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Tariffs

US-Vietnam Trade Deal Sparks Concerns in Beijing over Export Machine

Strategic Insights

— 2 min read

China has hit out at the US-Vietnam trade deal, with the commerce ministry stating that it will take resolute countermeasures to safeguard its legitimate rights and interests if its interests are harmed. The deal was announced on Wednesday and is the second seen as targeting China since President Donald Trump outlined his increases in tariffs on April 2. The agreement lowers tariffs on Hanoi's exports from a threatened 46 per cent to 20 per cent, but retains a 40 per cent levy on "trans-shipping" of goods, widely believed to be aimed at Chinese re-exports to the US. Scores of countries are racing to reach trade deals with the US before the July 9 deadline, when Trump's suspended "reciprocal" tariffs will come into effect.

Key Takeaways:

  • The US-Vietnam trade deal is seen as targeting China, with the US aiming to block the flow of Chinese goods that often move through Vietnam to dodge existing US duties.
  • The deal includes a 40 per cent levy on "trans-shipping" of goods, which is widely believed to be aimed at Chinese re-exports to the US.
  • China's commerce ministry has stated that it will take resolute countermeasures to safeguard its legitimate rights and interests if its interests are harmed.
  • Vietnam had a strong incentive to act quickly to avoid US tariffs, with the US buying 30 per cent of its exports.
  • The deal is part of a wider trend of the US lining up bilateral deals with countries near China to tighten economic co-operation and make it harder for Beijing to stretch its supply chain influence.
  • Capitalising on the "China plus one" strategy by south-east Asian nations had prospered during the US-China trade war, but now they will be expected to curtail some trade with China.

Statistics:

  • The US-Vietnam trade deal lowers tariffs on Hanoi's exports from a threatened 46 per cent to 20 per cent.
  • The 40 per cent levy on "trans-shipping" of goods is widely believed to be aimed at Chinese re-exports to the US.
  • China's commerce ministry has stated that it will take resolute countermeasures to safeguard its legitimate rights and interests if its interests are harmed.
  • Vietnam sells 30 per cent of its exports to the US.
  • Scores of countries are racing to reach trade deals with the US before the July 9 deadline.

Sources:

  • Joe Leahy and Nian Liu - Beijing; Ananthia Lakshmi - Surakarta (Financial Times)
  • Mark Williams, Capital Economics' chief Asia economist, and Gareth Leather, senior Asia economist (Financial Times)
  • Frederic Neumann, chief Asia economist at HSBC (Financial Times)
  • Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi (Financial Times)
  • Brian Wong, a professor at Hong Kong university (Financial Times)

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