[WASHINGTON] US President Donald Trump said he had reached a trade deal with Vietnam following weeks of intense diplomacy between the nations and ahead of a deadline next week that would have seen higher tariffs imposed on the country’s imports.
Under the agreement, Vietnam will pay a 20 per cent tariff on exports to the US, with a 40 per cent levy on any transshipments, Trump said in a social-media post on Wednesday (Jul 2). Trump said that Vietnam had agreed to drop all levies on US imports.
“In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff,” Trump wrote. The president said he he had secured the deal after discussions with Communist Party chief To Lam.
The deal with Vietnam would be just the third announced following agreements with the UK and China as trading partners race to cut agreements with the US ahead of a Jul 9 deadline. Trump had imposed a 46 per cent duty on Vietnam as part of his initial rollout of so-called reciprocal tariffs in early April that were levied on dozens of countries, but were then pared back to 10 per cent to allow time for negotiations.
Vietnam posed a particular challenge for the Trump administration, as some of the president’s top advisers view the nation as a strategic partner in efforts to counter China in Asia. At the same time, its exports become staples for American consumers.
The nation has seen its sales to US markets surge in recent years, partly because manufacturers shifted production there from China. It is a major supplier of textiles and sportswear, hosting factories for companies such as Nike, Gap and Lululemon Athletica Vietnam was the sixth-biggest supplier of US imports last year, sending goods worth almost US$137 billion, according to Census Bureau data.
A NEWSLETTER FOR YOU
Friday, 8.30 am
Asean Business
Business insights centering on South-east Asia’s fast-growing economies.
Shares in furniture stocks and apparel makers rose after Trump’s post, with ON Holding, Nike and Lululemon jumping to hit session highs, rising as much as 7.2 per cent, 3.9 per cent and 2.9 per cent, respectively.
Some US officials also wanted to calibrate tariffs for Vietnam and others in South-east Asia to ensure they’re sufficiently lower than what’s imposed on China to encourage production to leave that country.
The higher 40 per cent rate announced on Wednesday would be imposed on goods deemed to be “transshipping” – where components from China and possibly other nations are routed through Vietnam or subject to only minimal final assembly before being exported to the US.
That’s been a major concern for some of Trump’s top trade advisers, including Peter Navarro, who described Vietnam as “essentially a colony of communist China” during an April interview with Fox News.
Full details of what goods would be subject to that higher 40 per cent rate were not immediately available.
The deal with Vietnam was struck after weeks of discussions during which the US pressured the country to get tougher on trade fraud, ensure stricter enforcement against the transshipment of Chinese products, and also pushed for the removal of non-tariff barriers.
Vietnam offered to remove all tariffs and repeatedly promised to purchase more American goods. Senior Vietnamese officials flew to the US to rally support and sign deals, including for US$3 billion of agricultural goods. The trade minister also wooed executives from Nike, Gap and others to encourage them to get behind negotiation efforts.
Brands raced to move manufacturing to Vietnam over the past decade as US-China tensions escalated. The industrial shift from China to Vietnam also helped build the kind of massive trade gap that made it a prime tariff target for Trump.
Last year, Vietnam’s trade surplus with the US was the third-largest globally on a country basis behind only China and Mexico. Shipments in May jumped 35 per cent as firms sought to get goods onto vessels as quickly as possible ahead of the deadline. BLOOMBERG
