "He is barking mad. This is from the full transcript of Time Magazine's interview with him three days ago: You have to understand, I'm dealing with all the companies, very friendly countries. We're meeting with China. We're doing fine with everybody. But ultimately, I've made all the deals. [...]Bottom Line The notion of achieving balanced trade between Vietnam and the U.S. within the next 5 years is a total myth. It’s just not going to happen anytime soon. In fact, it will probably take decades, if ever — and guess what, in the real world that’s okay! Trade imbalances aren’t inherently bad; they reflect how different economies work together in a globalized world. The real goal should be building a strong partnership where both sides benefit — not chasing an impossible dream based on oversimplified ideas about how trade works. https://investorshub.advfn.com/boards/read_msg.aspx?message_id=176197592
Rebecca Ratcliffe south-east Asia correspondent
US exports account for third of Vietnam’s GDP and 40% tariff on so-called transshipments – products with Chinese input – means uncertainty for manufacturers
Mon 7 Jul 2025 10.20 AEST
The US reached a trade agreement with Vietnam last week, with Donald Trump saying the US would impose a 20% tariff on Vietnamese exports. Photograph: Luong Thai Linh/EPA
As news spread that Vietnam would become just the second nation to reach an initial tariff agreement with Washington, shares in the clothing companies and manufacturers that have a large footprint in the country rose with optimism.
Just hours later though, they declined sharply, as it became clear that the devil would be in the detail, and the most striking part of the deal might in fact be aimed at Vietnam’s powerful neighbour China.
However, a 40% tariff will remain for so-called transshipments – a provision that is aimed at Chinese companies accused of passing their products through Vietnam, or elsewhere, to avoid US tariffs.
Businesses worry that “transshipment” is a politicised term, and that if the US defines it too broadly, many goods could be unfairly targeted.
“Vietnam is a manufacturing hub – and as a hub you take inputs from other countries and make value-added stuff in Vietnam, and then export it to other countries,” says Dr Nguyen Khac Giang, visiting fellow at the ISEAS Yusof Ishak Institute.
It is unrealistic, he adds, to expect most Vietnamese goods, other than agricultural products, would be made entirely in Vietnam. What remains to be decided is: what proportion of a product should be?
How transshipments will be defined under the agreement – and how this policy will be enforced – remains to be seen, but it could have significant implications for global trade and tensions with China.
Workers at a garment factory in Vietnam’s Thai Nguyen province. Photograph: Nhac Nguyen/AFP/Getty Images
“One lesson for other countries is that the US intends to use these deals to apply pressure on China,” said Stephen Olson, a former US trade negotiator.
Vietnam, a booming manufacturing hub, benefited during the last Trump administration when punishing tariffs placed on China prompted many Chinese companies to shift their supply chains.
However, this caused the Vietnamese trade surplus with the US to surge, attracting US ire and allegations that Vietnam was wrongly acting as a conduit for Chinese companies wanting access to the US market.
China’s commerce ministry spokesperson He Yongqian responded to the US-Vietnam deal on Thursday stating: “We firmly oppose any party reaching a deal at the expense of China’s interests. If such a situation occurs, China will resolutely counter it to safeguard its legitimate rights and interests.”
Vietnam’s manufacturing industry is closely intertwined with both the US and China. US exports account for 30% of Vietnam’s GDP, while China is Vietnam’s top import source, relied on for raw materials used to make anything from footwear to furniture and electronics.
Vietnam is not alone in relying on China for such components, especially across electronic sectors. [color=red]“[China] is completely interwoven into global supply chains,”[/color] says Dan Martin, international business adviser at Dezan Shira and Associates, based in Hanoi.
If companies are expected to prove the origin of all goods, this could place an unwelcome burden on those in sectors such as textiles where margins are low, says Martin.
However, he cautions that it remains to be seen whether the higher 40% tariff on transshipments will be actively enforced. It is also possible that Vietnam could benefit if US policy encourages suppliers to set up shop in Vietnam, Martin adds.
Workers at a garment factory in Ho Chi Minh, Vietnam. Photograph: Anadolu/Getty Images
Businesses are largely pausing decisions until a clearer picture emerges, say analysts.
Policymakers in Hanoi remain on a diplomatic tightrope. Vietnam has long sought to balance relations with Washington and Beijing. It considers the US not only a key export market but a security partner that serves as a counterbalance to China’s assertiveness.
However, if Beijing considers that Hanoi is helping Washington constrain it, this risks antagonising Vietnam’s northern neighbour. It could lead to economic measures from China, or pressure over the disputed South China Sea, a major flashpoint in the region, says Peter Mumford, head of practice for south-east Asia at Eurasia Group.
As things stand, “aggressive retaliation” by Beijing against Hanoi is unlikely, he says: “Hanoi may even have given Beijing a rough indication of the steps it would have to take to secure a US trade deal.”
Vietnam has made efforts to show goodwill towards China over recent months, while also courting Trump.
In exchange for the 20% tariff rate, Trump said Vietnam would open up its market to US goods. US-made SUVs, “which do so well in the United States, will be a wonderful addition to the various product lines within Vietnam”, said Trump.
However the market for cars remains small in Vietnam, where city streets are famously crammed with millions of motorbikes.
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