Vietnam is ‘just a pathway for China to us,’ said Commerce Secretary Howard Lutnick.
News Analysis
President Donald Trump announced a trade agreement with Vietnam on July 2 via a Truth Social post, days before the 90-day tariff deadline.
While the White House has yet to release official details of the preliminary framework, Trump confirmed that it features a 20 percent tariff on many Vietnamese exports entering the United States as well as a 40 percent levy for transshipping.
U.S. trade officials have made transshipping—the tactic of rerouting goods through a third country to disguise the origin of the products—a focal point of trade negotiations with Asian markets.
For example, if China were to sell its merchandise through products exported by Vietnam to the United States, Hanoi would be hit with a 40 percent tariff.
China, Vietnam, and Transshipping
Vietnam maintains a robust manufacturing base and has benefited from the U.S.–China trade strife, but the issue of transshipment has been prevalent in the Southeast Asian market.
The practice involves shipping bulk quantities of Chinese goods, such as apparel and electronics, to Vietnam. These items are then relabeled, repackaged, or minimally processed to appear as if they were made in Vietnam. This allows China to bypass the tariff regime.
Peter Navarro, a White House trade adviser, has expressed concern that China is dodging U.S. tariffs by exploiting Vietnam for transshipment purposes.
“How does that work? Vietnam sells us $15 for every $1 we sell them, and about $5 of that is just Chinese product that comes into Vietnam. They slap a made in Vietnam label on it, and they send [it] here to evade the tariffs,” Navarro said in a Fox Business Network interview in April.
Appearing before a Senate Appropriations Committee hearing last month, Commerce Secretary Howard Lutnick stated that the administration would not agree to a zero-for-zero tariff agreement with Vietnam due to China’s significant involvement in the Vietnamese market.
“Vietnam has $125 billion [in] exports to us, and imports from us $12.5 million,” Lutnick said in an exchange with Sen. John Kennedy (R-La.).
“But where do they get it from? They buy $90 billion from China, then they mark it up and send it to us. It’s just a pathway for China to us.”
Market watchers say that the United States’ concerns over transshipping are justified. In addition to low labor costs and a robust manufacturing base, foreign investment plays a significant role in bolstering Vietnamese exports, says Simona Mocuta, the chief economist at State Street Investment Management.
By Andrew Moran
