ExplainerWhy 1 clause in the US-Vietnam trade deal is sparking concern across Asia
The inclusion of a 40 per cent tariff on transshipped goods could ‘open up a can of worms’ for the whole region, analysts said
The United States announced it had reached a trade deal with Vietnam on Wednesday, which will see Washington impose a 20 per cent tariff on Vietnamese goods.
However, the agreement has a sting in the tail. US President Donald Trump also said in a social post announcing the deal that goods deemed to be transshipped via Vietnam would face a far higher levy of 40 per cent.
It remains unclear exactly how the transshipment clause will work in practice, but analysts said the provision could have far-reaching implications – not only for Vietnam, but also for the wider region.
What is transshipment, and why is the US so concerned about it?
In its purest form, transshipment refers to exporters evading tariffs by diverting goods via a third country.
The US has grown increasingly concerned about a rise in transshipment since it began targeting China with sky-high tariffs earlier this year.
Trump administration officials allege that large volumes of goods are being exported from China to third countries – often in Southeast Asia – where their certificate of origin is altered, allowing them to be exported to America at a lower tariff rate.