Vietnam’s new trade deal with the US opens path to business restructuring

Just hours after a phone call with Vietnam General Secretary To Lam on 2 July, US President Donald Trump announced on Truth Social that Washington and Hanoi had reached a preliminary trade agreement. The deal sets a 20 per cent tariff on Vietnamese exports to the US, imposes a 40 per cent tariff on goods deemed to be “transshipped” (especially those with Chinese origins), and in return, Vietnam will grant zero-tariffs on American products. This makes Vietnam the third country, after the United Kingdom and China, to reach a preliminary trade deal with the US during this negotiation round.

The announcement marked the end of more than three months of tense negotiations, during which Washington considered tariffs of up to 46 per cent on Vietnamese goods. Dr Chu Thanh Tuan, Associate Program Manager of Undergraduate Business Programs at RMIT Vietnam, described the outcome as a politically significant compromise. “Vietnam has taken a positive step to stabilise trade. While technical details remain unresolved, this preliminary deal gives businesses a vital buffer to prepare for a shifting trade environment,” he said.

An acceptable outcome amid mounting pressure

According to Dr Tuan, the agreement represents a calculated and strategic move to mitigate risks and maintain trade continuity. “Vietnam has avoided what many feared could be widespread supply chain disruption and cancelled export orders,” he said. While the 20 per cent tariff is higher than usual, he believes this is a reasonable compromise in the context of rising political and trade pressure. 

However, he cautioned that the announcement is still just a political declaration. No binding bilateral legal document has been published yet. This means key technical issues, such as rules of origin, inspection mechanisms, and how to distinguish legitimate Vietnamese goods from ‘transshipped’ products, are still under negotiation. A lack of clarity in procedures could expose exporters to significant risk.

One of the most critical points is the 40 per cent tariff on goods classified as transshipped - a concept the US has pushed in response to its ongoing trade tensions with China. Under US agreements like USMCA and CAFTA, a product generally needs to show 35 to 45 per cent domestic value-added content to qualify as being of local origin. If Vietnamese exporters cannot demonstrate this, their goods risk being reclassified as disguised Chinese exports and hit with the higher tariff.

Dr Tuan advises Vietnamese businesses to audit their supply chains, invest in localisation, and maintain transparent production processes. Crucially, they must keep comprehensive records, from certificates of origin and invoices to contracts and bills of lading. The US Customs and Border Protection (CBP) can audit shipments or even visit factories, so digitalised record-keeping and transparency are essential.

Which sectors are most exposed? 

"Not all industries will be hit equally," said Dr Tuan. Garment and footwear, which were already used to most-favoured-nation tariffs of 10 to 20 per cent, may absorb the added costs. Larger firms like Vinatex, TNG, and An Phuoc, with diverse clients and stronger negotiating power, may be able to share costs with US partners. However, small and medium-sized businesses, often operating on thin margins and reliant on the US market, will face greater difficulty preserving contracts and profitability.

The electronics sector, especially manufacturers of components and assemblers for major tech brands like Samsung, Apple, and LG, appears relatively stable. While the 20 per cent tariff may dent short-term profits, Vietnam remains attractive for high-tech FDI amid ongoing supply chain shifts out of China. Many multinationals have already established production ecosystems in Vietnam and are unlikely to pull out due to short-term tariff changes.

By contrast, industries like furniture, seafood (shrimp and pangasius), household plastics, bicycles, and light industrial equipment are likely to be hit harder. These sectors previously benefited from very low tariffs when entering the US. The increase to 20 per cent erodes their competitive pricing edge, particularly compared to countries with USMCA benefits (like Mexico) or strong export competitors like India and Ecuador. Vietnamese firms will need to work significantly harder to retain market share.

Furthermore, industries such as plastics and bicycles, which still rely heavily on components from China, are at risk of being labelled ‘transshipped’. Without quickly raising local content, these exporters may face the 40 per cent tariff and risk losing access to the US market entirely.

A broader shift in US trade strategy and the challenge for Vietnam 

Dr Tuan believes the deal reflects more than a bilateral outcome. It signals a shift in the Trump administration’s approach to emerging economies. The US is increasingly using higher tariffs as a tool to demand market access and tighten supply chain control, not just with Vietnam but across Asia.

Thailand and Malaysia, both deeply embedded in Chinese supply chains, are now facing 36 per cent and 24 per cent tariffs respectively. Meanwhile, India, with its vast domestic market and geopolitical clout, is likely to reach a more favourable agreement. South Korea and Japan, on the other hand, are struggling: President Lee Jae-myung of South Korea admitted a deal before the 9 July deadline was unlikely, while Japan faces US demands for voluntary export limits on cars.

In this context, ASEAN is adopting a ‘hybrid’ strategy - maintaining internal consensus while allowing member states to negotiate individually with the US. This is aimed at avoiding isolation and reducing the risk of unilateral pressure. 

Meanwhile, the EU is negotiating from a position of strength due to its trade surplus and retaliatory capacity. It has refused to accept a 10 to 20 per cent baseline tariff without reciprocal concessions, particularly on digital taxes, ESG standards, and market access. As a result, US-EU talks are expected to be more complex but could yield a more balanced outcome than what smaller export-reliant countries like Vietnam can achieve.

Dr Tuan offered four key recommendations for Vietnamese exporters: (1) diversify markets to reduce reliance on the US; (2) boost localisation and supply chain oversight; (3) digitise export documentation to ensure readiness for audits; and (4) renegotiate pricing and delivery terms with US partners to manage rising tariff costs.

He also noted that the agreement has helped ease investor concerns. The VN-Index recovered slightly following Trump’s announcement, and some foreign investors have signalled plans to resume expansion in Vietnam. However, this positive sentiment won’t last unless the deal’s terms are clarified soon.

“Investors don’t want a short-term political gesture,” Dr Tuan said. “They want a binding, enforceable, long-term commitment.” While much remains uncertain, he believes the agreement is a valuable buffer, buying time for Vietnam to restructure its supply chains, manage origin-related risks, and strengthen long-term competitiveness.

“We haven’t won,” he said. “But we’ve kept the door open. And if we use this time wisely, Vietnam can still enter the next phase of global trade on stronger footing.”

Story: Quan Dinh H.

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