Contents
Yesterday, the United States and Vietnam reached a new trade agreement. On the surface, it appears to uphold the logic of free trade, but its specific provisions reveal a deeper layer of strategic planning. The U.S. will implement zero tariffs on imports from Vietnam, while Vietnamese exports to the U.S. will face multiple layers of restrictions. A standard 20% tariff will apply only to products genuinely manufactured in Vietnam, while those containing key components of non-Vietnamese origin, or only assembled in Vietnam, will be subject to punitive tariffs as high as 40%. So, we explore the latest US-Vietnam Trade Agreement.
Core Features of the Latest US-Vietnam Trade Agreement
This is not a mutually beneficial arrangement reached through equal negotiation, but rather a structurally dominant agreement. It not only imposes strict rules of origin on Vietnam’s manufacturing sector, but more clearly aims to block Chinese enterprises from using Vietnam as a transshipment channel for indirect exports to the U.S. What seems to be Vietnam’s newly acquired access to an open market, in reality, comes with a set of shackles that restrict the freedom of production.
While U.S.-China trade relations appear to be softening on the surface, the real strategic game has already shifted. The invisible struggle between the two countries has not ended—it has simply transformed from direct confrontation into covert transshipment tactics and a redefinition of the global manufacturing landscape. At the center of this shift stands Vietnam.
It is a well-known fact that part of China’s manufacturing capacity has been relocating outward in recent years. (Refer to my previous article: “Doing Business in Vietnam: A New Southeast Asian Gateway in the Next 10 Years.”) From Bac Ninh to Ho Chi Minh City, more and more assembly lines and production facilities have moved into Vietnam. The “Made in Vietnam” label has increasingly appeared in the U.S. market.
Vietnam now holds the highest share among all U.S. trading partners
In 2024, Vietnam’s exports to the U.S. accounted for over 30% of its GDP, far higher than China, Mexico, or any of America’s other major trading partners. This means Vietnam is not just an export-driven economy; it is practically operating as an industrial shell dependent on U.S. consumption. In fact, Vietnam now holds the highest share among all U.S. trading partners. This makes it a prime target for potential punitive tariffs, particularly under a renewed Trump-era trade approach. The structure of Vietnam’s exports is far from invincible—on the contrary, it is precisely this vulnerability that makes it an easily manipulated chess piece. With Trump-aligned trade voices potentially regaining influence, structural tariffs on Vietnam are likely only a matter of time.
This is why the US-Vietnam Trade Agreement reached in July 2025, though framed as cooperation, is in essence a structural lock-in. The U.S. offers zero tariffs for imports from Vietnam, but Vietnam’s exports to the U.S. must meet strict conditions. Products containing non-local materials or functioning as simple assembly exports will face a 40% punitive tariff. This effectively blocks the transshipment route for Chinese firms and shifts Vietnam’s export model from broad-based contracting to selective compliance. Vietnam becomes a model participant within the U.S. trade system, but at the cost of losing access to more diversified global markets.
Strategic Shifts Triggered by the US-Vietnam Trade Agreement
In recent years, U.S.-Vietnam cooperation has intensified rapidly, especially after their relationship was upgraded to a comprehensive strategic partnership in 2023. Over the subsequent years:
-
The U.S. has reshaped its supply chain strategy, designating Vietnam as a key alternative to Chinese manufacturing;
-
Vietnam has received massive inflows of capital from the U.S., Japan, and South Korea, becoming the largest beneficiary of the “China +1” strategy;
-
Vietnam has accelerated its transition toward digital and green manufacturing, aligning with new Western trade requirements such as carbon taxes and ESG standards.
Given this context, the core provisions of the 2025 US-Vietnam Trade Agreement are likely to include:
-
Tariff reductions or preferential product lists;
-
Loosened export controls on semiconductors and high-tech components;
-
American-style labor and environmental requirements;
-
The designation of Vietnam as a “critical manufacturing hub” under U.S. regional security and economic frameworks.
China’s Strategic Position Following the US-Vietnam Trade Agreement
Vietnam is now an integral part of the global manufacturing system. With massive foreign investments—especially from the U.S., Japan, and South Korea—its industrial zones are rapidly upgrading. Chinese enterprises can take advantage of this trend by forming joint ventures or setting up local factories, thereby spreading risk and accessing new markets.
Chinese firms also enjoy several competitive advantages in Vietnam—ranging from language capabilities to supply chain expertise and technical know-how—making them more adaptive than most new Western entrants. Many are already adopting a “dual-base” model:
-
Chinese headquarters handle advanced design and strategic management;
-
Vietnamese subsidiaries focus on assembly and tariff-friendly exports;
-
Together, they achieve a balance of cost, market access, and geopolitical adaptation.
Furthermore, the relationship between China and the United States resembles a temporary pause rather than a true resolution:
-
China’s export resilience remains strong. Despite ongoing efforts to decouple, China retains key advantages in sectors like renewable energy, industrial machinery, and cross-border e-commerce;
-
The U.S. is attempting to cultivate a “second ring” of manufacturing locations—Vietnam, India, Mexico—positioned as potential substitutes for China. Yet none can fully replicate China’s scale or sophistication. These countries may evolve into complementary players, not replacements.
This pause is, in reality, a strategic breathing space. Both sides are recalibrating—extending timelines, reshaping supply chains, and reinforcing indirect containment positions.
Conclusion:
From a broader U.S.-China strategic perspective, the US-Vietnam Trade Agreement resembles a temporary ceasefire designed to close loopholes. The United States is still blocking China’s access to core technologies, and China’s export engine continues to operate robustly. While the front line remains in check, the U.S. is reinforcing its second-tier supply chain network—anchoring North America with Mexico and fortifying Southeast Asia with Vietnam. This is not peace—it is a prolonged front.
In essence, investing in Vietnam is no longer optional. After 2025, it will represent the minimum entry requirement for access to Southeast Asia markets. Those who act early, secure assets, and build cross-border structures will hold the advantage in the next stage of U.S.-China strategic competition.
