Yesterday, in a post on Truth Social, US President Donald Trump announced a trade deal with Vietnam that would impose a 40 percent tariff on goods transhipped through Vietnam and a 20 percent tariff on all other Vietnamese imports. This article looks at which sectors are most at risk of the that higher 40 percent rate.
US President Donald Trump announced yesterday, via his Truth Social platform, that the US had reached a trade agreement with Vietnam.
The agreement would see a 40 percent tariff on goods transhipped through Vietnam and a 20 percent tariff on all other Vietnamese imports.
The announcement, however, was short on specific details, one of the most crucial being a definition of what ‘transhipped goods’ will be.
With this in mind, there are still a lot of questions to be answered, and as such, any analysis should be taken with a grain of salt.
That said, there are a few stand-out sectors in terms of possible transhipping that will be worth keeping an eye on as more details of the deal come to light.
These are discussed below.
United States’ Rules of Origin
Firstly, however, it’s important to note that most free trade agreements use a combination of domestic value added (generally around 35 percent) and a change of HS code to determine whether a good can be claimed to have been made in a certain jurisdiction.
For the United States, however, it’s a little different.
It also employs a HS code change rule; however, it adds a “substantial transformation test”.
This is a case-by-case assessment by US Customs of how much a product’s name, character, or use has changed as it passes through a country.
This makes ROO assessments in the US far more subjective compared to many other parts of the world.
That is to say, any broad risk assessment based on the president’s announcement yesterday has significant limitations.
However, there are a number of key indicators that can be used to determine which sectors may find themselves under the most scrutiny and subsequently what impact this might have on these sectors and Vietnam’s economy overall.
Key
Total exports
Total value of goods exported to the US in 2024, based on preliminary Vietnam Customs data released in January 2025.
Exports to US
Total value of goods exported to the US in 2024, using preliminary customs data from January 2025.
Exports to US (%) total exports
Total value of goods exported to the US in 2024, using preliminary customs data from January 2025, as a percentage of all exports to the US.
Sector exports to US (%)
Total value of goods exported to the US in 2024, using preliminary customs data from January 2025, as a percentage of the sector’s total exports.
Domestic value added as a percent of gross exports
The share of value contributed within Vietnam to a given export item, per OECD Trade in Value Added data (2020).
Re-exported intermediate imports
The percentage of imported parts or materials incorporated into a particular export item before re-export, per OECD Trade in Value Added data (2020).
Garments and Textiles
| Total exports | 37,036,851,951 |
| Total exports to the US | 16,151,794,382 |
| Exports to US (%) total exports | 13.52% |
| Sector exports to US (%) | 43.61% |
| Domestic value added | 44.6% |
| Re-exported intermediate imports | 90.7% |
With 44.6 percent domestic value added and an extremely high 90.7 percent reliance on imported inputs, garment and textile makers should expect some scrutiny from US trade authorities.
Moreover, with 44 percent of the sector’s exports shipped to the US, it is heavily exposed to any change in origin enforcement.
Electronics
| Total exports | 72,584,230,572 |
| Total exports to the US | 23,201,555,610 |
| Exports to US (%) total exports | 19.42% |
| Sector exports to US (%) | 31.97% |
| Domestic value added | 50.1% |
| Re-exported intermediate imports | 84.3% |
Electronics have a moderate domestic value added share of 50.1 percent but a very high re-exported intermediate import rate of 84.3 percent.
About 32 percent of the sector’s exports go to the US, underlining both their economic importance and a heightened transhipment risk.
Wood products
| Total exports | 16,282,136,053 |
| Total exports to the US | 9,056,598,490 |
| Exports to US (%) total exports | 7.58% |
| Sector exports to US (%) | 55.62% |
| Domestic value added | 47.8% |
| Re-exported intermediate imports | 67.0% |
Despite having stronger local content at 47.8 percent and lower (but still high) re-exported intermediate imports at 67 percent, wood products remain highly exposed, with more than half of sector exports destined for the US market.
Machines and Equipment
| Total exports | 52,191,541,774 |
| Total exports to the US | 22,052,523,094 |
| Exports to US (%) | 18.45% |
| Sector exports to US (%) total exports | 42.25% |
| Domestic value added | 29.6% |
| Re-exported intermediate imports | 62.6% |
This sector shows the lowest domestic value added among these categories at just 29.6 percent, combined with a high 62.6 percent share of imported intermediate inputs.
Over 42 percent of its exports are US-bound, suggesting that, despite smaller absolute values, it could face serious scrutiny.
What to watch moving forward
Again, there are a lot of unanswered questions with respect to the trade deal Donald Trump announced last night, and this makes it difficult to accurately assess its impacts.
Key questions that will shed the most light on what the outcomes of this deal might be include:
- How is a good determined to have been transhipped?
- How will this be monitored and enforced?
- What support will be made available for impacted industries in Vietnam, if any?
That is to say, it’s all very vague right now, and there is still a lot of detail to be filled in.
Garment and textile, electronics, wood products, and machine and equipment manufacturing firms, however, should be watching most closely as more details come to light.
See also: Trans shipping: To What Extent is Vietnam China’s backdoor to the U.S.?