Vietnam’s role as a trans shipment hub for Chinese goods has become a key point of contention between the US and Vietnam. While there seems to be little question that this practice is taking place, there does seem to be some debate as to what extent. With this in mind, this article looks at a few key data points worth considering.
The shipment of goods made in China through Vietnam to avoid tariffs was thrust into the spotlight back in April when Counsellor to the President of the United States, Peter Navarro, called out the practice on CNBC.
“They (Vietnam) sell us $15 for every $1 we sell them. About $5 of that 15 is China trans shipping to Vietnam to evade their tariffs,” he said.
This concept was nothing new in and of itself – Vietnam’s own Institute for Economic and Policy Research warned Chinese trans shipment was a growing concern back in 2020.
The context in which it was raised, however, just days after a “reciprocal” tariff had been placed on Vietnamese goods entering the United States of 46 percent, was very much unique.
As a result, now a key feature of trade discussion between the US and Vietnam, there has been broad speculation as to how big of a problem this really is.
That said, as an illicit trade, it can be difficult to track and accurately quantify. There are, however, a few data points that can offer some interesting insights.
China to Vietnam, Vietnam to the United States
Firstly, at a very superficial surface level, there is a clear correlation between the growth in Vietnam’s exports to the United States and imports from China.
From 2016 to 2024, Vietnam’s exports grew by 250 percent. Of those exports, goods shipped to the US grew more than fourfold from US$33 billion to US$119.5 billion, with its share of Vietnam’s total exports jumping from about a fifth to about a third.
At the same time, Vietnam’s total imports jumped by 230 percent, with imports from China more than doubling, though as a percentage of total imports holding steady at about 40 percent.
However, there are very legitimate reasons that would explain this trend, too. Most obviously, factories integrating Vietnam into their existing China-centric supply chains, and moving just part of their production south.
This data does, however, speak to the significantly increased role for Vietnam in US-China trade.
Re-exported intermediate imports
Digging a little deeper, the Organisation of Economic Cooperation and Development (OECD) tracks goods that are imported and then re–exported without a significant transformation (generally local added value of less than 35 percent).
Notably, OECD data only goes as far as 2020, but that does cover the whole first Trump term. It’s also enough to see a clear pattern whereby the volume of Vietnam’s re-export of goods with only limited added value shows significant growth.
Notably, this is a totally legitimate practice. Where it gets dicey is if these goods, on their way through Vietnam, find themselves labelled as ‘made in Vietnam’ with the expectation that they will be treated accordingly by customs at their final destination.
Domestic versus foreign value added
And the growth of Vietnam’s re-export of goods with limited value added as a percentage of its exports fits with a decline in Vietnam’s contribution to the final goods that it exports and a rise in their imported content.
That is to say, exports are climbing, but as a percentage, Vietnam is contributing less.
Moreover, China’s share of foreign value added in those exports, by the same metric, is growing.
Specifically, China accounted for just 5.35 percent of the total foreign value added to Vietnamese exports in 2015, with that number climbing to 6.92 percent by 2020.
Trade remedies cases
There have also been a broad number of trade remedies cases that have findings in the affirmative with respect to goods being shipped from China through Vietnam to the US to avoid tariffs.
Certain corrosion-resistant steel products in 2018, solar cells back in 2023, and certain hardwood plywood products last year, to name but a few.
In fact, a list kept by the Trade Remedies Council, a part of the Vietnam Chamber of Commerce and Industry, lists 25 anticircumvention cases against goods from Vietnam, with 13 pertaining to goods originating in China.
These investigations are long and go deep into the trade in the products in question. The results of the aforementioned steel products enquiry, for example, runs 58 pages long.
That is to say, there is a lot of research that goes into making these anticircumvention decisions giving their outcomes a lot of weight.
UFLPA data
Then there is the US Uyghur Forced Labour Prevention Act (UFLPA), which presumes all goods from China’s Xinjiang province are made with forced labour and, as such, bars their entry to the US.
In its lifetime to the end of April, the UFLPA has seen 3,005 shipments from Vietnam entering the US stopped, with 1,523 denied entry, according to data from US Customs and Border Patrol.
True, this does not specifically speak to tariff circumvention, however, it does speak to Vietnam’s role as a go-to channel for Chinese goods when they find their access to the US restricted.
What does it all mean?
Of course, none of this proves anything definitively, but it does seem that trans shipment is happening and that it has become a substantial part of Vietnam’s export trade.
Stamping out the practice, however, given that by its very nature it adds very little to the local economy by way of jobs, should be relatively easy to do, politically speaking.
It could even be beneficial if it sees those firms trying to skirt tariffs move a greater part of their production to Vietnam in order to reach a point where goods can be legitimately labelled as ‘made in Vietnam’.
That said, as far as Trump’s “reciprocal” tariffs go, trans shipment through China is just one of a long list of grievances. Still, clamping down on the practice does seem to be one that would be more manageable and could have a positive upside as well.