News analysis US tariff deal a relief for Vietnam, and a sting in the tail for China

Punitive measure on trans-shipped goods will be seen as provocative by Beijing

- Philip Wen Regional Correspondent

BANGKOK - Given the vagaries of the Trump administration, Vietnamese Prime Minister Pham Minh Chinh displayed considerable confidence on June 25 when he anticipated striking a trade deal with the US.

"I hope that you will see that the result will come earlier than two weeks," he said, speaking on a panel at the "Summer Davos" in Tianjin, China, before the pause on the 46 per cent reciprocal tariffs was due to lapse on July 9.

The Prime Minister was proven right — with a full week to spare. While full details will likely only be fleshed out over the coming weeks, the headline takeaways are that the US will levy a 20 per cent tariff on made-in-Vietnam products, with a 40 per cent tariff applying on goods trans-shipped via Vietnam.

In return, Vietnam has agreed to remove all pre-existing tariffs on US imports, as pledged by Hanoi from the outset of its trade negotiations with Washington.

"For investors looking at Vietnam as an investment thesis... they can now have a 20 per cent baseline to work with," said Ms Trinh Nguyen, a senior economist covering emerging Asia at Natixis. "They can then make their calculations whether or not it is still profitable to do business there."

The tariffs threat came just as Vietnam had embarked on a highly ambitious growth agenda to target high-income status by 2045. To achieve that, the Communist Party has targeted 8 per cent growth in 2025 and double-digit growth beyond that.