Trump and Vietnam Strike Tariff Deal, Last-Minute Agreement Spares Harsher

US President Donald Trump announced Wednesday (July 2) that the United States and Vietnam struck a trade deal just a week before the July 9 deadline.

The agreement will see the US impose a 20 percent tariff on many Vietnamese exports, meaning Vietnam averted the threatened 46 percent levy. Additionally, transshipped goods, which are goods routed through Vietnam before being shipped to the US, will be subject to a 40 percent tariff. In his post, Trump said Vietnam agreed to allow the import of US goods at a 0 percent tariff in return.

The last-minute framework gives Washington a political win while preserving Vietnam’s vital access to its largest export market. Vietnam is America’s 10th biggest trading partner, and the US is by far its most important destination for manufactured goods.

However, details remain thin. It is still unclear exactly which products will fall under the 20 percent tariff, or how the 40 percent penalties on transshipped goods will be enforced.

While Vietnam’s state media did not confirm those tariff levels in its official statement, it said the two countries”Vietnam – US joint statement concerning a fair and balanced reciprocal trade agreement framework.”

The timing of the deal is also critical. Under Trump’s April-announced plan, tariffs on Vietnamese goods were due to rise to 46 percent, alarming businesses that have shifted manufacturing from China to Vietnam over the past five years.

Since 2018, Vietnam’s exports to the United States have nearly tripled, climbing from US$49.14 billion to US$136.5 billion last year, according to US Census Bureau data. American exports to Vietnam, meanwhile, rose about 30 percent to US$13.04 billion in the same period.

For Trump, the agreement with Vietnam is an important success as he races to conclude similar frameworks with other trading partners before the broader tariff hikes resume next week.

Talks with India are underway, while negotiations with Japan and the European Union have encountered complications.

Analysts say the Vietnam deal could set the tone for these upcoming talks, as Vietnam’s dependence on US trade meant it had a weak negotiation position. “Other countries will feel they should be able to lock in a lower tariff rate than the 20 percent that President Trump says Vietnam has agreed to,” Mark Williams, chief Asia economist at Capital Economics, told CNBC.

Murray Hiebert of the Center for Strategic and International Studies meanwhile noted that had Trump insisted on the full 46 percent tariff, Vietnam risked losing out to other Southeast Asian rivals, damaging both its economic prospects and its willingness to partner with Washington.

“Had Trump stuck with 46 percent, much higher than the current tariff on China, Vietnam feared it would be disadvantaged by its competitors especially in Southeast Asia,” Hiebert told Reuters. “This likely would have dented Vietnam’s trust in the US and it might have toned down some of its security cooperation with…