US and Vietnam Seek Trade Deal, China Access Poses Main Obstacle

Tariff Background: In April, the U.S. imposed a hefty 46% “reciprocal tariff” on Vietnamese exports, citing concerns that Chinese-made goods were being transshipped via Vietnam.

Negotiation Progress: As of mid-June, the third round of talks in Washington yielded some progress—Vietnam made commitments to curb transshipment, reduce reliance on Chinese industrial inputs, and boost U.S. imports—but key issues remain unresolved.

Deal Outline: A preliminary deal announced in early July would lower U.S. tariffs on Vietnamese goods to 20%, down from 46%, while imposing a 40% tariff on suspected transshipped goods, especially those with Chinese origin. In return, Vietnam would eliminate tariffs on U.S. imports.

China’s Role & Concerns: The agreement is widely viewed as targeting China’s ability to dodge tariffs via Vietnam, and it may strain Vietnam–China relations. Concerns center on defining “transshipment,” tracing component origins, and enforcing rules of origin.

Economic Stakes: Vietnam’s trade surplus with the U.S. surged—over $12.2 billion in May, up 42% YOY. China supplies around 50% of Vietnam’s production inputs, complicating Vietnam’s ability to fully comply without economic disruption.

Next Steps: Talks continue with unresolved details on origin rules, audit mechanisms, and U.S. demands for reduced China dependence Vietnam also formed a task force to avoid the 46% tariff, with negotiations still open

***Photo Reference: https://newbusinessage.com/article/us-vietnam-trade-deal-sows-new-china-uncertainty***