Vietnam's 20% Customs Agreement with Trump Lacks Sufficient Detail

Vietnam has rushed to meet the trade deadline of July 9 set by U.S. President Donald Trump, hoping to escape a series of harsh retaliatory tariffs. But this early move now leaves officials in Hanoi and major producers facing more confusion than clarity. Vietnam is one of only two countries to reach a last-minute agreement before the deadline, avoiding the initial threat of a 46% tariff. Trump has publicly announced that the new overall tariff rate is 20%. However, no full agreement has been announced, and both sides have not clearly explained the detailed terms, leaving businesses without answers just weeks before the tariff is set to be reinstated on August 1. May Thành Công, the main supplier from Vietnam for companies like Adidas, Columbia, and Calvin Klein, has hoped to receive support. However, the current situation remains deadlocked. The company's president, Mr. Trần Như Tùng, stated that it is uncertain whether the 20% tax will apply to all goods or will increase for products using Chinese materials. "For products with materials from China but manufactured in Vietnam, what is the export tax rate to the U.S.? 20%, 30%, or 35%?" Mr. Tung asked. "We need to wait." This issue is not hypothetical. The Vietnamese garment industry relies on China for about 70% of its raw materials, including zippers, cotton yarn, and spandex. Unclear Transfer Terms Cause Confusion in Factories A clause in the agreement with Donald Trump threatens to impose a 40% tax on "transship" goods. However, there is no definition of "transship". The Vietnamese government has not provided a clear explanation, and the United States has not published any details. This raises concerns among manufacturers that goods containing Chinese components - even if legally assembled in Vietnam - will face higher taxes. Rich McClellan, the founder of RMAC Advisory, a consulting unit for both Vietnamese companies and the government, said: "We can breathe a sigh of relief because at least we know the answer for Vietnam... but there is still quite a bit of uncertainty in the current deal." He referred to the transfer terms as "the most ambiguous and potentially risky part of this agreement." Economic expert Michael Wan from MUFG stated that the impact of the 40% provision depends on how the Trump administration defines it. If it targets blatant cases such as falsely labeling "Made in Vietnam", the damage could be contained. However, if it is based on the threshold of imported materials, Vietnam's exports could be severely affected. Vietnam's manufacturing sector is built on the demands of the United States. Nearly one-third of Vietnam's total export turnover is to the United States, and Vietnam's trade surplus with the United States in 2024 reaches 123 billion dollars, ranking third after China and Mexico. Currently, that success is being questioned by Washington, especially as nearly one of three new production projects in Vietnam last year was funded by Chinese investors. Hanoi Strives to Clarify Before the Deadline in August Prime Minister Pham Minh Chinh met with the US-ASEAN Business Council (US-ASEAN) in Hanoi on Friday to promote clearer terms. This group represents companies such as Apple, Amazon, and Boeing. Prime Minister Pham Minh Chinh urged the council to support Vietnam's efforts to finalize a comprehensive agreement, reduce tariff rates, and prevent actions that could harm trade relations. Trump's public announcement has surprised Vietnamese leaders. Mr. Pham stated that the two countries have agreed on a framework, but warned that there are still no detailed tariff rates for specific products. He also urged U.S. companies to push the White House to recognize Vietnam as a market economy, which would help alleviate pressure from trade defense tools. So far, investors have not pulled back. Foreign direct investment (FDI) in Vietnam has increased by nearly 30% to $21.5 billion in the first half of the year. However, American retailers have begun to sound the alarm. Steve Greenspon, the founder of Honey-Can-Do, said: "A 20% tax will lead to higher prices for goods and inflation. This will certainly reduce demand for goods, harming businesses and American jobs." Thành Công Garment Company has seen order volume in the United States decrease by 15–20% in Q3 due to the need to rush shipments before the July deadline and awaiting clarification. Vietnam's initial move may have helped them avoid the worst threats from Washington - for now. However, without a complete text, a product list, and no guarantees of better terms compared to neighboring countries, the final outcome remains unclear.