U. S. -Vietnam Trade Deal: A New Chapter in Global Trade Wars

In a surprising move, the U.S. and Vietnam struck a trade deal just before the U.S. was set to reinstate full tariffs.

Key Points of the Deal

• Tariff Reduction: The agreement cuts the duty on Vietnamese imports to the U.S. from 46% to 20%.
• Transshipping Tariff: Vietnam agreed to impose a 40% tariff on goods from other countries shipped through Vietnam to the U.S., a practice known as transshipping, often used by China to bypass trade barriers.

Impact on Global Trade

• Exclusive Agreement: This deal makes Vietnam one of the few countries to secure a trade agreement with the U.S. under the current administration.
• Future Trade Relations: Other nations are left wondering about their future trade relations with the U.S.
• Some experts believe this deal signals that tariffs will continue to rise.
• Others think it might make it easier for other countries to negotiate similar deals.

Concerns for Emerging Markets

• Higher Than Expected Tariffs: Economists worry that the 20% tariff rate is higher than expected.
• Impact on Transshipped Goods: The additional 40% tariff on transshipped goods could affect other countries, particularly Thailand and Malaysia.
• Spillover Effects: Countries that have set up factories in Vietnam could also be affected.

Upcoming Trade Deals

• Rough Frameworks: More trade deals are expected in the coming days, with the U.S. open to making rough frameworks rather than full deals.
• India's Potential Deal: India is one of the countries that might strike a deal next, but the agriculture sector could be a hurdle.
• Allowing U.S. market access could lead to domestic backlash.

EU's Perspective

• Challenging Relationship: The EU's relationship with the U.S. has not been smooth.
• Tariff Expectations: Vietnam's deal shows that the EU might not get what it wants, which is tariff-free trade.
• Possible Agreement: The EU could agree to a 10% tariff and focus on sectoral wins.