Trump Announces 20% Vietnam Tariff in New Deal Targeting Transshipping and Reshaping U.S. Trade

President Donald Trump revealed a new trade deal between the United States and Vietnam, which includes a 20% tariff on all Vietnamese imports. Announced via Truth Social, Trump said that, in exchange, Vietnam will grant the U.S. complete, tariff-free access to its markets—a first for the Southeast Asian nation. The agreement, touted as a major win for U.S. trade, also addresses transshipping practices, a method used by countries like China to circumvent tariffs by rerouting exports through Vietnam.

New Tariffs Target Transshipping, Raise Costs as Trade Deal Timing Remains Unclear

As part of the deal, goods entering the U.S. via Vietnam that originated elsewhere will be hit with a 40% tariff. This measure aims to stop transshipping, which Trump claimed has been used extensively by China. Although Trump stated that Vietnam “will pay” these tariffs, economists emphasize that importers—often American companies—bear the actual cost, not the exporting countries. These higher costs could translate into increased prices for U.S. consumers.

The deal comes just ahead of the expiration of a 90-day pause on Trump’s earlier reciprocal tariffs. During this pause, Vietnamese goods were temporarily subjected to a lower 10% tariff, down from the original 46%. The new 20% rate, while still a reduction from the initial level, will increase costs for U.S. businesses. It remains unclear when the new trade framework will officially take effect or whether both parties have formally signed it.

Tariff Effects Loom Amid Market Optimism, Vietnam Vulnerability, and Policy Uncertainty Persist

Despite concerns about potential price increases, the S&P 500 rose slightly following the announcement. Critics of Trump’s tariff strategy argue that such unpredictable trade policies lead to market instability and inflation. However, Trump and his allies claim tariffs are not inflationary and have helped raise significant revenue for the U.S. government.

A study commissioned by CNBC showed that even a 10% tariff could significantly raise retail prices—for instance, boosting the cost of a men’s sweater by 8%, with much steeper hikes at higher tariff rates.

Vietnam, whose exports to the U.S. make up nearly 30% of its GDP, stands to be deeply affected by this trade shift. Trump has also signaled flexibility in extending the tariff pause for other nations as negotiations continue.

So far, only China and the United Kingdom have successfully revised their trade terms with the U.S. Federal Reserve Chairman Jerome Powell recently noted that the effects of tariffs will become more visible over the summer, particularly in sectors like apparel and footwear. Analysts suggest that delayed economic impacts are partly due to earlier stockpiling by businesses and the time lag in retail pricing.