Vietnam-US Trade Deal 2025: Summary, Impacts, and Strategic Responses

On July 2, 2025, the United States and Vietnam reached an important trade agreement that brings significant changes to their economic relationship. As manufacturers in Vietnam prepare for these shifts, they face both challenges and opportunities that will impact their operations and market strategies. This article examines the implications of the deal, the concerns expressed by the Vietnamese business community, and strategic responses to navigate the evolving trade landscape.

US President Donald Trump and Vietnam’s top leader have agreed in principle to a framework trade deal under which the US will impose a 20 percent tariff on most Vietnamese exports and a 40 percent levy on goods transshipped through Vietnam from third countries. In return, Vietnam will grant zero tariffs on US imports and provide preferential access for certain American goods, such as large-engine automobiles.

FIND BUSINESS SUPPORT

Navigate Tariff Risks by Diversifying Your Supply Chain and Markets across Asia

Announced just days before a scheduled July 9 tariff hike, the agreement was confirmed in joint statements by both governments, though detailed implementation steps and product‐specific rates remain to be finalized.

At this moment, the newly announced tariff framework has created urgent challenges and opportunities for manufacturers in Vietnam. This article examines how manufacturers in Vietnam are planning for the new tariff policy and deploying immediate and short-term strategies to protect their margins and maintain US market access. We then explore broader trade shifts, accelerated supply chain diversification, evolving foreign direct investment (FDI) patterns, and reciprocal market-opening commitments that manufacturers can adopt now to manage risk and stay competitive.

Significance and uncertainties

Vietnam’s exports to the US accounted for roughly 30 percent of its total export value in 2024, making this framework deal a strategically important win for Hanoi, especially as Vietnam became the third country in as many months to secure a trade agreement with Washington after the United Kingdom and China, a testament to the government diplomatic push. Once in force, clearer and potentially lower tariff treatment could deliver meaningful cost relief and margin stability for export-oriented sectors.

That said, a clearer assessment of impact depends on several open questions. First, it remains unclear whether the 20 percent tariff represents the total duty applicable, replacing existing WTO most favored nation (MFN) rates, or an additional surcharge on top of them. Although most early analysis suggests the former, a small differential could shift effective costs by 5–10 percentage points, materially affecting product pricing and competitiveness.

Second, the definition of “transshipment” and its enforcement criteria are not yet published. Academic estimates suggest that transshipped goods represent only around seven percent of Vietnam’s imports from China and around 16 percent of its exports to the US, indicating that, even if the 40 percent levy is applied, it would impact a relatively small slice of total trade, but potentially a disproportionate share of certain high-volume categories. Manufacturers and policymakers alike will need to monitor forthcoming guidance closely to understand the final tariff structure and to plan accordingly.

Market’s concern about the US tariff policy

A June 2025 PwC pulse survey of Vietnam-based businesses reveals widespread concern about the US tariff policy and outlines how companies are bracing for impact. Notably, 78 percent of survey respondents came from the manufacturing sector, and 33 percent of them export directly to the US. An additional 67 percent have indirect exposure, such as supplying exporters. This broad participation illustrates that even firms without direct US sales are cautious about the ripple effects on their supply chain.

A resounding 86 percent of companies expressed substantial concern about the negative impacts of the US tariffs on their operations. Top worries include rising costs, competitiveness erosion, and supply chain disruptions. In fact, 23 percent identified higher costs as the primary impact they anticipate, with 15 percent citing market shifts, such as losing share to untariffed competitors, and another 15 percent expecting lower US demand for their products. This indicates that cost inflation and demand softening are front-of-mind risks.

To mitigate these challenges, companies are taking proactive measures. Within the survey, 44 percent reported diversifying sourcing to other countries to reduce over-reliance on any single supplier base, especially China. Meanwhile, 40 percent of the respondents are automating and streamlining processes to boost efficiency and cut production costs, and 34 percent are renegotiating with existing suppliers for better pricing and terms, seeking to share or reduce the cost burden.

Many firms are also repositioning their market and pricing strategies, with 41 percent looking to enter new markets beyond the US to spread risk, and 25 percent are adjusting pricing. These responses demonstrate a combination of supply-chain reengineering, operational efficiency drives, and strategic market adjustments as Vietnamese businesses gird for the tariff era.

Immediate strategic recommendations

To navigate the new tariff landscape, Vietnamese exporters should implement a multi-pronged strategy, and the following are some recommended actions:

Contract renegotiation

Review the existing sales contracts and consider renegotiating to add tariff pass-through provisions, ensuring that additional duties can be factored into the price or shared with other stakeholders. Companies can consider updating force majeure and material adverse change clauses to explicitly cover sudden tariff hikes, giving both parties a clear exit or adjustment mechanism if costs spike.

Supply chain adjustment

The manufacturers could consider diversifying their suppliers and reducing reliance on a single country by expanding their supplier and manufacturing bases to other low-tariff or tariff-exempt regions. Many Vietnamese firms are coming to terms with the risks of over-reliance on China, and are seeking alternative input sources in ASEAN countries, as well as exploring partnerships in Indonesia, Malaysia, Mexico, and elsewhere. By spreading procurement and production across multiple locations, companies not only mitigate the transshipment risk but also strengthen resilience against future trade actions. This strategy aligns with the trend of “China plus one” adopted by multinationals, leveraging Vietnam and other countries to hedge against trade tensions.

Operational efficiency

FIND BUSINESS SUPPORT

Advance Your China + 1 Asia Manufacturing Strategy with Tailored Business Intelligence

Manufacturers can also consider doubling down on lean manufacturing principles to improve cost competitiveness. According to the PwC’s survey, both local and multinational companies in Vietnam identified manufacturing process optimization as the top lever for cost reduction. This entails eliminating waste, improving energy efficiency, enhancing labor productivity, and increasing operational efficiency by embracing digital transformation, particularly in procurement and supply chain management.

If the elevated tariffs look to persist, firms should evaluate the strategic relocation of production or parts of the supply chain to lower-cost or tariff-exempt locations. In PwC’s framework for cost optimization, relocating facilities to alternative geographies is cited as a longer-term response lever. Vietnamese firms may consider scaling up operations in countries with favorable US trade terms, for instance, those with free-trade agreements or lower labor costs, to serve the US market.

Transshipment compliance and risk mitigation

So far, neither Washington nor Hanoi has published a detailed definition of “transshipment” under this agreement. In practice, US Customs will scrutinize imports for signs that third-country inputs have been sufficiently processed in Vietnam, which generally means meeting one of two substantial transformation tests:

Tariff-classification change: The finished good must fall under a different Harmonized System (HS) heading, typically at the 4-digit or 6-digit level, than its non-originating inputs; or

Regional value content (RVC) test: A minimum percentage of the product’s ex-works value must consist of originating, in our case, the Vietnam-added content. Two common methods to calculate this are:

• Transaction value (or build-up) method:

RVC = [(ex works price – cost of non-originating materials)/ex works price] x 100%

For this method, the RVC thresholds must be at least 35 percent. 

• Net cost (or build-down) method:

RVC = [(net cost – cost of non-orginating materials)/net cost] x 100%

Under this method, the thresholds start at 45 percent, and net cost refers to the total manufacturing expense of a product, excluding non-production items such as selling, general, and administrative costs, royalty or license fees, profits, and any duties or taxes on non-originating materials. In practice, it encompasses direct inputs, raw materials, direct labor, and factory overhead, allowing you to calculate RVC by isolating the share of genuine Vietnamese value added against these core production costs.

While final thresholds under this Vietnam-US framework are not yet set, trade agreements commonly require 30-40 percent RVC or a classification change. Until precise rules are released, exporters should assume a 35–40 percent RVC target or a clear HS-code change. Detailed costing records, bills of materials, processing logs, and origin certificates will be essential to demonstrate that your goods genuinely qualify as “Made in Vietnam” and thus avoid the 40 percent transshipment levy.

Market reaction and investor sentiment

The announcement of the Vietnam-US tariff deal prompted a noticeable reaction in financial markets, reflecting relief that the worst-case tariff scenarios were avoided. US retail and apparel stocks with supply chains heavily reliant on Vietnam rallied on the news. Shares of companies like Nike, Under Armor, and VF Corp all rose after the July 2 deal was unveiled. Investors interpreted the 20 percent tariff as lower than the feared 46 percent, and thus a positive for firms sourcing from Vietnam. This stock uptick underscores how closely markets were tracking the negotiations and how sensitive certain sectors, such as footwear, apparel, and furniture, are to tariff outcomes.

Analysts and trade experts, however, cautioned that the obstacle is in the details going forward. Key open questions include enforcement specifics and the exact definition of what constitutes legitimate Vietnamese origin versus mere transshipment. “Transshipping is a vague and often politicized term in trade enforcement. How it is defined and applied in practice will shape the future of US-Vietnam trade relations,” said Dan Martin, business adviser at Dezan Shira and Associates. In other words, if US Customs takes a hard line on what constitutes substantial transformation, some Vietnamese exports with high Chinese content could still face challenges or additional duties.

Conversely, clear and fair rules could allow trade to flow with minimal friction under the 20 percent tariff regime. Analysts are also watching for any carve-outs or product-specific rules that might emerge as details are negotiated. The consensus among observers is that the framework deal represents a major step forward, but its implementation will be critical. Both sides will need to establish monitoring mechanisms to ensure compliance and adjust the agreement as real-world data on its impact becomes available.

FDI outlook

From an FDI perspective, Vietnam’s ability to continue attracting manufacturing investment will depend on how this tariff deal unfolds over time. The Vietnamese leadership clearly wants to reassure investors and trading partners that Vietnam remains a stable production base. Prime Minister Pham Minh Chinh emphasized avoiding the 46 percent tariff “nuclear option” as essential, implying that Vietnam’s hard-won reputation as a manufacturing hub was at stake. By obtaining a much lower tariff, Vietnam has probably avoided an investor exodus that could have happened if the high tariffs had been enforced. Factories that moved from China to Vietnam in recent years can largely continue operations, paying 20 percent instead of potentially relocating again.

FIND BUSINESS SUPPORT

Our expertise helps you capitalize on growth opportunities and navigate country-specific regulations in Asia's manufacturing sector

However, one Vietnamese CEO mentioned in an internal briefing that the effect on FDI will depend on how long these tariffs last. If the 20 percent tariff is temporary or gradually reduced through further negotiations, Vietnam may still be attractive for most FDI, allowing US importers to tolerate a temporary 20 percent surcharge or find ways to share the costs. But if the tariffs stay in place for many years, they will raise the costs of producing in Vietnam for the US market, which could make other countries more appealing in the long run. In that case, companies might rethink investments or expansion plans in Vietnam, especially for export-focused projects, and ultimately, American consumers could face higher prices.

The CEO warned that extended tariffs “ultimately fall on customers,” meaning there is a natural limit to how much cost can be absorbed or passed on before sales suffer. Thus, Vietnam’s mid-term FDI outlook may depend on ongoing diplomatic efforts to further normalize trade terms.

On the US side, domestic politics will play a role in the tariff policy’s longevity. The upcoming US midterm elections in late 2026 could be a turning point. If political winds shift, the tariff strategy could be re-evaluated. In practical terms, this means maintaining strong relationships with US stakeholders and possibly lobbying through industry groups to highlight how stable, lower tariffs benefit both economies through affordable consumer goods and continued investment in Vietnam.

In summary, Vietnam’s priority is to leverage this deal to continue its FDI success story, pitching itself as a reliable partner that proactively addresses US concerns. The government’s moves to crack down on origin fraud and its concessions on market access for US goods show a willingness to adapt policies to maintain good trade relations. If the 20 percent tariff can be gradually reduced via further negotiations, or at least if no new tariffs are added, Vietnam’s growth trajectory in manufacturing FDI should remain intact, albeit with investors calculating in a “tariff discount” to their expected returns.

If you are unsure about the implications of the US tariffs for your business, we can support you with customized supply chain and tariff advisory.

• Previous Article Update Your Company Address After Vietnam’s Provincial Merger: A Brief Guide
• Next Article E-ID Registration Guide for Foreign Residents in Vietnam