Trump’s Vietnamese Pact is directed to China, raises more questions than answers

US President Donald Trump announced a commercial pact with Vietnam on Wednesday, but his scarce details left the economists to wonder what it would mean for the flow of Chinese goods, diverted through the country.

Trump said on Wednesday There will be a 20% Tariff for Vietnam goods and a 40% tariff for “transshing” of goods originating from another country and transferred to Vietnam for a final consignment in the United States

Chinese manufacturers have used transshine to bypass the huge tariffs of their direct consignments in the United States using Vietnam as a major transfer center.

White House trading adviser Peter Navarro claims that about one -third of Vietnam’s exports are diverted from China and identified Vietnam as “essentially a colony of communist China” in an interview with Fox News in April.

The last deal is an obvious strike against such redirected shipments from China, said Yao Jin, Assistant Professor of Delivery Chain Management at the University of Miami.

But the imposition of targeted levies on transplants will be a difficult task for Hanoi, as it will have to determine the scope of what would be ranked as “made in Vietnam” and what a transfer is.

“If this applies only to clean transfers – goods sent from China to the United States through Vietnamese ports, without a local assembly – then it must hardly have an impact on Vietnam,” Frederick Neumann, Chief Economist of Asia Bank told CNBC on Friday.

However, if a 40% tariff is applied to “all Vietnamese goods with even a minimal share of Chinese components, interruptions can be significant,” Neumann said.

Similarly, Dan Wang, a director of China at Eurasia Group, said “it is not clear how this would work – probably the weight falls on Hanoi regarding the issuance of certificates for origin rules – and what level of Chinese components, if this is the indicator, will be considered too much.”

As more Chinese manufacturers have moved their production to Vietnam from Trump’s first term, the Vietnam trade surplus with the United States more than a trip to a Register a high $ 123.5 billion Last year from less than $ 40 billion in 2018, According to the US Census BureauS

Many Southeast Asian countries had favored Since the last US trade war during Trump’s first term, serving as alternative centers for production and export.

More commercial transactions will be determined by the country’s own assessment of its exposure to the US and China markets, the level of transfer activity in this country and the consequences for local industries, said Lynn Song, Chief Chinese Economist in Ing.

Shipments from China to many countries from Southeast Asia this year have grown to a record high Shown Chinese customs data., So

If trade transactions in Vietnam and the United Kingdom are any indications, future transactions of the United States with other countries are likely to include measures to restore transfer, increasing the purchase of US goods and “provisions aimed at Chinese,” said Stephen Olson CNBC.

The strict security requirements for steel and pharmaceutical products in the US-UK deal are considered as an attempt to remove China from the British supply chain.

The country’s Ministry of Commerce said on Thursday that it is “Conduct From the agreement, urging other countries not to seek a deal with Washington at the expense of China’s interests.

China is likely to see Washington as “using reciprocal tariff negotiations to make third parties try to get China out of supply chains,” Olson added. He expects Beijing to put pressure on countries not to join the US demands and to return against this practice in negotiations with Washington.

This said that Beijing is likely to give up any specific actions as the deal is clarified, the experts said as they wait to see how the commercial transactions of other countries are shaped.

“The transfer of the table to a commercial deal in Vietnam would be unreasonable,” said Ing.

In recent days, the US and China have returned from restrictive measures against each other in honor of the commercial consensus achieved in Geneva, Switzerland, in May. Since then, Washington has raised Ethan export restrictions, chip design software and parts of jet engines, while Beijing is set to quickly pass the export approval to rare land.

Both sides reached a commercial framework Last month after talks in London, which remained in force until mid -August, with Chinese goods currently facing about 55%tariffs.

The US and Vietnam deal also suggests that the end tariffs for Chinese goods are unlikely to fall under this threshold of 40%, according to Nick Maro, the chief economist of the Economic Intelligence Division, as lower duties for direct delivery from China can encourage companies to displace the production of china.