After narrowly dodging the heavy 46% tariffs initially threatened in April, Vietnam now faces a 20% rate on most goods. In return, U.S. products going into Vietnam will be unimpeded by any tariff taxation. However, an additional 40% tariff rate will remain for so-called transshipments. These are separate charges specifically aimed at targeting goods made in other countries but shipped through Vietnam. While no direct target was named, this plug-up measure is clearly intended for one country — China. 

This taxation of transshipments from Vietnam marks a subtle escalation in the ongoing U.S.-China economic power struggle. Indeed, portions of Vietnam’s growing trade surplus with the U.S. are highly suspected to be Chinese-made products rerouted from their origins to evade higher trade tariffs, as evidenced by trade data collected after 2018. Tariffs on transshipments are the American solution to mitigating the impacts of China’s back-channel operations and serve as part of wider efforts put forth by the Trump administration to combat perceived U.S. economic disadvantage. Unlike previous countermeasures that sought to hit the Chinese economy head-on via tariffs on direct imports and sanctions on key industries, the new transshipment policy reflects a broadening of the economic struggle between the two powers to encompass all commercial arteries available. China, for its part, has promised retaliatory measures against any nation that “sacrifices Chinese interests in exchange for tariff concessions.” 

Caught in the middle is Vietnam. The country benefited heavily from the Section 301 tariffs imposed on China during Trump’s first term, redirecting global trade flows towards the emerging export economy, whose growing labor force, favorable trade agreements, and improved industrial infrastructure made it the obvious alternative to an increasingly volatile Chinese market. As a result, its trade surplus with the U.S. ballooned from 38.3 billion in 2017 to 123.5 billion in 2024. Yet, this growing trade imbalance, along with exports of Chinese-made products labeled as “Made in Vietnam,” has brought about the ire of the United States under the second Trump administration. Even so, Vietnam-China trade relations are unlikely to deteriorate in the foreseeable future. Vietnam and other Asian nations still heavily depend on China for the supplies needed to create finished goods. Thus, as Vietnamese exports to other nations grow, its imports from China will likely grow proportionately as well. 

For the United States, Vietnam appears to be following the footsteps of China to a concerning extent. Both countries are founded upon communist philosophies and ruled by a one-party system. Now, Vietnam is taking after China’s legacy in terms of boosting domestic manufacturing capabilities. It is possible that the Trump administration saw in Vietnam a possible repeat of the rise of China and sought to take early actions to constrain that prospect. Vietnam’s inability to impose tariffs on U.S. imports in the trade agreement highlights the probability behind this notion. 

The possibility of excess foreign goods killing off domestic industries is a common threat often faced by young and emerging markets like Vietnam. When China first began to rise in economic prominence and opened its economy to the world in the 1980s, it did so under careful consideration for its fragile emerging markets and thus implemented significant protection measures like tariffs, joint venture conditions, and special economic zones for experimentation. 

With the new trade agreement pushed forward by the United States, it is clear that, at least in a Trump-oriented foreign policy, the tilted power dynamics between the two nations would afford Vietnam no such luxury. Eliminating Vietnamese tariffs on American imports would ensure that, while the country can evolve into a manufacturing hub, it will face significant challenges in establishing any domestic industry of its own.  

What This Means For Other Economies

Uncertainty still surrounds the announced 40% tariff rate on transshipment goods. Current figures indicate there is only a few billion dollars worth of trans-shiped goods in Vietnam flowing from China to the U.S. A lot will depend on how this tariff is applied. If applied in a targeted manner, then this policy, although sizable in its impacts, should still be manageable for Vietnam and ultimately foster the creation of alternative supply chains away from China. If the approach is too broad or blunt, however, this deal holds the potential to create more damage than progress in this field. 

For now, Vietnam’s case is not a clear indication of what other countries should expect out of trade talks with the Trump administration, given its very situational approach to diplomacy. For other similar export nations, it is perhaps a positive signal of the Trump administration’s willingness to lower its initial demands. Still, for larger economies like those of the European Union and Japan, Vietnam will not serve as a useful case study. While U.S.-Vietnam relations are relatively straightforward, other larger geopolitical players would face more complicated negotiations, of which much is at stake.