President Donald Trump announced on July 2 that the U.S. has reached a trade agreement with Vietnam, under which goods exported from Vietnam to the U.S. will be subject to a 20% tax, while the U.S. will have access to the Vietnamese market at a 0% tax rate.
According to a post on Truth Social, he stated that Vietnam also agreed to impose a 40% tax on goods originating from other countries but brought to Vietnam for further export to the U.S. — a form known as "transshipping." This is a tactic often attributed to China to evade U.S. taxes.
Although Trump asserts that "Vietnam will have to pay" the 20% tax, in reality, such import taxes are usually paid by importers in the U.S. and may be passed on to consumers in the form of higher prices.
This agreement comes less than a week before the expiration of the 90-day suspension of higher retaliatory tariffs proposed by the Trump administration. Previously, Vietnamese goods were taxed at 46%, reduced to 10% during the suspension phase. Now it is back up to 20%, significantly increasing import costs into the U.S.
Nevertheless, the S&P 500 index still rose slightly after the information about the agreement was announced.
In the post, Trump wrote:
"I am very honored to announce that I have just reached a trade agreement with the Socialist Republic of Vietnam after discussions with General Secretary To Lam – whom I deeply respect. This will be a major cooperation agreement between the two nations. Accordingly, Vietnam will pay a 20% tax on all goods entering the U.S. and 40% if they are transshipped. In return, the U.S. will have comprehensive access to the Vietnamese market at a 0% tax rate. I believe that SUVs – also known as large engine vehicles – which are very popular in the U.S., will become a wonderful product in the Vietnamese market. Working directly with General Secretary To Lam has been a very pleasant experience. Thank you for your attention to this matter!"
However, it is still unclear when this agreement will take effect or whether it has been officially signed by both parties. White House advisors declined to confirm the specific tax rate announced by Trump.
According to officials, Trump may continue to delay or adjust the deadline for his retaliatory tax policy. For the past 90 days, countries have had their taxes reduced to 10% to allow time for negotiation. So far, besides China and the UK, not many countries have reached new agreements with the U.S.
Vietnam, where exports to the U.S. account for about 30% of GDP, is one of the most vulnerable countries if Trump's tax policy is expanded.
Critics warn that this erratic tax policy could make the U.S. economy more unstable and consumers will bear higher prices. However, the Trump administration argues that taxes do not cause inflation and have helped the U.S. bring in billions of dollars.
A study from AlixPartners for CNBC shows that if the U.S. imposes a 10% tax on Vietnamese goods, the price of imported men's sweaters will rise by about 8%. If a 46% tax is imposed as before, prices will increase by up to 35%.
Federal Reserve Chairman Jerome Powell also stated on Tuesday that the impact of Trump's tariffs may become clearer this summer.
Expert insight: Quick analysis from a finance lecturer at the University of Bristol, UK
A senior lecturer and director of the Master's program in Finance & Accounting at the University of Bristol provided a quick comment on Facebook:
In terms of negotiation: In the context of the U.S. specifically naming Vietnam as a country engaging in transshipping and intending to impose high taxes, achieving a 20% rate is a relatively successful outcome. A 40% rate for transshipping is "a strong but controlled strike."
Compared to expectations: The 20% tax rate is not too low, but compared to gloomy predictions (nearly 30%), it is not a bad result. The U.S. market reacted positively, with Nike stocks – which have a large supply chain in Vietnam – rising slightly.
Details are unclear:
Will all non-transshipped goods be subject to 20%, or are there exceptions?
Is the method for determining transshipped goods clear? Based on what criteria?
Does this agreement only apply to retaliatory taxes or does it include other types of taxes proposed by Trump?
Impact on the domestic industry: Which industries currently facing nearly 20% tax may benefit because it is clearer and reduces risk. Industries that previously enjoyed low tax rates and now must rise to 20% will be under pressure.
Will FDI be affected? Need to see what advantages Vietnam's competitors have. Is the 10% tax differential large enough for companies to leave Vietnam? Not necessarily, as there are other factors besides taxes such as labor, infrastructure, and political stability...
Regarding the depreciation of the VND: It is not advisable to devalue to combat taxes as it may be accused of currency manipulation. As a lesson from Canada, when negotiating trade while imposing digital service taxes, Trump immediately stopped negotiations.
Instead of adjusting the exchange rate, focus should be on supporting businesses to reduce costs, thereby absorbing the tax impact. If capital is withdrawn significantly, the USD/VND exchange rate will rise on its own - without the need for administrative intervention.
In conclusion: This may only be a consensus at the leadership level, specific details still need further negotiation in the coming time.
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