US-Vietnam Trade Deal Hints at Tariffs in Southeast Asia

The newly unveiled US-Vietnam trade deal, though still murky in its details, is seen as a signal of US tariff policy for the entire Southeast Asian region.

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Photo: AsiaNews

As with all of US President Donald Trump's bilateral trade deals, the only assurance so far is that the devil is in the details.

On Wednesday, Trump revealed on the social network Truth Social that the US has the parameters for a new bilateral trade deal with Vietnam, with a 20% tariff on imports into the US and a 40% tariff on goods in transit.

There is debate about what that 20% means. Is it 20% or is it 20% in addition to existing tariffs?

“Our take is that the 20 percent tariff on Vietnam goods will remain on top of the duties already placed on footwear and apparel,” TD Cowen analyst John Kernan wrote in a note Thursday.

Fashion and footwear companies are currently enjoying a reduced tariff rate of 10% through July 9, down from the 46% rate initially imposed on Vietnam when Trump first announced reciprocal tariffs on April 2. But what happens on July 10? Will tariffs temporarily rise back to 46% until a formal trade deal is reached? Or will they stay at 10% temporarily while the US and Vietnam finalize the terms of the deal?

Next up is China. In another surprise twist in the Trump-initiated trade war, the United States has cut tariffs on Chinese imports from 145% to 30% for 90 days to allow negotiations to continue until August 12. That would bring the total tariff rate to 55%, including the additions to existing tariffs.

Complicating matters, Treasury Secretary Scott Bessent said the administration had “set the table” for future tariff talks after US-China tensions eased after the two sides agreed to a rare earth minerals trade deal. But Chinese representatives have stressed that they will oppose US efforts to sign trade deals that go against their interests. And Trump has accepted that challenge, saying the trade deal with Vietnam will include a 40% pass-through tariff. China is both Vietnam’s largest trading partner and its largest supplier of manufacturing materials. And some Chinese manufacturers are said to have circumvented Chinese tariffs by shipping goods to Vietnam before they reach their final destination in the United States. The transshipment tariffs target trade between China and Vietnam.

And there are even questions about regulatory thresholds, such as regional value content rules. Twenty-five percent of footwear is made in Vietnam, which has become a popular manufacturer of high-performance sneakers, and the majority of components—that is, manufacturing inputs—are sourced from China. One unanswered question centers on how much Chinese material can be included in a pair of shoes destined for the U.S. market and still be hit with the new 40% tariff.

What’s more, the United States is in bilateral trade negotiations with India, Indonesia, and Cambodia. All three Southeast Asian countries have picked up some of the footwear production that has moved out of China.

TD Cowen’s Kernan believes that when Vietnam’s tariffs move to 20%, the rest of Southeast Asia will likely face tariffs higher than 10%. All global tariffs are currently at 10% due to a temporary pause until July 9, with the exception of China.

“We expect the rest of Southeast Asia tariff rates at 20 percent or higher,” Kernan forecasts. He said that 20% tariff is likely to be “mitigatable” under certain conditions, such as a 5% price increase when goods hit shelves and manufacturers absorbing about 10% of the increased cost.

Companies are analyzing the potential impact of the tariffs as more information becomes available. With the lack of tariff certainty as footwear companies reported first-quarter earnings over the past six weeks, most had been estimating 10% tariffs for the remainder of 2025. That thinking has now changed.

An Adidas spokesperson, asked about the impact of the US-Vietnam trade deal on its business, said the company would “provide our next business update” on July 30, when it reports second-quarter results. Other companies are also likely to comment on the situation in their earnings releases.

“We expect companies to discuss pricing and mitigation but also the now-higher tariff rates on Vietnam and potentially the rest of Southeast Asia,” Kernan said of the upcoming second-quarter earnings reports. “Simply put, assuming a 10 percent tariff rate in guidance will need to be adjusted higher.”

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