Vietnam sees Trump tariffs cutting up to a third of US exports
Tariffs of 20 to 40 per cent would slash export revenue by up to US$37 billion, and hit the majority of Vietnam's key industries, including electronics, machinery, garments, footwear and furniture, according to a document prepared for Prime Minister Pham Minh Chinh's advisory council and seen by Bloomberg News.
That figure assumes that firms in Vietnam would bear the full cost of the tariffs, according to a source familiar with the estimates, who added it's likely importers would need to cover some of that burden.
The tech industry would face the biggest hit, with an estimated decline in exports of about US$15 billion, the document shows, stating that the tariffs pose 'a direct risk to the sustainability of the electronics supply chain'. Vietnam's total exports to the US amounted to about US$120 billion last year, according to official data.
The report was dated Jul 11, just over a week after Trump announced a trade deal with Vietnam, and was compiled by a research unit of Chinh's advisory council. Vietnam has still not officially confirmed the tariff rates announced by the US president, and neither country has published official term sheets on the deal.
Vietnam's Ministry of Foreign Affairs did not immediately respond to a request for a comment.
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Trump said that the US will impose a 40 per cent tariff on goods that are transshipped through Vietnam, a move largely aimed at curbing the re-routing of Chinese goods through the South-east Asian nation. That's put Vietnam in a tough position, given China is its biggest trading partner and main source of imported components used in goods such as AirPods and phones that are exported to the US.
There's no clarity from the US on how it will determine transshipped goods and how the 40 per cent rate would be applied.
The internal document from Vietnam contains some surprisingly direct language stating how the US tariff policy is aimed at reining in China. Trump was using it as a tool 'to restrain China's 'galloping' development and rebuild its position', the report said.
Vietnam's leaders were caught off guard by Trump's declaration and have been seeking to lower the tariff rate, Bloomberg News reported previously. Since then, Trump has announced trade deals with Indonesia, the Philippines and Japan, and sent dozens of tariff letters to trading partners ahead of an Aug 1 deadline when higher US duties kick in.
Trump had initially threatened to hit Vietnam, an export powerhouse that last year had the world's third-biggest trade surplus with the US, with a 46 per cent tariff, among the highest of its major trading partners.
To address US concerns around so-called rules of origin of goods, Vietnam's trade ministry has taken greater steps to protect the 'Made in Vietnam' brand and toughen up trade fraud regulations. Under new draft guidelines released by the ministry, clearer rules will be set to determine the specific content of products and their origin.
The guidelines include measures to assess the value-added content contributed by Vietnam and where the main production stages have been performed. It will also establish an inspection system and penalties for incorrect labelling.
The internal document highlights the challenges facing Vietnamese companies in interpreting the deal. More effort is needed to 'clarify how the localisation proportion is calculated, and to persuade the US to factor in the share of imports from the US and other clearly sourced markets when determining origin', it says. BLOOMBERG
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