[CTC] Facing ‘existential’ threat, Vietnam aims to reach trade deal soon with US

Wed May 28 06:51:52 PDT 2025

*Facing ‘existential’ threat, Vietnam aims to reach trade deal soon with US*

By Doug Palmer, PoliticoPro

5/27/25

Vietnam appears primed to be one of the first Asian countries to reach a
deal with the United States to avoid President Donald Trump’s sweeping new
tariffs, driven by its desire to avoid what would be an existential threat
to its economy.

“I do think it's one that is going to be on the earlier side,” said Erin
Murphy, an expert in Asian economic issues at the Center for Strategic and
International Studies, a nonpartisan Washington-based think tank. “It would
be devastating for them if they don’t get a deal because we’re such a huge
market for them.”

*Under pressure:* Few countries are in a deeper trade hole with the United
States than Vietnam, putting enormous pressure on Hanoi to reach a deal
with Trump in coming weeks to avoid his threat to impose 46 percent tariffs
on Vietnamese goods.

That was one of the highest rates that Trump announced for any country when
he unveiled his new “reciprocal” tariff program on April 2.

He subsequently delayed the action for 90 days, ending on July 8, to allow
time for countries to negotiate smaller tariff increases. But
administration officials say they won’t go below a 10 percent “baseline”
tariff on all goods also announced on April 2 and already in effect.

Last year, Vietnam exported $136 billion worth of electronics, clothing,
footwear, furniture, seafood and other goods to the United States and
bought just $13 billion of American agricultural products and manufactured
goods in return.

To balance trade, Vietnam either would have to increase its purchases of
U.S. goods by more than $120 billion annually — basically a 1000 percent
increase — or slash its exports to the United States dramatically.

The second option would be catastrophic since the United States is
Vietnam’s largest export market, bigger even than China, its huge neighbor
to the north. Factories built to make products for American consumers can’t
easily be redirected to other markets, especially if the American companies
behind them relocate to other countries.

While no country in Southeast Asia is happy about Trump’s tariff tactics,
some such as Malaysia and Thailand are less worried, said one industry
official, who like others in this article was granted anonymity to discuss
the sensitive trade talks. But for Vietnam, the possibility of a 46 percent
U.S. tariff is an “existential” threat, he said.

*Potential purchases:* A framework agreement with the Trump administration
is likely to include purchases of American military equipment
<https://www.rfa.org/english/vietnam/2025/04/21/us-f16-fighter-jet-sale/> and
other goods, along with tariff cuts and possibly some measures aimed at
reducing Vietnam’s trade ties with China, Murphy said.

In recent months, Vietnam has signaled its intention to buy Boeing aircraft
<https://www.reuters.com/business/aerospace-defense/vietnam-airlines-signs-funding-deal-with-vietcombank-50-narrow-body-planes-2025-04-24/>
, agricultural goods
<https://www.reuters.com/markets/commodities/vietnam-says-ready-import-more-us-farm-goods-trade-risks-rise-2025-02-14/>
 and liquefied natural gas
<https://www.reuters.com/world/asia-pacific/vietnam-reviewing-duties-us-lng-high-tech-products-pm-says-2025-03-14/>from
the United States. It’s also moved to cut tariffs on cars, LNG and ethanol,
which is primarily made from corn in the U.S.

After Trump unveiled his reciprocal tariff program in April, Vietnamese
Prime Minister Pham Minh Chinh also promised to buy more American defense
and security equipment
<https://www.reuters.com/world/asia-pacific/vietnam-says-buy-american-defence-security-products-trump-tariffs-loom-2025-04-08/>
.

Vietnam's Trade and Industry Minister Nguyen Hong Dien has already made
several trips to the United States and held talks with U.S. Trade
Representative Jamieson Greer earlier this month in South Korea, where the
two sides reached “a high level of agreement on issues of principles,
approaches, content orientations and negotiation plans,” according to an
unofficial English translation of a Vietnamese government statement
<https://moit.gov.vn/tin-tuc/viet-nam-va-hoa-ky-thuc-day-dam-phan-cap-bo-truong-hiep-dinh-thuong-mai-doi-ung.html>
.

During the latest meetings last week in Washington with Greer and Commerce
Secretary Howard Lutnick, the two sides pledged “to soon reach an agreement
in accordance with the expectations and conditions of each side,” the
Vietnamese government said. USTR, the Commerce Department and the White
House did not respond to a request for comment on last week's discussions.

USTR’s annual report on foreign trade barriers
<https://ustr.gov/sites/default/files/files/Press/Reports/2025NTE.pdf> includes
seven pages on Vietnam, highlighting concerns about protection of U.S.
intellectual property rights for U.S. music, movies and pharmaceuticals as
well as digital trade barriers and food safety standards that thwart sales
of U.S. agricultural products.

Having barely avoided tariffs during Trump’s first term, Vietnam began
moving very quickly after Trump was elected again in November to show they
were serious about trying to reduce the trade imbalance. “They sent
negotiating teams almost immediately,” Murphy said, adding that the Trump
Organization family business also had been in talks to build a skyscraper
in Vietnam in addition to a recently approved golf course
<https://www.reuters.com/world/asia-pacific/trump-organization-break-ground-golf-club-vietnam-amid-trade-talks-2025-05-21/>
.

But unlike other Asian trading partners such as Japan and South Korea,
Vietnam has few big companies that can help cool Trump’s tariff fever by
pouring huge new investments into the United States, industry officials
said.

*Tough regional competition: *Although two of Vietnam's neighbors, Laos and
Cambodia, face higher potential U.S. tariffs — 48 percent and 49 percent
respectively — under Trump’s “reciprocal” tariff scheme, their economies
are far less dependent on trade with the United States. Cambodia exported
just $321 million worth of goods to the United States last year and Laos
only $40 million.

In addition, many other members of the Association of Southeast Asian
Nations face substantially lower reciprocal tariff rates than Vietnam,
including 17 percent for the Philippines, 24 percent for Brunei and
Malaysia, 32 percent for Indonesia and 36 percent for Thailand.

That's raised concerns in Hanoi that any ASEAN country that ends up with a
substantially lower rate than Vietnam would have a huge advantage in
attracting investment for production aimed at the U.S.

*Lingering uncertainties:* Industry officials are worried about what more
the Trump administration could ask Vietnam to do — especially in regards to
China — to reduce its tariff threats.

Two possibilities believed to be under discussion include Vietnam matching
U.S. tariff rates on Chinese goods and agreeing to rules that would allow
the U.S. to impose higher tariffs on Vietnamese goods that contain
significant Chinese content or that are manufactured in Vietnam at
Chinese-owned facilities, industry officials said.

Both ideas would be hard for Vietnam and other ASEAN countries to accept,
as would other potential demands to cooperate with the U.S. on export
controls aimed at keeping certain high-tech goods out of China’s reach or
investment screening to limit Chinese investment in Vietnam’s economy,
Murphy said.

Trump’s threat to impose tariffs on semiconductors
<https://www.federalregister.gov/documents/2025/04/16/2025-06591/notice-of-request-for-public-comments-on-section-232-national-security-investigation-of-imports-of>
and
downstream products that contain semiconductors is another huge area of
concern since it could potentially affect tens of billions of dollars worth
of Vietnam’s electronic exports to the United States.

Vietnamese officials are also worried about an executive order that Trump
issued in April
<https://www.whitehouse.gov/presidential-actions/2025/04/restoring-american-seafood-competitiveness/>
that
orders USTR and the Commerce Department to develop a “comprehensive seafood
trade strategy” since that could lead to tariffs on Vietnam’s seafood
sector.

It could be hard for Vietnam to strike a deal with the U.S. unless they
have a clearer idea how those key probes will affect their key exports,
industry officials said.
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