The US-Vietnam trade deal announced this week has been met by investors with cautious optimism as well as deep uncertainty. The deal will cut Trump's proposed tariffs on Vietnamese goods from 46% to 20%, but the fine print of the agreement is unclear.
Markets initially responded to the trade deal with relief, as shares of Nike, Under Armour, and other firms that depend on Vietnamese manufacturing rose after the initial announcement. However, stock prices leveled off after the complexity and ambiguity of the deal became more apparent. Although Vietnam avoided the steepest tariffs, it now faces a two-tier system: a 20% levy on most exports to the U.S., and a 40% tariff on goods which have been the subject of “trans-shipment”—a reference to Chinese products rerouted through Vietnam to avoid U.S. duties.
The focus on trans-shipment is troubling, as neither Washington nor Hanoi has yet clarified what will be deemed to constitute trans-shipment and how the 40% tariff will be enforced. For example, details are lacking regarding what constitutes enough added value to make a good Vietnamese rather than Chinese, avoiding the penalty. The Vietnamese government issued only a general statement about “preferential access” for U.S. goods, while omitting confirmation of specific tariff levels. Enforcement challenges remain as neither side has announced formal mechanisms to implement the promises in the trade deal.
In effect, what exists today is less a finalized trade pact and more a high-stakes framework agreement. Businesses with interests in Vietnam must monitor Hanoi's next move as it tries to protect its export-driven economy.
The United States will place a lower-than-promised 20% tariff on many Vietnamese exports, Donald Trump said on Wednesday, cooling tensions with its tenth-biggest trading partner days before the U.S. president could raise levies on most imports. Vietnamese goods would face a 20% tariff and trans-shipments from third countries through Vietnam will face a 40% levy, he said. Vietnam could import U.S. products with a zero percent tariff, he added.
