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Vietnam US Trade Deal 2025 Update: Agreement Reached
Vietnam US Trade Agreement Reached
The United States and Vietnam yesterday announced that they have reached a trade deal with the following details:
- Vietnam will cut tariffs on all U.S. imports to 0%. We note that Vietnam has so far are not aggressively charging tariff on any trade partner. The current tariff applied to the U.S. is only around 4%.
- The United States will impose a 20% tariff on Vietnamese goods and a 40% tariff on transshipment goods.
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Our initial thoughts
It is still too early to judge whether this is a good deal for Vietnam, as we must wait for the outcomes of other regional countries’ negotiations. However, cutting the tariff to 20% from the initially threatened 46%, and becoming the third country to reach an agreement, underscores Vietnam’s importance to U.S. supply chains. Vietnam now enjoys a first-mover advantage as countries that miss the deadline may face higher tariffs, potentially steering additional manufacturing orders its way.
Further clarification from both governments, especially on the definition of “transshipment goods”, is needed, but we think the overall impact is not significant. In an earlier study, Harvard Business School showed that potential transshipments accounted for only 16% of Vietnam’s U.S. exports, or less than 5% of Vietnam’s total exports. With tighter inspections in the last few months, that share should fall further.
When the US tariff will be implemented
The effective date is still unknown, but recent U.S.–UK and U.S.–China deals suggest implementation will not be immediate. General Secretary To Lam is expected to visit Washington in the coming weeks, and further talks may secure exemptions, especially for products with high domestic value added, and advance Vietnam’s request for U.S. “market-economy” status.
Challenge and mitigation
A 20% tariff will still pressure Vietnam’s exporters, particularly electronics, textiles and footwear, whose demand is price sensitive. We therefore anticipate government support such as tax breaks and favorable credit packages for affected firms.
Some worry that removing all tariffs on U.S. goods could hurt domestic producers, but the main U.S. items currently taxed are autos, wine and cigarettes, which are not something that Vietnamese local firms are having dominant position. Vietnam has only one domestic automaker, while majority of cars on the street from Japanese, German, South Korean brands, so lower-priced U.S. vehicles should largely benefit consumers.
There is also concern that Vietnam might let the Vietnamese Dong depreciate to offset the tariff effect. We see this as unlikely: the State Bank of Vietnam aims to keep the exchange rate to move in a narrow range, and any sharp depreciation would raise import costs and risk U.S. “currency-manipulator” scrutiny.
Conclusion
We remain optimistic about the initial deal. Further negotiations may add some upside, and we are updating our macro forecasts. A quick recalculation suggests the GDP impact should be broadly unchanged. If 16% of shipments to the U.S. face a 40% duty and the remaining 84% face 20%,the blended tariff on Vietnam’s exports to U.S. is about 23.2%. This is better than the 30% we previously assumed, though the positive impact is largely offset by the lack of tariff exemption for semiconductors, phones, and computers that we built into our earlier projections.
On the stock market, although the VN-Index stayed flat today after the news, we observe a strong inflow from foreign investors to industrial parks and logistics stocks. Looking ahead, Vietnam’s bid for FTSE Emerging-Market status, ongoing structural reforms and a softer U.S. dollar continue to support inflows. For 2025 we project EPS growth of 13.5% for the top 100 companies, with the VN-Index trading at an attractive 2025F P/E of 12.1x.
Compare the latest tariff developments to our expectations in the last quarter
Click here to see other macroeconomic trends in Vietnam.
