World Facing Up To 70% Tariffs – How US-Vietnam Trade Deal Provides Clue To Trump’s Tariff Level On China

World Facing Up To 70% Tariffs – How US-Vietnam Trade Deal Provides Clue To Trump’s Tariff Level On China


July 4th, 2025 by financetwitter



With merely days before Washington’s reciprocal tariffs come back in full force, global attention turned to Vietnam on Thursday (July 3) after Donald Trump announced a trade deal with Hanoi. Under the agreement, which the U.S. president proudly called the “Great Deal of Cooperation”, the U.S. will charge 20% tariffs on Vietnamese exports to the United States.

That is significantly below the 46% rate Trump had imposed in early April, before he issued a 90-day temporary reprieve. Vietnam, meanwhile, will charge “zero tariffs” on U.S. products. Trump immediately declares victory, blowing his own trumpet – “Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade.”



But there was something else. Trump has decided to slap a whopping 40% levy on goods “transhipped” to the U.S. through Vietnam – twice the 20% rate on regular imports from Vietnam. While the Dealmaker-in-Chief did not mention China explicitly, the new provision clearly was designed to target a backdoor used by Chinese exporters ever since the first US-China trade war started to dodge the U.S. tariffs.


U.S. tariffs on Chinese goods have been cut back to around 55%, down from as high as 145% in early April after Trump made a spectacular U-turn to prevent empty shelves in the domestic market. But Trump’s new trade deal with Vietnam provides a clue about the tariff rate that Chinese goods would land, as talks between Washington and Beijing continue following their recent truce.

Beijing and Washington reached a trade framework last month following talks in London, which remains in effect through mid-August. As part of the deal, China agreed to resume shipments of rare earths – key inputs for wind turbines, smartphones, electric vehicles and military hardware. In return, the U.S. will ease export restrictions on ethane, chip-design software and jet engine components.


The 40% tariff on transshipped goods suggests that even if tariffs on China are eventually reduced, they’re unlikely to fall below that threshold. Here’s why – if China’s duties were to fall to 35% (for example), China would get back its competitive edge hence encourage Chinese firms to shift operations back, and American companies will have little incentive to go back to the U.S.


On the other hand, if tariffs on Chinese goods are to rise to 45% or higher, companies would find it more profitable to continue transshipping goods from Vietnam to the U.S. Essentially, the 40% tariff on transshipped goods would become a new benchmark whether China will export to the U.S. directly or via Vietnam. Of course, Trump may change his mind suddenly, leading to chaos again in the global economy.

“The 40% figure in the Vietnam deal might reflect a broader conviction in the Trump administration about the appropriate tariff level on China, which would be similarly reflected in other bilateral deals. However, I am skeptical that Trump has a specific red line for minimum tariffs on China” – said Gabriel Wildau, a managing director at Teneo focused on political risk analysis in China.

However, at least for now, signs are showing that the two largest economies in the world are following through on the terms of the London agreement. The White House has lifted recent export license requirements for chip design software sales in China, and approved U.S. ethane exports to China without additional approvals, largely because Beijing has a trump card – rare earths.


Treasury Secretary Scott Bessent said Chinese rare earth magnets are flowing, although they haven’t yet bounced back to the levels seen before Chinese imposed export curbs in early April. The U.S. remains hopeful that China will further ease restrictions on those exports after their London deal, although there were reports that buyers were forced to pay premium price for rare earth minerals.



Beijing has warned that it would respond to deals that came at the expense of Chinese interests and the decision to agree to a higher tariff on goods deemed to be “transshipped” through Vietnam could face retaliation. Based on China’s position as Vietnam’s largest trading partner and key source of inputs for domestic production, any retaliatory steps could have a significant impact on Vietnam’s economy.

Vietnam was one of the main beneficiaries of a new landscape in the global supply chains in the wake of Trump’s first term and the Covid-19 pandemic. Factories mushroomed around Hanoi and Ho Chi Minh City as Chinese and Western firms looked for ways to diversify their production base amid the strains of the pandemic and increasing geopolitical rivalry between Washington and Beijing.


China on Thursday said it has taken note of the US-Vietnam trade deal and is currently assessing the situation. “We’re happy to see all parties to resolve trade conflicts with the US through equal negotiations, but firmly oppose any party striking a deal at the expense of China’s interests,” – He Yongqian, a spokesperson for the Ministry of Commerce, said at a briefing.

Apart from Vietnam, Beijing is growing increasingly cautious about U.S. efforts to strike trade deals that could isolate China. With a July 9 deadline approaching, when Trump’s higher “reciprocal” tariffs are set to take effect, U.S. officials are ramping up negotiations with key partners in Asia and Europe. But Vietnam had a very weak negotiating hand due to its strong dependency on trade with the U.S.

Other emerging market economies in the region, especially Malaysia (24% tariff) and Cambodia (49%), might or might not enjoy the roughly 50% discount on the initial tariffs imposed like Vietnam. Almost every Southeast Asian country has offered lower-to-zero tariffs for American goods such as agriculture products, commodities and automobiles just to appease the U.S. president.




It’s worth noting that the Trump family has recently announced development projects in Vietnam. The country’s government approved a plan by the Trump Organization and local business Kinh Bac City Development to invest US$1.5 billion in hotels, golf courses and luxury real estate. The Trump Organization is also scouting for locations to build a Trump Tower in Ho Chi Minh City. Therefore, Vietnam appears to enjoy special discount on U.S. tariffs.

It would be interesting to see if Cambodia and Malaysia will also suffer the same 40% levy on goods “transhipped” to the U.S. through their respective countries. If the punishment is less severe, then it would open a new door for transshipment. Malaysia isn’t likely to enjoy a tariff of 10% as that baseline was already reserved for Singapore, which buys more from the U.S. than it sells.

The countries in the region may not want to offend either the U.S. or China. But Washington is very keen to use tariffs as a leverage to disentangle the global supply chain from China. As a key trading partner and investor in the region, China looms large in the negotiations. Southeast Asian countries will have to ensure that whatever deals they strike are not worse than what Beijing extracts from Washington.


Because Trump has called for tariffs as high as 50% on the EU, which could be a tactic to extract maximum concessions from the 27-nation bloc, China may end up with a tariff rate higher than that. On Friday (July 4), President Trump said the U.S. will start sending notices to inform many trading partners of unilateral tariff rates of up to 70% – more than almost all the reciprocal rates that the POTUS had floated earlier.

So far, the Trump administration has struck trade pacts with the U.K. and Vietnam, and an on-again, off-again truce with China. Others such as the European Union and Japan have been struggling to secure agreements. While the White House is giving priority to talks with essential trading partners, the U.S. doesn’t have the capacity to negotiate in detail with every global counterpart.



Vietnam, and other Asian countries for that matter, may act tough initially by taking steps to crack down on illegal trade rerouting through tougher policing of rules of origin certification, just to make Donald Trump happy and to give him something to brag. Over time, everyone, including Trump and his successors, may close both eyes over trans-shipping.


The fact remains that many different types of goods made in Vietnam, including clothing, furniture and electronics, use components made in China. Exactly how the U.S. plans to determine whether a product from Vietnam would qualify for a 20% tariff or a 40% tariff isn’t clear. The U.S. has to depend on detailed information from foreign customs authorities to identify whether trans-shipping or re-labelling actually happens.

Regardless of how Trump plays with the numbers to isolate Beijing, trans-shipping will continue to happen simply because illegal re-routing of Chinese products will be hard and too time-consuming to catch. Heck, the U.S. does not know how much such activity exists. It can’t even catch illicit fentanyl coming across its own border, what more Made-in-China goods being re-labelled as Made-in-Vietnam or other countries.