On July 2nd, transshipping the Trump administration announced a trade agreement with Vietnam. Over the past few years Vietnam has represented a counterbalance of overseas manufacturing capability against overdependence on Chinese based manufacturing. There are however some sticking points that the market will have to absorb.
Vietnamese goods were currently being imported into the US at 10 percent under current tariff rules. The announced rate per the trade agreement is set to be 20 percent. A doubling of the current rate. This is likely to increase prices in the US for consumer goods in Vietnam. One of the other issues highlighted was the transshipping of Chinese goods to Vietnam and then relabeling these goods as Vietnamese. These goods will face a 40 percent tariff.
While lower than the initially announced reciprocal tariff of 46 percent, this tariff announcement most likely falls short of market expectations. In the same announcement it was announced that US goods into Vietnam would face no tariffs. In that same vein Vietnam’s per capita income as of 2023 is 4282.08 as of 2023. This will not lead to much increase in individual Vietnamese consumer demand for US products and these tariff free imports will most likely benefit manufacturing/industrial customers.
As a trader I will be continuing to monitor how stocks heavily affected by imports into the US will continue to reach. With the July 9th deadline of tariff pauses quickly approaching it will be rather important to keep an ear to the ground for news on further deals being announced and more importantly how the market reacts to the news.
