Economy Vietnam Faces Tough U.S. Tariff Demands Amidst Complex Trade Dynamics

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In a dynamic trade negotiation update, Reuters has reported that the United States has set forth a series of stringent demands aimed at Vietnam, as part of an effort to curb its dependency on Chinese imports. This diplomatic tightrope walk involves Vietnam managing its relationships with both the U.S. and China, two major economic powers.

 

According to the Reuters report, based on anonymous sources privy to the ongoing discussions, the U.S. has requested Vietnam to reduce its reliance on Chinese materials and enhance regulation of its production and supply chains. These demands are detailed in an annex to a framework prepared by U.S. negotiators, shared shortly after recent trade talks between the two nations.

 

As Vietnam navigates these requests, it is particularly keen on mitigating the impact of a looming 46 percent tariff on its exports to the U.S., a significant threat given that 29 percent of its total exports, accounting for 30 percent of its GDP, head to the American market. A full imposition of this tariff could severely disrupt Vietnam’s export-driven economy.

 

Vietnam has been one of the beneficiaries of trade dynamics during Donald Trump's first term, as multinational companies shifted bases to Vietnam to avoid Chinese tariffs. Consequently, Vietnam's trade surplus with the U.S. has soared. However, this rise in exports has paralleled increased imports from China, complicating the picture of its economic interdependence.

 

Notably, U.S. trade officials have accused Vietnam of facilitating the re-routing of Chinese goods to circumvent tariffs. Peter Navarro, Trump's trade adviser, labelled Vietnam a "transshipment" hub, which he said functions almost as a Chinese "colony."

 

To resist the U.S. pressure and avoid potentially severe repercussions, Vietnam has suggested measures to address its trade imbalance, including plans to purchase additional American goods such as liquefied natural gas and aircraft. Vietnamese companies are also negotiating a purchase of $2 billion in U.S. agricultural products, and Vietnam Airlines is nearing a deal for Boeing jets. Yet, Reuters sources indicate that these steps may fall short of satisfying U.S. negotiators.

 

The demands from the U.S. pose a substantial challenge for Vietnam. Given its deep integration into Chinese supply chains, any attempt to disentangle could result in reduced U.S. exports, with far-reaching economic, social, and political consequences. It could also strain Vietnam's strategic relations with China, which relies on confidence that Vietnam will not align against it with Western powers.

 

Therefore, while Vietnam is likely to address U.S. concerns over tariff evasion, making binding commitments about its economic relationship with China seems unlikely. Pushing these demands aggressively risks damaging U.S.-Vietnam relations, potentially curtailing the cooperative economic interactions that both nations currently enjoy.

 

  Adapted by ASEAN Now from The Diplomat 2025-06-05