What Vietnam is Considering to Avoid U.S. Tariffs

 What Vietnam is Considering to Avoid U.S. Tariffs

Vietnam is facing the possibility of tariffs on nearly all of its exports to the United States after President Donald Trump announced plans for new levies that could impact the country’s $142 billion in exports to the U.S., which accounts for about 30% of Vietnam's GDP. As the U.S. adopts an increasingly protectionist stance, Vietnamese officials and foreign businesses are uncertain about how these measures will play out.

To navigate these challenges, Vietnam is considering several strategies to avoid or mitigate the impact of potential tariffs:

1. Duties and Non-Trade Barriers

Vietnam's average tariff rates are generally higher than U.S. duties, and it also applies value-added tax (VAT) on goods. However, some economists argue that the effective bilateral tariff rates between the two countries are lower in Vietnam. While it remains unclear which rates the U.S. administration is using to determine reciprocal tariffs, Vietnam has signaled that it is open to finding compromises. This could involve reducing duties on U.S. goods, but this move may also necessitate reducing tariffs on other trade partners.

Additionally, the Office of the United States Trade Representative (USTR) in its 2024 report flagged several non-tariff trade barriers in Vietnam, including import bans, complicated registration requirements, and technical or sanitary barriers. These issues might be addressed as part of ongoing discussions to ease tensions.

2. Energy Imports

Vietnam has explored increasing its purchases of U.S. liquefied natural gas (LNG) to support its developing LNG industry. However, concrete actions have yet to materialize. Discussions between Vietnamese officials and U.S. counterparts continue but have not yet resulted in firm agreements. Vietnam is also considering restarting its nuclear power program and is seeking suppliers of nuclear energy technology, potentially as a way to diversify its energy sources and engage in new trade opportunities with the U.S.

3. Agriculture Goods

Vietnam's trade minister has indicated that the country is open to importing more U.S. agricultural products. However, given that Vietnam’s total imports of farm products from the U.S. amounted to only $3.4 billion last year, increasing agriculture imports may not be enough to significantly address the trade imbalance between the two nations.

4. Transshipment and Steel

Vietnam has long been suspected of serving as a transshipment hub for Chinese goods to the U.S., particularly due to the large volumes of intermediate goods it imports from China. For certain products, like solar panels, Vietnam has already faced sanctions. Last week, Vietnam imposed temporary anti-dumping duties on Chinese steel products in response to U.S. tariffs on Vietnamese steel exports, which are already subject to anti-dumping duties. This move comes as the country seeks to avoid the impact of a potential 25% U.S. tariff on its steel exports.

Conclusion

As Vietnam faces increasing pressure from the U.S., the country is exploring multiple avenues to mitigate the impact of potential tariffs. These include opening more channels for imports of U.S. goods, adjusting tariff policies, and addressing non-trade barriers. However, the effectiveness of these measures in offsetting the broader trade tensions remains uncertain, especially given the size of the U.S. trade deficit with Vietnam.