Opinion | Why Vietnam’s US trade deal is a high-risk economic gamble

Name: Following US-Vietnam agreement, China says it opposes deals that hurt its interests
Uploaded: 2025-07-07T12:30:09.000Z
Duration: 1 min 33 s
Description: Following US-Vietnam agreement, China says it opposes deals that hurt its interests

It’s a strategic chance to catalyse economic reforms but failure risks making Vietnam a dependent client state

Reading Time:3 minutes

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Vietnamese garment factory workers in Ho Chi Minh City on April 3. Photo: AFP

Khanh Vu Duc

Published: 8:30pm, 7 Jul 2025

Just days before a sweeping 46 per cent US tariff on Vietnamese imports was set to take effect, Hanoi and Washington reached a surprise deal. Vietnam agreed to a tariff of 20 per cent on direct exports to the United States and 40 per cent on transshipped goods. In return for the reduced US tariffs, Vietnam grants zero-tariff access to American goods entering its market.

Presented as a pragmatic trade compromise, the deal’s deeper significance lies in its geopolitical and structural dimensions. It underscores both Vietnam’s urgency to safeguard US market access and a shifting – though still tentative – strategic alignment between Hanoi and Washington amid rising Chinese economic and military assertiveness.

Vietnam has long benefited from preferential trade access to the US market, particularly during the first Trump term, when Chinese companies fleeing US tariffs relocated their manufacturing to Vietnam. But that advantage became a liability: last year, Vietnam’s trade surplus with the US surged to US$123.5 billion – raising alarm in Washington over alleged transshipments and the back-door benefits to China.

Back in office, US President Donald Trump has turned that imbalance into a political flashpoint. By agreeing to the tariffs, Vietnam has temporarily averted direct punitive measures. But in doing so, it has opened its market – completely and unconditionally – to US goods.

Vietnam’s decision to eliminate import duties on a broad swathe of American exports – from liquefied natural gas (LNG) and aircraft to semiconductors, pharmaceuticals, agriculture and even automobiles – represents a dramatic shift. For US exporters, it unlocks a US$100 billion consumer market in Southeast Asia with a rapidly expanding middle class. For Vietnamese producers, however, the competitive landscape just became significantly more challenging.

The impact is expected to be broad. In the LNG sector, with multiple terminals under development, Vietnam’s energy diversification strategy could align with US suppliers such as Cheniere Energy, which are well-positioned to secure long-term contracts.

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Following US-Vietnam agreement, China says it opposes deals that hurt its interests

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}It’s a strategic chance to catalyse economic reforms but failure risks making Vietnam a dependent client state

It’s a strategic chance to catalyse economic reforms but failure risks making Vietnam a dependent client state