Macro Flash Note – July 3, 2025: 20% TARIFF ON VIETNAM, 40% ON TRANSSHIPPED GOODS. FROM NEUTRAL IMPACT TO STRUCTURAL WAKE-UP CALL

On July 2, 2025, U.S. President Donald Trump posted on social media regarding retaliatory tariffs on Vietnam. Key points include:

• The U.S. will impose a 20% tariff on goods exported from Vietnam to the U.S.;
• A 40% tariff will apply to goods transshipped through Vietnam to the U.S.;
• In return, Vietnam is to open its market to the U.S. with a 0% import tariff.

As of now, beyond President Trump’s statement, there has been no official announcement from the Vietnamese Government regarding this matter. Market reactions remain cautious.

ACBS’s QUICK COMMENT:

Based on the preliminary information from President Trump’s announcement, and pending further details, we believe the outcome of the current U.S.–Vietnam tariff negotiation aligns with our base-case scenario (retaliatory tariffs in the 20–25% range), and the overall impact on Vietnam’s economy is neutral to mildly negative. Several international research organizations have also forecast this scenario and suggested that it could lead to a decline in Vietnam’s imports and exports, with an estimated negative impact of around 0.5% on the country’s GDP. Our assessment is based on the following:

(1) We currently interpret the 20% tariff as an “all-in” rate, likely inclusive of the existing provisional 10% base tariff. This level allows for comparison with current or proposed rates for other partners: 10% for the UK, 18% for Thailand (under negotiation), and 25% (possibly escalating to 50%) for the EU. Although the 20% rate is lower than the initial 46% proposal, it is still not favorable when compared to other nations that have finalized or are nearing final negotiations with the U.S. As a result, Vietnam may continue to face FDI pressure, particularly relative to countries other than China.

(2) The 40% tariff on “transshipped goods” remains vaguely defined. Vietnam has previously faced accusations of serving as a transit hub for Chinese goods entering the U.S. market. A higher tariff rate aimed at deterring this practice is expected. However, President Trump’s statement does not provide a clear definition of transshipment. Typically, such determination relies on two criteria: (a) CO (Certificate of Origin) and (b) RVC (Regional Value Content) = (Value of regional inputs / FOB value) × 100%. Under most FTAs, a product with RVC ≥ 40% qualifies for origin status and tariff preferences. While Vietnam and the U.S. do not currently have a bilateral FTA, we believe RVC will be the likely basis for determining origin. This would require strict bilateral supervision and agreement by product category. This presents a structural challenge for Vietnam, given the country’s high dependence on imported raw materials from China and elsewhere. Moreover, Vietnam’s FDI-driven, labor-intensive export structure with low domestic value-added content will require significant restructuring to meet origin requirements.

(3) However, the gap between the 40% tariff and the projected 54% tariff on Chinese goods may allow transshipment activities to persist in the short term. This could benefit certain logistics companies in the near term, but it poses a risk of widening the trade imbalance over the medium to long term, potentially complicating Vietnam–U.S. trade relations.

(4) The impact of tariffs will vary across different sectors. The table below outlines the top 10 export categories from Vietnam in Q1 2025, along with their respective FDI intensity (see Appendix 1). It is evident that electronics & computers, mobile phones & components, machinery, footwear, textiles and inputs are highly FDI-concentrated and at risk of falling under the 40% transshipment tariff. In contrast, wood products, agricultural and seafood exports, rubber, etc., are less likely to face origin-related issues.