President Donald Trump announced on Wednesday a trade agreement with Vietnam that includes a 20% tariff on the Southeast Asian nation’s exports to the United States.
Details of the Agreement and Tariff Structure
Trump stated on Truth Social that the deal grants the U.S. tariff-free access to Vietnamese markets. Vietnam also agreed to impose a 40% tariff on goods that originate from other countries but are shipped through Vietnam—a practice known as transshipping, commonly used to avoid trade barriers. China, a major U.S. exporter, reportedly uses Vietnam as a transshipment hub.
Though Trump said “Vietnam will pay” the tariff, tariffs are taxes levied on importers, not directly on exporting countries.
The announcement came shortly before a 90-day pause on several of Trump’s reciprocal tariffs expired. During the pause, Vietnamese imports faced a 10% tariff instead of the prior 46% blanket rate. Raising it to 20% will increase costs for importers and potentially raise prices for American consumers or suppliers.
Despite the tariff news, the S&P 500 saw a slight rise.
Trump’s Full Statement Highlights
Trump praised his discussions with To Lam, Vietnam’s Communist Party General Secretary, calling the agreement a “Great Deal of Cooperation.” He emphasized that the U.S. would gain “TOTAL ACCESS” to Vietnam’s markets, enabling tariff-free sales. Trump also noted the popularity of SUVs in the U.S. and suggested they could become a strong product line in Vietnam.
It remains unclear when the deal will take effect or if it has been officially signed. White House aides have yet to confirm specific tariff rates.
Trump has suggested he might revise or ignore the approaching deadline for reinstating higher tariffs after the pause ends. So far, revised deals have been reached with China and the U.K., with other negotiations ongoing.
Economic Implications and Criticism
Vietnam’s exports to the U.S. accounted for about 30% of its GDP last year, making the country sensitive to tariff changes.
Critics argue that Trump’s tariff policies create uncertainty and lead to higher prices for American consumers. The administration counters that tariffs have generated billions in revenue without causing inflation.
A recent pricing model estimated a 10% tariff on Vietnamese goods raises the cost of an imported men’s sweater by 8%, while the original 46% tariff would cause a 35% increase.
Federal Reserve Chairman Jerome Powell noted that tariff effects on prices are expected to become more visible during the summer. Some price increases in apparel and footwear are already evident, possibly delayed by pre-tariff stockpiling and the time lag in economic impacts.
Author’s Opinion
Tariffs aimed at protecting domestic industries often end up increasing costs for everyday consumers. While generating government revenue, these taxes can disrupt supply chains and fuel inflation. Trade negotiations should focus on long-term cooperation rather than short-term tariffs that can strain international relations and the economy.
Featured image credit: XDENT LAB
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