At the beginning of July, the United States and Vietnam signed a trade agreement. At the heart of the agreement is a significant reduction in tariffs on Vietnamese goods—from 46%, as set in the tariff schedule announced on “Liberation Day” this April, down to 20%. In addition, a 40% tariff will be imposed on goods originating from third countries. This represents a major shift, as the United States had previously imposed only minimal tariffs of 3%–4% on Vietnamese imports for many years.
It is difficult to understand the logic behind this agreement without reference to China. Since the start of the first U.S.–China trade war in 2018, China has taken several effective steps to circumvent US tariffs on Chinese goods. First, Chinese companies exporting to the United States shifted parts of their operations to Vietnam. Second, some continued exporting to the United States through Vietnam. In fact, the rise in trade volume between Vietnam and the United States has been linked to a corresponding increase in exports from China to Vietnam. In 2024, the United States imported $136 billion worth of goods from Vietnam—up from $49 billion in 2018. In those same years, Vietnamese imports from China surged from $65 billion to $144 billion.
It is therefore no surprise that Beijing was angered by the newly signed trade deal. The agreement seeks to block China’s strategies for bypassing tariff barriers. It is expected to harm both Chinese companies operating in Vietnam—who will now face 20% tariffs—and Chinese goods rerouted through Vietnam en route to the United States, which will face a 40% tariff under anti-circumvention measures. Still, it is unlikely the agreement will roll back trade flows between the three countries to 2018 levels. More realistically, the agreement will halt the sharp growth observed in recent years. This is for two main reasons: First, while a 20% tariff on Vietnamese goods marks a steep increase compared to recent years, in today’s global environment of high tariffs, importing from Vietnam remains economically viable for American importers compared to other alternatives. Second, much of the Chinese export to Vietnam consists of raw materials, not finished products—for example, fabric used in clothing production. These goods would be subject to the lower 20% tariff rather than the full 40%.
In the coming year, it will become clearer how the US–Vietnam trade agreement affects trade flows between the two countries, as well as between China and Vietnam. Nonetheless, the message is already evident: China remains a central player—even in trade agreements that don’t directly involve it.
At the beginning of July, the United States and Vietnam signed a trade agreement. At the heart of the agreement is a significant reduction in tariffs on Vietnamese goods—from 46%, as set in the tariff schedule announced on “Liberation Day” this April, down to 20%. In addition, a 40% tariff will be imposed on goods originating from third countries. This represents a major shift, as the United States had previously imposed only minimal tariffs of 3%–4% on Vietnamese imports for many years.
It is difficult to understand the logic behind this agreement without reference to China. Since the start of the first U.S.–China trade war in 2018, China has taken several effective steps to circumvent US tariffs on Chinese goods. First, Chinese companies exporting to the United States shifted parts of their operations to Vietnam. Second, some continued exporting to the United States through Vietnam. In fact, the rise in trade volume between Vietnam and the United States has been linked to a corresponding increase in exports from China to Vietnam. In 2024, the United States imported $136 billion worth of goods from Vietnam—up from $49 billion in 2018. In those same years, Vietnamese imports from China surged from $65 billion to $144 billion.
It is therefore no surprise that Beijing was angered by the newly signed trade deal. The agreement seeks to block China’s strategies for bypassing tariff barriers. It is expected to harm both Chinese companies operating in Vietnam—who will now face 20% tariffs—and Chinese goods rerouted through Vietnam en route to the United States, which will face a 40% tariff under anti-circumvention measures. Still, it is unlikely the agreement will roll back trade flows between the three countries to 2018 levels. More realistically, the agreement will halt the sharp growth observed in recent years. This is for two main reasons: First, while a 20% tariff on Vietnamese goods marks a steep increase compared to recent years, in today’s global environment of high tariffs, importing from Vietnam remains economically viable for American importers compared to other alternatives. Second, much of the Chinese export to Vietnam consists of raw materials, not finished products—for example, fabric used in clothing production. These goods would be subject to the lower 20% tariff rather than the full 40%.
In the coming year, it will become clearer how the US–Vietnam trade agreement affects trade flows between the two countries, as well as between China and Vietnam. Nonetheless, the message is already evident: China remains a central player—even in trade agreements that don’t directly involve it.