So, what does the United States get?At the heart of the statement is a 20 percent tariff to be charged on goods entering the US from Vietnam.
This was first announced back in July and at the time was heralded as a win on account of the fact it was a reduction from the 46 percent tariff Trump had first floated back in April.
Although it’s worth remembering the average trade-weighted import tariff on goods entering the USA pre-April of this year was just 2.2 percent, according to the World Trade Organisation.
Aside from tariffs, the statement also addresses non-tariff barriers for US producers.
It singles out:
- Motor vehicles only needing to meet US safety and emissions standards, as opposed to Vietnam’s as well;
- Addressing import licenses for medical devices from the US;
- Making regulatory approvals for US pharmaceuticals easier;
- Implementing and enforcing the intellectual property rights Vietnam has already agreed to in several international agreements; and
- Responding to US concerns about the alignment between Vietnam’s testing, inspection, and certification procedures with those of the US.
On top of that, Vietnam is expected to lower market entry barriers for US agricultural products, with a view to accepting certificates issued by US regulatory authorities, too.
Finally, the statement says Vietnam Airlines will buy 50 aircraft from Boeing worth over $8 billion, with 20 MoUs signed signalling purchases of US$2.9 billion worth of US goods if realised.
What does Vietnam get?
Firstly, it’s worth mentioning that if the United States gets what it’s asking for, many of these reforms will have positive spillover effects for Vietnam.
Stronger IP enforcement, for example, is good for all major brands and would likely strengthen Vietnam’s reputation as a safe place to do business IP-wise.
Making it easier and faster to import pharmaceuticals and medical devices should ultimately make them cheaper and more accessible.
Moreover, cheaper agricultural products from the US will benefit the hip pocket of Vietnamese consumers, too.
That said, as far as direct gains from the agreement go, the short answer is: not much.
The only line item that might directly benefit Vietnamese producers is that some products might be identified for a zero-tariff rate. These are listed in Appendix III.
Coffee from Vietnam received special mention by the president as likely to face a zero percent tariff, though notably, the industry’s response has been somewhat muted.
In an interview with Nguoi Lao Dong earlier this week, the head of VICOFA noted that this will depend on whether other coffee producers are afforded the same exemption, that the US doesn’t buy all that much Vietnamese coffee, and that Vietnam produces robusta coffee, but US consumers have a preference for Arabica.
But of the items listed in Appendix III, about 1,900 eight-digit HS codes out of a possible 5,400, there aren’t a lot that apply to Vietnam.
For example, items that don’t appear on the list include footwear, and garments and textiles, which combined accounted for about US$20.2 billion worth of exports to the US in the first nine months of this year, about 17.9 percent of a total of US$112.8 billion.
These carve-outs, therefore, might be better than nothing, but are likely to be limited.
What’s still on the table?
Notably, the joint statement doesn’t cover everything that was reportedly discussed in Malaysia.
Aside from lower tariffs, Vietnam has also thrown market economy status and D1 and D3 export restrictions on the agenda, both of which Vietnam’s Prime Minister reportedly raised with Trump in Malaysia, to which the local press has reported there was a positive response.
On the former, however, it seems unlikely that a change of circumstances review, which is what would be required, will be repeated after one was undertaken last year.
On the latter, D1 export restrictions relate to national security, and include things like electronics, avionics, navigation systems, sensors, and high-performance computing equipment, while D3 relates to chemicals that can be used for biological weapons, things like pathogens, toxins, biological agents, and genetic elements with potential use in biological warfare.
It seems unlikely Vietnam would be importing very much of either of these for its own use; moreover, they can be imported now, it’s just that the exporter needs to get it approved.
So, what does this latest statement mean?
White House economic adviser Stephen Miran referred to the trade deal announced back in July as “fantastic” for the US and “extremely one-sided”, and this announcement isn’t all that different from that one.
Moreover, there has been no word on how Vietnam might address most-favoured-nation issues that would require any cut to tariffs on US goods, in lieu of a formal trade agreement, to be afforded to all other members of the WTO.
It’s on this point that clarity on a timeline would be useful — does Vietnam lower tariffs on US goods now? Or does it wait for a formal trade agreement? And then does a formal trade agreement even happen if Vietnam doesn’t make these changes first?
That is to say, there is still significant ambiguity around what exactly is happening in terms of any sort of trade agreement, or even what a trade agreement looks like under the Trump administration.
With this in mind, the statement issued over the weekend seems unlikely to change much, if anything at all.
