The United States and Vietnam have reached a new trade agreement, announced on July 2, 2025. This deal significantly alters the tariff landscape for goods traded between the two nations, aiming to address U.S. concerns about trade imbalances and transshipment.

Key Elements of the New US-Vietnam Trade Deal:

• Tariffs on Vietnamese Exports to the US: A 20% tariff will now apply to a broad range of Vietnamese exports to the United States. This is a reduction from the originally proposed "reciprocal" tariff of 46% but still a substantial increase from the typically low duties Vietnam enjoyed previously (averaging 2-10%).

• Transshipment Tariffs: A higher 40% tariff will be imposed on goods deemed to be "transshipped" through Vietnam, particularly those with significant Chinese content and minimal local value-add. This provision is specifically designed to prevent companies from rerouting Chinese goods through Vietnam to avoid U.S. tariffs on Chinese products. The enforcement criteria for this remain somewhat vague, creating a "compliance grey zone" for businesses.

• Zero Tariffs on US Imports to Vietnam: In a significant concession, Vietnam has agreed to grant zero tariffs on U.S. imports. This means American goods, from agricultural products like soybeans and meat to automobiles and machinery, will enter Vietnam duty-free. This aims to create new market access for U.S. exporters.

Status of Deals and Agreements:

The agreement with Vietnam is one of the few trade deals the U.S. has finalized under the current administration's new tariff push. It follows agreements with the United Kingdom and a framework agreement with China. The broader tariff pause, which had temporarily kept higher tariffs at bay, has been extended until August 1, 2025. After this date, absent further extensions or new deals, the higher tariff rates will automatically take effect for countries that haven't reached agreements.

Implications for Companies:

• Vietnamese Exporters: Companies exporting from Vietnam to the U.S. will face significantly higher costs due to the 20% tariff. This particularly impacts price-sensitive sectors such as textiles, footwear, furniture, seafood, and electronics. Many companies that shifted production from China to Vietnam to avoid tariffs will find their competitive advantage narrowed. They will need to reassess their supply chains, potentially absorb higher costs, raise prices, or explore new strategies.

• Transshipment Risk: Businesses with supply chains involving goods that originate in other countries (especially China) and are minimally processed in Vietnam before being sent to the U.S. face a substantial risk of the 40% transshipment tariff. Companies are urged to review their bills of materials and enhance compliance protocols to ensure their goods genuinely meet origin requirements.

• US Exporters: U.S. companies will benefit from duty-free access to the Vietnamese market, creating new opportunities for American agricultural products, manufacturers, and specialty parts suppliers. This could lead to increased market share for U.S. goods in Vietnam.

• Vietnamese Domestic Industries: Local Vietnamese industries will face stiffer competition from competitively priced U.S. imports due to the zero-tariff entry for American goods.

• Supply Chain Diversification and Localization: The deal encourages both Vietnamese and foreign investors to accelerate investment in upstream industries within Vietnam (components, materials) to ensure products meet stricter origin standards and avoid transshipment penalties. Companies may also explore "dual-base" models, with design and strategic management in one country and assembly/tariff-friendly exports in Vietnam.

Overall, while the 20% tariff is lower than initially proposed, it represents a significant shift for businesses engaged in U.S.-Vietnam trade. The emphasis on preventing transshipment indicates a strong intent to ensure that goods genuinely originate from Vietnam to receive the agreed-upon tariff rates. The legal foundation of these tariffs, imposed under the International Emergency Economic Powers Act, is also currently under review by the U.S. Court of Appeals for the Federal Circuit, which adds a layer of uncertainty regarding their long-term enforceability.