On July 9th, before the 90-day global tariff suspension period comes to an end, the United States and Vietnam have reached a tariff agreement, making Vietnam one of the few countries to have a trade deal with the US to date.
The details of the agreement are not yet clear, but what is worth noting is the “transshipment” tariff provision targeting Chinese goods.
On July 2nd (Wednesday), former President Trump posted on the social media platform “Truth Social,” stating: “According to the agreement terms, all Vietnamese goods shipped to our country will be subject to a 20% tariff, and a 40% tariff will be imposed on any goods transshipped (to the US via Vietnam).”
On July 3rd, a spokesperson from the Chinese Ministry of Commerce responded by stating, “We firmly oppose any party using sacrificing Chinese interests as a means to reach a deal,” and that “China will firmly take countermeasures.”
Why does the US-Vietnam trade agreement, seemingly unrelated to China, cause anxiety and fear to the Chinese Communist Party?
The terms of the agreement between the US and Vietnam indicate that even amidst the unstable trade truce between the US and China, and ongoing negotiations with other trade partners, trade with China remains the core focus of US trade policy. The agreement implies that if other countries wish to continue selling products to the US, they will also be required to limit China’s presence in their economy. The US and UK also agreed on certain terms in a recent trade deal, requiring the UK to enhance supply chain security, which is also interpreted as targeting Chinese trade.
China expert Wang He told Epoch Times that Trump’s Tariff 2.0 has a very clear goal, which is to cut off China’s third-party exports to the US.
“The trade agreement signed between the US and Vietnam will have a significant guiding effect and will become a norm for the US to sign trade agreements with other countries,” he said.
Since Trump entered the White House, he issued the “America First Trade Policy Document,” with solving unfair trade practices against China as a key focus, particularly concerning China evading tariffs through third countries like Vietnam and Mexico.
In April, Trump announced a global tariff and imposed tariffs on the top 10 countries, five of which were Asian countries. Analysts believe that Trump’s imposition of tariffs on these countries was “actually aimed at China,” representing a comprehensive attack on Beijing’s extended supply chains.
“Trump has learned some lessons from the US-China tariff war in 2018,” Wang He said. By establishing a tariff alliance globally, such practices as redirecting Chinese goods to the US through third countries aim to exclude China.
Taiwanese economic expert Huang Shicong said that the US-Vietnam trade agreement is of great interest globally since Vietnam is the most significant money laundering transit point for China.
“China has been continuously warning the US not to impose secondary tariffs, but unexpectedly, in the latest US-Vietnam agreement, the US has included secondary money laundering transit tariffs,” Huang Shicong said.
Huang believes that what truly terrifies China is the demonstration effect of Vietnam, becoming a new global rule.
He pointed out that Vietnam serves as an example, and countries looking to reach a trade agreement with the US in the future, if suspected of being a laundering transit point, will likely face higher tariffs from the US.
“For example, the US and UK’s templates have been used as models for the EU, where industries with structures similar to Vietnam will also negotiate with the US using Vietnam as a model, turning into a new rule for international trade.”
Frederic Neumann, Chief Asian Economist at HSBC in Hong Kong, told The Wall Street Journal, “The US seems to have a more strategic intention, namely to fundamentally restrict Chinese exports entering the US market through back doors.”
China-supplied goods to Vietnam make up a significant portion of Vietnam’s imports, while its main export destination is the US.
Since Trump imposed tariffs on Chinese goods worth billions of dollars during his first term, trade between the US and Vietnam has surged.
Last year, the US trade deficit with Vietnam reached $123 billion, making Vietnam the third-largest trade deficit country for the US.
Data from the US Census Bureau shows that since 2018, Vietnam’s exports to the US have increased from less than $50 billion to around $137 billion in 2024. In contrast, US exports to Vietnam have only increased by about 30% during the same period.
The US has repeatedly criticized Chinese companies for using Vietnam as a transshipment point to evade tariffs, by simply processing goods in Vietnam and labeling them as “Made in Vietnam” for export to the US, even with minimal stay at Vietnamese ports.
On June 4th, US Commerce Secretary Howard Lutnick testified before the Senate, stating, “They (Vietnam) purchased $90 billion from China, then increased the price and resold it to us.” He said, “So Vietnam is just a channel for China to reach us.”
Huang Zongding, Deputy Researcher at the Institute for China’s Military and Operational Concepts at the Taiwan Institute for National Defense Security, told Epoch Times that the relevance between Vietnam importing goods from China and exporting goods to the US is 100%.
He pointed out that under the backdrop of the US-China trade war during Trump’s first term, while US-Vietnam trade relations strengthened, Vietnam also imported a large number of intermediate goods from China. This asymmetric trade relationship between the two has been deepening.
“During Trump’s first term in the trade war with China, 60% of the additional transfer goods from Vietnam to the US actually came from Vietnamese companies owned by Chinese capital.”
In fact, the “transshipment” tariff provision targeting Chinese goods has always been a key point in US-Vietnam trade negotiations.
On April 3rd, when the US announced a 46% equivalent tariff on Vietnam, the Vietnamese government held an emergency meeting aimed at addressing US concerns about illegal transshipments. At the meeting, the Ministry of Industry and Trade and customs officials were instructed to enhance supervision of illegal transshipment activities and develop a plan within two weeks.
On April 15th, the Vietnamese Ministry of Industry and Trade issued a directive calling for strict measures against the illegal transshipment of goods to trading partners like the US, to avoid high tariffs being imposed by the US.
Despite Vietnam taking some measures to address the transshipment of Chinese goods, Vietnam relies on Chinese raw materials and equipment. The effectiveness of Vietnam’s efforts to combat transshipment remains uncertain.
Wang He stated that if Vietnam enforces these measures effectively, it would indeed be effective.
He analyzed two scenarios: one scenario involves Chinese products arriving in Vietnam and being labeled as Vietnamese products for export, which would face strict penalties from the US; the other scenario involves Chinese machinery, equipment, and raw materials being transported to Vietnam for reprocessing or processing, which has an established calculation method internationally. Once the product reaches a certain level of localization in Vietnam, it can be recognized as a Vietnamese product, and there should be no issue exporting it to the US.
“It depends on the details regarding the determination of the original source and manufacturing location between Vietnam and the US.”
Wang He stated that under pressure from the US, Vietnam would have to enforce strict enforcement, making it increasingly difficult for Chinese products to pass through via Vietnam.
Huang Zongding mentioned that before the signing of the US-Vietnam Bilateral Trade Agreement (BTA) in 2001, Vietnam faced an average of 40% tariffs on its products entering the US. Vietnam naturally does not want to return to the era of high US tariffs. The US also leverages the common attitude shared by developing countries like Vietnam, which benefit extensively from the US market under the outsourcing policy. These countries have to rely on the US market, so Vietnam and other related countries seem compelled to cooperate.
Currently, bypassing routes through which Chinese businesses reach the US are increasingly difficult.
A Shenzhen business owner revealed to Epoch Times that with the US tightening tracking investigations on Chinese products, the channel for Chinese products to reach the US through third countries like Vietnam, South Korea, and Malaysia is becoming increasingly blocked: “The customs of Vietnam, South Korea, and Malaysia are fully intercepting Chinese products. As we enter June, this channel is becoming increasingly impassable.”
At the same time, the US Department of Justice (DOJ) has recently intensified law enforcement efforts, focusing on investigating false declaration and falsification of origin for small machinery, electronic products, toys, and other categories, listing them as a key enforcement focus.
Amid China’s ongoing economic downturn, the “transshipment” tariff provision in the US-Vietnam trade agreement undoubtedly exacerbates China’s economic challenges.
Wang He stated that as China’s domestic demand fails to rise, and investment-led economic growth reaches an extreme, under these circumstances, China’s economic development relies solely on exports.
He said that Trump will sign trade agreements with around 7-8 dozen economies globally by July or August, and by then, a globally centered tariff alliance led by the US will take shape.
“If the Trump Global Tariff Alliance is established, not only will China’s exports to the US be severely impacted, but other countries will also raise tariffs on Chinese goods. In particular, after China’s exports to the US decline, the CCP will use ASEAN, the EU, Africa, Latin America as dumping grounds for its goods, putting pressure on those countries. This will stimulate those countries to also rely on escalating tariffs against Chinese goods, just like the US.”
“The path that China has taken to spur economic growth through exports will become increasingly challenging. If China’s economy does not see significant improvement in investment and domestic demand, China’s economy will be in very bad shape, and will suffer a heavy blow.”