President Donald Trump said Wednesday that the United States has struck a trade deal with Vietnam that includes a 20% tariff on the Southeast Asian country’s imports to the U.S.
Trump’s announcement on Truth Social said that the deal will give the U.S. tariff-free access to Vietnam’s markets.
Vietnam also agreed that goods would be hit with a 40% tariff rate if they originated in another country and were transferred to Vietnam for final shipment to the United States.
The process, known as transshipping, is used to circumvent trade barriers. China, a top exporter to the U.S., has reportedly used Vietnam as a transshipment hub.
Trump wrote that “Vietnam will pay” that 20% duty, but tariffs are taxes on foreign goods that are paid by the importers of those products.
The agreement was unveiled less than a week before a 90-day pause on many of Trump’s so-called reciprocal tariffs was set to expire, sending U.S. duties on imports from dozens of countries soaring.
Under that protectionist trade scheme, Vietnamese imports to the U.S. were subject to a 46% blanket tariff. That rate was lowered to 10% during the 90-day interim. Raising the tariff on Vietnamese goods to 20% will hike costs for U.S. importers, which could be passed on to consumers or suppliers.
The S&P 500 nevertheless rose slightly on news of the trade deal.
Read Trump’s full post:
“It is my Great Honor to announce that I have just made a Trade Deal with the Socialist Republic of Vietnam after speaking with To Lam, the Highly Respected General Secretary of the Communist Party of Vietnam. It will be a Great Deal of Cooperation between our two Countries. The Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping. In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff. It is my opinion that the SUV or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam. Dealing with General Secretary To Lam, which I did personally, was an absolute pleasure. Thank you for your attention to this matter!”
It was unclear from Trump’s post when the deal will take effect, or if it has been officially signed by both parties.
Trump has signaled that he may ignore or revise the upcoming deadline for his reciprocal tariffs to snap back higher. The 90-day pause, which lowered tariffs on nearly all other countries to a blanket 10% rate, was imposed in early April to give countries breathing room while they negotiate deals with the U.S.
With the deadline approaching, the Trump administration has only struck revised trade frameworks with China and the United Kingdom, though it has repeatedly said the U.S. is close to deals with numerous other countries.
Vietnam, whose exports to the U.S. reportedly comprised 30% of its gross domestic product last year, is especially vulnerable to Trump’s tariffs.
Critics of Trump’s unpredictable tariff policies warn that the duties create economic uncertainty and will result in higher prices for U.S. consumers. The Trump administration and its defenders counter that tariffs do not cause inflation and note that the president’s duties have brought in billions of dollars to the U.S. government.
A pricing model created for CNBC this month by retail consulting group AlixPartners found that a 10% U.S. tariff on Vietnamese goods would cause the price of an imported men’s sweater to rise by about 8%. Under the 46% tariff Trump initially slapped on Vietnam, the price of that same sweater would rise roughly 35%, the group found.
U.S. Federal Reserve Chairman Jerome Powell said Tuesday that officials expect that the impacts of Trump’s tariffs will start to show up more during the summer months.
Prices on certain items, including apparel and footwear, are already ticking higher as a result of the tariffs, CNBC has reported.
Some analysts believe the lack of a widespread impact on U.S. prices so far is the result of pre-tariff stockpiling by companies, as well as the time it takes for those tariffs to show up in the economy.
— CNBC’s Courtney Reagan contributed to this report.
