For Thanh Cong clothing, a Vietnamese supplier of clothing companies such as Adidas, Calvin Klein and Columbia, had a trade agreement to avoid the worst of the rates of US President Donald Trump should have been an enormous relief.
Vietnam was one of only two countries that, according to Trump, closed a deal with the US with a deadline of July 9 to avoid his so -called mutual rates. This week many of his neighbors received letters from the White House, in some cases threatening higher taxes.
But the company remained enigmatic about the lack of detail in the agreement. Trump announced a blanket 20 percent rate rate, a decrease in an initial threat of 46 percent, but neither Vietnam nor the US have provided further details or released a definitive version of a trade agreement.
Hanoi also did not confirm the new rate and only said that the two parties had reached an “fair and balanced mutual framework of trade agreement”, increasing further uncertainty for companies.
The American side also included a clause that “transferred” a 40 percent rate on goods – or diverted – via Vietnam, although it did not define the transfer. But the clause has fired for concern among companies that they will be punished for the use of Chinese inputs, which are crucial to deliver chains in Vietnam.
Tran NHU Tung, the chairman of the company, noted that the basic rate of 20 percent was not much higher than the 15-17 percent import tax that is currently being paid by Vietnamese clothing makers. But the transfer clause can turn out to be a huge challenge.
“For the products that [have] Materials from China but manufactured in Vietnam, what is the rate to export to the US? 20 percent or 30 percent or 35 percent? “Said Tung.” We have to wait. “
Vietnam, one of the largest suppliers of clothing, shoes, electronics and other products for the US, has become a production patroner in recent years and attracted Apple, Nike, Nike and Samsung while companies hurried to relocate China production to prevent recoil of geopolitical tensions.
Many of those companies are scrambling to find out that the new trade agreement will work – and by moving quickly, Vietnam has scored or enclosed favorable conditions.
“There is a sigh of relief that at least we know what the answer is for Vietnam … But there is still quite a bit of uncertainty in the agreement that currently exists,” said Rich McClellan, founder of the RMAC advice, whose customers include companies and the Vietnamese government.
The transfer clause is “the most ambiguous and most potentially risky part of this agreement,” he added.
Vietnam is at stake a lot. One of the world’s most trade-dependent countries, with an export-to-BBP ratio of almost 90 percent, a third of exports only go to the US, making a higher rate percentage a considerable risk of economic growth.
The trade surplus with the US has risen to $ 123 billion in 2024 in recent years, the third largest behind China and Mexico.
The country has also drawn accusations of serving as a channel for Chinese companies that want to avoid Washington’s rates. A large amount of production investments in Vietnam comes from China, which was almost one in three new projects last year.
Experts say that the definition of the transfer of the Trump administration of a series of practices could refer, simply recovery of Chinese goods with a counterfeit “made in Vietnam” label or to the use of Chinese raw materials in goods made in Vietnam.
“The impact can be more limited if these 40 percent rates are forced exclusively for the most Egregious practices of ordinary distraction to prevent American rates,” said MUFG analyst Michael Wan.
“If, on the other hand, a stricter determination of the transfer is defined as a certain threshold of foreign added value, the impact can be pronounced.”
Given the interest of the Trump government in isolating China, companies fear a broader definition. This would be extremely harmful to Vietnam, where many companies rely on Chinese raw materials and components, and warned that it would be impossible to remove them.
“That is not realistic, that does not take into account how worldwide Supply Chains work,” said an American businessman in Hanoi. “It is not only impossible for Vietnam. It is impossible for everyone.”
Another big unknown is how Vietnam’s rate percentage will relate to that of his neighbors – a difference that will be crucial for Vietnam that retains its competitive advantage as a production hub. Trump has established a new deadline of 1 August so that countries have an agreement with the US.
“Whether the negotiated rate is ultimately a victory or loss for Vietnam, will largely depend on or other ‘China Plus one’ markets protect comparable deals,” said Marco Förster, ASEAN director at De Dese Shira & Associates.
Official data for the first half of the year shows that the BDI increased almost a third to $ 21.5 billion, suggesting that the investments were not deterred by the tariff uncertainty. Vietnam also has a lead in certain stimuli and cheaper costs for producers.
But Steve Greenspon, founder of the American housing articles, warned that “a rate of 20 percent will even lead to higher prices and inflation on goods”.
“This will certainly lead to a reduced demand for goods, hurting American companies and jobs,” he said. “Companies will continue to produce their products in Vietnam, although at a lower pace than prior to the rates.”
For Tung, orders from American customers had already fallen between 15 and 20 percent for the third quarter, after a hurry to send orders before the deadline of July 9. Up to 70 percent of the raw materials for clothing production, from cotton yarn to zippers and elastic, are from China, making it difficult for industry to prevent them from being entangled in transfer.
“Most clothing materials from Vietnamese clothing companies are imported from China,” Tung said. “It is therefore difficult to find another material supplier, except China.”
Data visualization by Haohsiang Ko in Hong Kong
