U.S. President Donald Trump on Wednesday announced a new trade agreement with Vietnam, cutting his earlier proposed 46% tariff on Vietnamese imports down to 20% and securing a commitment from Hanoi to allow American goods into the country duty-free.
Trump also revealed that a 40% tariff would be imposed on any goods suspected of being transshipped through Vietnam—an apparent warning to Chinese exporters seeking to bypass U.S. tariffs.
The development marks another sharp turn in Trump’s aggressive trade strategy, with analysts interpreting the deal as less about bilateral trade with Vietnam and more about tightening controls on China’s access to U.S. markets via Southeast Asia.
“It is my Great Honor to announce that I have just made a Trade Deal with the Socialist Republic of Vietnam,” Trump said on Truth Social.
“It is my opinion that the SUV or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam,” he added.
Aimed at China, Not Just Vietnam
The tariff compromise, which reduces steep penalties originally floated in April, comes just as Vietnam’s economy continues to thrive as a global manufacturing hub—largely benefiting from multinationals fleeing China during Trump’s first trade war. But the most significant clause may be the newly imposed 40% penalty on “transshipped” goods, a direct effort to block Chinese supply chains from exploiting loopholes through third countries.
“The ‘China quotient’ in U.S. negotiations with other Asian economies is arguably evident in the deal with Vietnam,” said Vishnu Varathan, head of Asia macro research at Mizuho Bank. “The U.S.’s intent is quite obviously to not disincentivize Vietnam’s role as a substitute for China at a lower 20% tariff.”
Vietnam has become a favored destination for multinationals rerouting production lines away from China, a shift that accelerated during Trump’s first administration. In 2023, the U.S. trade deficit with Vietnam surged to $123.5 billion—its third-largest globally, after China and Mexico.
But Washington has grown increasingly wary that some of Vietnam’s rising exports are in fact Chinese goods repackaged or rerouted to dodge U.S. duties. The U.S., thus, is signaling that such practices will face steep consequences under the new deal, by including a transshipment clause with sharply higher tariffs.
The agreement appears to be part of a larger shift in Trump’s trade strategy—favoring smaller, issue-specific frameworks over comprehensive multilateral pacts. Eli Clemens, a policy analyst at the Information Technology and Innovation Foundation, said the Vietnam deal may serve as a model.
“A tariff framework that targets transshipment while preserving the potential benefits of efficient cross-border commerce is a smart move—if enforced transparently and paired with clear rules of origin,” Clemens noted. “Future trade negotiations should also include targeted transshipment deterrents that level the playing field for U.S. manufacturers and retailers.”
The structure reflects lessons from previous U.S.–China trade battles, where supply chains merely shifted locations rather than altering core dependencies.
China’s Warning
Beijing responded to the development with a warning. Speaking at a press conference Thursday, He Yongqian, a spokeswoman for China’s Ministry of Commerce, said China was closely reviewing the U.S.–Vietnam deal for possible harm to its commercial interests.
“We are happy to see all parties resolve trade conflicts with the U.S. through equal negotiations but firmly oppose any party striking a deal at the expense of China’s interests,” she said, warning of retaliation if Beijing’s concerns were validated.
“If the agreement is found to harm China, we will firmly strike back to protect our own legitimate rights and interests.”
Chinese officials have long suspected that the U.S. is working to reshape Indo-Pacific trade networks to isolate China, particularly in the technology, semiconductors, and clean energy sectors. The Vietnam agreement is only the latest in a series of U.S. efforts to shift supply chains elsewhere.
Washington’s firm stance on transshipment enforcement and its willingness to reward partners like Vietnam puts other Asian economies on notice. Countries such as Thailand, Malaysia, and the Philippines may find themselves under pressure to either align with U.S. trade rules or face steep penalties.
“It would be remiss to ignore this critical pillar of U.S. trade deals with the rest of Asia, which is trained on undermining China’s economic reach and influence,” Mizuho’s Varathan said.
He also warned that this approach could increase Beijing’s suspicion and lead to further instability.
“Other Asian economies will be particularly vulnerable to a two-sided geoeconomic squeeze given that their reliance on both China and the U.S. are significant,” he added.
Impact on Energy and Autos
Trump has spotlighted U.S.-made SUVs and liquefied natural gas (LNG) as potential winners under the deal, projecting that Vietnam’s growing middle class and energy needs will drive up American exports. But economic fundamentals in Vietnam tell a more complex story.
Despite the trade opening, Vietnam’s domestic transportation remains dominated by motorcycles, which account for more than 90% of all registered vehicles. The car ownership rate is a modest 22 per 1,000 people, compared to over 500 per 1,000 in more developed economies.
Meanwhile, LNG exporters may face headwinds. Coal remains the dominant source of electricity in Vietnam, generating over 50% of power, while natural gas use has declined to under 10% due to shrinking domestic reserves and limited infrastructure. With no gas power plants currently under construction and over 50 GW of wind and solar projects in pre-construction, Vietnam’s energy future is leaning green—not gas-powered.
Markets Cheer Deal
Despite long-term uncertainties, the deal immediately boosted market confidence. The S&P 500 and Nasdaq hit fresh record highs on Wednesday, and U.S. stock futures extended those gains on Thursday. Vietnam’s VN-Index also rose to its highest level since April 2022.
However, the geopolitical fallout may be only beginning. China sees the Vietnam deal as a direct attempt to sideline its trade influence, and further retaliation from Beijing—either economically or diplomatically—cannot be ruled out.
For Trump, the deal represents another piece to his reshaped trade puzzle: a framework that blends economic leverage with geopolitical pressure, aims to restrict China’s backchannels, and courts new allies in America’s quest to rewire global commerce.
