Vietnam braces for end of US tariff pause

Time of India

7 hours ago

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Businesses in Vietnam's capital are suffering from declining sales after the United States introduced trade tariffs on the country earlier this year.
Hanoi's Old Quarter is replete with stores selling designer goods, brand clothing and electronics from rustic French colonial buildings that still form the fabric of the area.
Signs proclaiming that goods are "Made in Vietnam" are everywhere — a concept locals insist on emphasizing to passers-by, hoping for sales from foot traffic made up largely of tourists and backpackers.
Vietnam PM expects trade deal before July tariff deadline
Vietnam is an attractive prospect for US investors because of its young workforce and low labour costs.
However, that has been dampened by Washington's 46 percent tariff rate, which is due to come into effect in July.
Hanoi is in negotiations with Washington for a reduction.
On Wednesday, Vietnamese Prime Minister Pham Minh Chinh said he expected a trade deal with the US ahead of the scheduled 46 percent tariffs.
"I hope that you will see that the result will come earlier than two weeks," Chinh said. "Vietnam and the US share a deep understanding on tariffs. I hope that all the positive things will come for us."
In the meantime, a baseline tariff of 10 percent has been in place since April.
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Fast-growing economy
Apple, Samsung and Nike have chosen Vietnam as key manufacturing locations. The country exported goods worth $142 million to the US last year, accounting for about 30 percent of its total economic output.
Vietnam has one of the fastest-growing economies in Southeast Asia, with a projected GDP growth of 6.8 percent by the end of 2025, according to a report by the World Bank in March.
The report attributed the estimated growth to Vietnam rebounding in industries such as manufacturing exports, tourism and foreign direct investment.
But those projections may not meet expectations in the absence of a trade deal or tariff relief.
"Without tariff relief, Vietnam will fail to hit their ambitious growth targets; the US market is simply too important for them," Zachary Abuza, a professor at the National War College in Washington, told DW.
"Even if they can reduce that 46 percent tariff, the Trump administration has imposed a baseline 10 percent tariff on all countries."
Why are Trump's tariffs so high?
US President Donald Trump has hit Hanoi with high tariffs partly due to concerns that China is using Vietnam as a transshipment point to work around its own high tariffs imposed by Washington. Hanoi has intensified efforts to curb illegal transshipment, predominantly involving goods from China.
Eric Nguyen, CEO of Grando Premium Aluminium Vietnam, which produces and exports to international markets worldwide, told DW that the US government suspects that Vietnam is using products from China.
"But the fact is that Grando, we do not use Chinese material, [everything is] 100 percent made in Vietnam," Nguyen said, adding that the tariffs have forced their operations to rely on other markets worldwide.
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We seek to expand our export market to other markets, such as Europe, Japan, and Korea, so that we do not depend 100 percent to the US market and to be less vulnerable to any change from the US government," he said.
Nguyen Tuong Phan, general manager of Aviation Solution Services, a cargo freight company in Hanoi, told DW that since the tariffs were introduced, cargo freight companies in China have been trying to send their cargo to the US via Vietnam in order to evade the higher rates.
"Now a lot of charter flight from freight forwarders are coming from China, are now coming to Vietnam. The capacity to fly to the US increase from Vietnam has increased by, let's say, 80 percent,' he said.
Balancing US demands with China ties
Vietnam and China hold close relations both economically and politically. Beijing is Hanoi's largest trading partner and both countries share similar political ideologies and are governed by their respective Communist parties.
Hanh Nguyen, a research fellow at the Yokosuka Council on Asia Pacific Studies (YCAPS), said if Vietnam does decide to reduce its dealings with China, it will hurt the Vietnamese economy either way.
"Reducing or even cutting off input materials and components from China will cause significant damage to Vietnam's economy," she told DW.
She noted that Vietnam's manufacturing sector — particularly electronics and textiles — is "dependent on imported raw materials from regional supply chains based in China."
"If Vietnam complies with US demands, it will also hurt Vietnam's ties with China, which will perceive Vietnam's compliance as joining the US-led anti-China coalition," Hanh added.
Vietnam is a huge manufacturing hub for international clothing brands, but Washington has highlighted how counterfeit products have also contributed to their concerns over trade.
In January, a report from the US Trade Representative flagged Saigon Square shopping mall as a hotspot for the sale of forged fashion items from major brands.
Hanh said Vietnam has taken several measures to cater to Washington's concerns, that will hopefully reduce the high tariffs imposed on them.
"[Vietnam has been] stepping up the crackdown on transshipment issues and has recently launched a new campaign to crack down on counterfeit products and digital piracy," he said, adding that the question now is: what will Vietnam's do next?
"There is not a country in the world that has been more proactive than Vietnam in negotiating tariff relief with the Trump administration. One of the predicaments for the Vietnamese right now, is how much to negotiate and give away."