US-Vietnam Trade Deal Sparks China Tensions

Vietnam has struck a trade agreement with the United States that avoids the harshest of proposed tariffs—particularly a 46% levy that was expected to take effect—but introduces new concerns over U.S.-China tensions.

Under the new deal, Vietnam will instead face a minimum 20% tariff on certain goods, with additional 40% tariffs targeting items suspected of “transshipment”—the practice of rerouting Chinese goods through Vietnam to avoid U.S. trade barriers. Analysts warn this provision may aggravate relations between Washington and Beijing.

The U.S. has previously accused Vietnam of masking Chinese-origin goods. While the deal helps Vietnam avoid crippling tariffs, it also introduces ambiguities around enforcement, which could impact Vietnam’s economy if broader interpretations of “transshipment” are adopted.

Vietnam agreed to give preferential market access to U.S. products—especially large-engine cars—but the fine print on the transshipment issue remains vague. Analysts predict Vietnam could see a 25% drop in exports to the U.S., potentially affecting over 2% of its GDP. Diplomatic ripple effects are anticipated as China watches closely for precedents that might undermine its own trade interests.