Vietnam firms teeter as Trump transshipping rule threatens

Vietnam Rethinks U.S. Tariff Strategy as “Transshipment” Rules Tighten

The United States, a pivotal U.S. export destination for Vietnam’s apparel and footwear, is poised to enforce a 20% tariff on shipments that originate in Vietnam and transit through Chinese channels.Companies in Vietnam are watching closely to see how this will affect the flow of goods.

How “Transshipment” May Hit Vietnam’s Supply Chain

• Huashuo, a plastic processor in Hai Phong, claims that fully produced Vietnamese parts will not be classified as “Chinese.” The firm manufactures packaging and parts on site and believes the entire production cycle eliminates the tariff burden.
• However, the agreement doubles the tariff to 40% on goods that are “transshipped” through third countries that exploit Vietnam to cheat anti‑tariff barriers. This could hit firms that export 90% of their products to the U.S. while sourcing 40% of plastic pellets from China.

Vietnam’s “Made‑in‑Vietnam” Certificate Faces Stricter Controls

Under the new policy, Hanoi requires that at least 35% of a product’s final value come from materials and production done in Vietnam before a certificate of origin is issued. Companies must disclose raw‑material origins, settle purchases, and allow factory visits. If these thresholds are missed, Washington will distrust Vietnam’s certificate and slash the tariff further.

Impact on Vietnam’s Trade Balance

• Vietnam exports 32% of its goods to the U.S. and imports 40% from China.
• Between January and May, imports from China jumped about 25% year‑on‑year, while U.S. exports grew more than 27%.
• Only about 20% of the U.S. export increase appears to stem from rerouted Chinese goods; the bulk remains domestically produced.

“China Plus One” Strategy Under Strain

Vietnam has long attracted foreign investment as a “China plus one” base, offering cost advantage and geographic proximity. Several large companies have relocated from China to Vietnam, and the country is the third‑largest investor after South Korea and Singapore. Yet the economy is largely driven by re‑export, processing, and trade‑oriented production, making it vulnerable if U.S. sanctions target Chinese components.

Key Stakeholder Insights:

• Adam Ahmad Samdin, Oxford Economics: The U.S. tariff policy could drive many international firms to halt the “China plus one” strategy. Taiwanese electronics are especially exposed due to high Chinese input content.
• Marcel Thieliant, Capital Economics: Only a fraction of U.S. export growth comes from transshipped goods; domestic manufacturing supplies most of the demand.
• Alicia Garcia Herrero, Natixis: The U.S. policy to carve out Southeast Asian influence will likely face obstacles as China remains integral to regional supply chains.

Outlook

Vietnam’s future in a U.S.-China trade war hinges on its capacity to differentiate truly Vietnamese-produced goods and maintain strict compliance with origin certification requirements. As Washington extends its reach into Asia, many Vietnamese exporters remain cautious, waiting to see how transshipment rules will actually play out before accelerating investment.