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China has hit out at the US-Vietnam trade deal, amid concerns in Beijing that the US president is using his “liberation day” tariff negotiations with third countries to curb its export machine.
The deal with Vietnam lowers tariffs on Hanoi’s exports from a threatened 46 per cent to 20 per cent, but retains a 40 per cent levy on “trans-shipping” of goods — widely believed to be aimed at Chinese re-exports to the US.
The agreement, announced on Wednesday, is the second seen as targeting China since President Donald Trump outlined his “liberation day” increases in tariffs on April 2. In May, the US and UK agreed a deal that included strict security requirements for steel and pharmaceuticals that were widely seen as intended to squeeze China out of British supply chains.
The ministry of foreign affairs in Beijing, when asked about the deal with Vietnam, an important trading partner with China, on Thursday, said trade negotiations should not hurt the interests of “third parties”.
“Relevant negotiations and agreements should not target or undermine the interests of any third party,” the ministry said.
Scores of countries are racing to reach trade deals with the US before the July 9 deadline, when Trump’s suspended “reciprocal” tariffs will come into effect.
Vietnam, one of the world’s most trade dependent countries, had a particularly strong incentive to act quickly to avoid US tariffs. The US buys 30 per cent of its exports.
But the extent of the final tariffs agreed and the additional levy on trans-shipping reflected the heavy price for Hanoi to seal the agreement, analysts said.
“The new US-Vietnam deal is not just about trade; it is clearly aimed at China . . . it is meant to block the flow of Chinese goods that often move through Vietnam to dodge existing US duties,” said Julien Chaisse, an expert on international economic law at the City University of Hong Kong.
“This fits a much wider trend: the US is lining up bilateral deals with countries near China to tighten economic co-operation and, at the same time, [make] it harder for Beijing to stretch its supply chain influence.”
Many south-east Asian nations had prospered during the US-China trade war by offering alternative manufacturing and export hubs for Chinese companies seeking to evade US tariffs. But capitalising on this “China plus one” strategy translated into large trade surpluses in goods with the US.
“The key lesson for other countries from this deal, and that agreed previously by the UK, is that they will be expected to curtail some trade with China,” said Capital Economics’ chief Asia economist Mark Williams and senior Asia economist Gareth Leather wrote in a note.
“That will be seen as a provocation in Beijing, particularly if similar conditions are included in any other deals agreed over coming days.”
China’s commerce ministry on Thursday also said that it firmly opposed any countries reaching a trade deal at its expense, adding that it would safeguard its rights and interests.
Analysts warned that the Vietnam deal, as well as others that Beijing deems as endangering its interests, could also undermine US-China trade talks. Trump recently claimed a tariff truce with Beijing has been signed, but concerns remain over Chinese restrictions on the flow of rare-earth exports and US export controls on advanced technology such as semiconductors.
Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, said it was a positive sign that Vietnam had locked in a deal ahead of the deadline, avoiding the situation of countries such as Japan, which Trump again this week threatened with higher tariffs.
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But Sitkoff noted that the details of the US-Vietnam deal remained uncertain.
“Assessing the pros and cons of the deal is difficult without seeing further details about what the tariffs actually mean,” he said.
Key for Hanoi will be how the 40 per cent trans-shipment levy is enforced. Trans-shipment is difficult to trace and the Trump administration has not said how it defines the practice, though it has made the issue a priority in trade talks with Vietnam and other south-east Asian countries.
Sitkoff added that it was unclear whether the 20 per cent tariff was a final amount or if it would be applied on top of existing levies, and which products would be subject to the 40 per cent charge.
“Do the 40 per cent tariffs on ‘trans-shipped’ goods apply to any product that contains content from another nation? The answers to these questions can be the difference between celebrating or crying,” he said.
