US-Vietnam Trade Pact Reshapes Tariff Structure for Bilateral Goods

A new United States-Vietnam trade deal which substantially changes tariff conditions on both sides has drawn the focus to wider trade patterns in Southeast Asia as well as changes in American policies with former President Donald Trump back at the table of international economic negotiations.

As the official sources explain, now there is a 20 percent tariff on goods, which the United States will impose on the goods imported directly to it directly from Vietnam. This is twice the common minimum tariff which had been imposed on Vietnamese imports. Washington is in a stricter move to impose a tariff of 40% on goods that go through trans-shipping through Vietnam, which means that an item that continues to Vietnam without first going through its origin country is a trans-shipment.

The deal as Donald Trump described it as an inclusive one also contained promises by Vietnam to eliminate tariffs completely on U.S products. This provides American exporters with access to the entire tariff-free Vietnamese consumer market, which can be a game changer in the balance of trade and chain supplies in the area.

Before this turn of events, Vietnamese exports to the U.S were looking at a 46 percent tariff hitting them next week. The new deal hence puts that looming step on hold giving the Vietnamese manufacturers and exporters a relief.

The new agreement came after a telephonic call between Donald Trump and Vietnamese General Secretary To Lam, the Vietnamese state media reported. It is said that the discussions were based on addressing trade tension and re-establishing healthier bilateral trade relations.

One of the top trade advisors to Trump, Peter Navarro, emphasized that almost a third of the Vietnamese exports to America are actually Chinese goods. The high tariff charged on trans-shipped goods by 40% is termed as a direct measure to curb the practice that has made the loopholes through which China has been able to supply its goods into the U.S to circumvent the trade restrictions that have been placed by the U.S to be squeezed.

While the U.S. gains unrestricted access to Vietnamese markets, several implications arise for regional trade:

• Vietnamese exporters may face higher costs when targeting U.S. markets, potentially reducing competitiveness.
• American manufacturers and agricultural producers may benefit from tariff-free exports, encouraging expansion in trade volumes with Vietnam.
• The crackdown on trans-shipping could impact Chinese firms that rely on Vietnamese routes to access the U.S. market.

According to trade analysts, this agreement conforms to the economic policy of Trump who earlier on insisted that the U.S. should focus on its manufacturing sector and stop its reliance on imports of other countries with large trade surpluses. The strategy, however, may bring in re-calibrated trade routes and fresh alliances to the Indo-Pacific region.

As far as, the Vietnamese government has not presented the exact terms of the agreement publicly, but it has been confirmed that the scope of the deal encompasses a great variety of categories of produced goods, including electronics, clothing, and agricultural products.

The insiders in the industry have already started evaluating how it would affect particular sectors. It is believed that the U.S. textile exporters will immediately benefit because Vietnam has a high level of demand for industrial fabrics. Conversely, Vietnam garment and footwear producers will have their own difficulties adapting to the new environment of imposed 20 percent tariffs.

The trend is also happening at a moment when Vietnam is also in the process of negotiating a series of trade agreements in Asia and Europe with a view to trying to meet the challenges created by falling trends in global trade.

Businesses, on the two sides, are waiting, in the meantime, actual implementation guidelines issued by their respective trade departments. Although the political optics are better on the idea of more coupling, the results to be achieved will depend on the rates at which the terms will be passed to be implemented.

This is already a step taken by the United States to once again establish a hold on the international trade system especially in areas where more and more the production and export capabilities of China have taken over.