US Keeps Pressure on Chinese Goods Amid Vietnam Trade Deal

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Jul 4, 2025 - 10:00 Updated: Jul 4, 2025 - 09:51
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US Keeps Pressure on Chinese Goods Amid Vietnam Trade Deal
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News Analysis
President Donald Trump announced a trade agreement with Vietnam on July 2 via a Truth Social post, days before the 90-day tariff deadline.

While the White House has yet to release official details of the preliminary framework, Trump confirmed that it features a 20 percent tariff on many Vietnamese exports entering the United States as well as a 40 percent levy for transshipping.

U.S. trade officials have made transshipping—the tactic of rerouting goods through a third country to disguise the origin of the products—a focal point of trade negotiations with Asian markets.

For example, if China were to sell its merchandise through products exported by Vietnam to the United States, Hanoi would be hit with a 40 percent tariff.

China, Vietnam, and Transshipping

Vietnam maintains a robust manufacturing base and has benefited from the U.S.–China trade strife, but the issue of transshipment has been prevalent in the Southeast Asian market.

The practice involves shipping bulk quantities of Chinese goods, such as apparel and electronics, to Vietnam. These items are then relabeled, repackaged, or minimally processed to appear as if they were made in Vietnam. This allows China to bypass the tariff regime.

Peter Navarro, a White House trade adviser, has expressed concern that China is dodging U.S. tariffs by exploiting Vietnam for transshipment purposes.

“How does that work? Vietnam sells us $15 for every $1 we sell them, and about $5 of that is just Chinese product that comes into Vietnam. They slap a made in Vietnam label on it, and they send [it] here to evade the tariffs,” Navarro said in a Fox Business Network interview in April.

Appearing before a Senate Appropriations Committee hearing last month, Commerce Secretary Howard Lutnick stated that the administration would not agree to a zero-for-zero tariff agreement with Vietnam due to China’s significant involvement in the Vietnamese market.

“Vietnam has $125 billion [in] exports to us, and imports from us $12.5 million,” Lutnick said in an exchange with Sen. John Kennedy (R-La.).

“But where do they get it from? They buy $90 billion from China, then they mark it up and send it to us. It’s just a pathway for China to us.”

Market watchers say that the United States’ concerns over transshipping are justified. In addition to low labor costs and a robust manufacturing base, foreign investment plays a significant role in bolstering Vietnamese exports, says Simona Mocuta, the chief economist at State Street Investment Management.

“Not since China’s rise on the global manufacturing scene has another country made such impressive inroads into the U.S. market as Vietnam,” Mocuta said in a May report.
Some said that the administration might be overestimating the value of transshipment goods.
But a report delivered to the U.S.–China Economic and Security Review Commission in May 2024 suggests that the White House could also be applying a broader definition. In his congressional testimony, Trade Representative Jamieson Greer pointed to imported goods that contain components and parts made in China.

Vietnamese officials, meanwhile, have attempted to curb the illegal transshipment of goods to the United States by digitizing and centralizing the issuance of certificates of origin. These efforts could be falling short, says one expert.

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Cargo containers and gantry cranes at Yantian Port in Shenzhen, in southern China’s Guangdong Province, on June 12, 2024. Jade Gao/AFP via Getty Images
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Trade data over the past 12 months, according to ING economist Deepali Bhargava, indicates that Vietnam has experienced a substantial increase in imports from China and a rise in re-exports to the United States.

Trends in various sectors, such as machinery and equipment, indicate high transshipment volumes and values.

“While directly gauging the extent of transshipments is difficult, the weakness in the local manufacturing sector production despite robust export growth suggests limited domestic value-add,” she said in a research note on July 3.

Roughly 48 percent of China’s total exports to Vietnam were machinery and electrical equipment last year. At the same time, about 41 percent of Vietnam’s total exports to the United States were concentrated in electrical products and machinery equipment.

“Some of this change could be attributed to Vietnam’s own domestic demand, but the rapid surge on both ends suggests significant transshipment activity,” Bhargava said.

Supply Chains

While transshipping could be the centerpiece of trade developments, diversified supply chains could also play a role.

Terms of the trade agreement grant Vietnam a tariff advantage over China, says Roland Rajah, director of the Indo-Pacific Development Centre, a dedicated policy research center within the Lowy Institute.

“Those tariffs triggered supply chains to begin shifting to Vietnam, delivering a surge in Vietnam’s exports to America (and feeding into today’s trade tensions),” Rajah said in a report.

Although the United States is attempting to rebalance global trade and reshore manufacturing, the deal offers “reinforcement for more supply chains to keep moving Vietnam’s way, to the country’s great benefit,” he added.

Other countries should take notice, too, according to economists at Capital Economists. The deal, they say, sends a signal to Vietnam and other U.S. trading partners that they are expected to reduce a significant portion of their trade with China.

“Vietnam has had one of the weakest hands to play in its trade negotiations with the US,” they said in a note.

“If it is confirmed that it has agreed to a 20 percent tariff, this isn’t a template that other countries will feel they have to follow. Instead, the key lesson for other countries from this deal, and that agreed previously by the UK, is that they will be expected to curtail some trade with China.”

China responded to the U.S.–Vietnam agreement, stating that it would oppose any country that strikes a deal “at the expense of China’s interests.” He Yongqian, a spokeswoman for China’s Ministry of Commerce, said at a July 3 press briefing that the country will “firmly strike back” when that happens.

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