Trump's Vietnam Strategy Signals Limited Relief on China Tariffs

according to Bloomberg News, President Donald Trump’s recent trade agreement with Vietnam offers insights into the potential future of US tariffs on Chinese imports as negotiations between Washington and Beijing progress. Currently, Chinese products are subject to tariffs around 55%, a figure expected to hold steady until August. The new deal with Vietnam introduces a 20% tariff on Vietnamese exports and an even higher 40% tax on goods identified as transshipped—an approach aimed at curbing methods used by Chinese exporters to evade US tariffs since the onset of the trade conflict.

By tightening these loopholes, the Trump administration is hinting at what any forthcoming agreements with China might entail. The significant 40% tariff on transshipped items indicates that even if there are reductions in tariffs for China, they may not dip much below this level.

Gabriel Wildau from teneo suggests that this high tariff could reflect a broader sentiment within the Trump administration regarding acceptable tariff levels for China, wich might also be mirrored in other international agreements. Though, he expresses doubt about whether there is a definitive minimum threshold for these tariffs.

Last month saw both nations establish a trade framework during discussions in London that will remain active until mid-August. As part of this arrangement, China has committed to resuming rare earth shipments—essential materials for technologies like wind turbines and electric vehicles—in exchange for some easing of US export restrictions related to ethane and certain tech components.

While current tariffs on Chinese goods have been reduced from highs of 145% earlier this year down to approximately 55%, specific levies tied to fentanyl remain unchanged at 20%.In response,Beijing has tightened regulations surrounding two chemicals crucial for fentanyl production—a strategic move aimed at gaining further concessions from Washington.

Christopher Beddor from Gavekal Research notes that all eyes are currently focused on the implications surrounding those fentanyl-related tariffs. There’s speculation that china may be open to negotiations concerning this issue since it has been signaling its willingness over recent months.

However, it seems unlikely that china’s duties will drop below Vietnam’s current rate of 40%. If they were reduced further—to say 35%—it could give Chinese manufacturers an edge again and potentially reverse trends encouraging companies away from relocating operations back home—a scenario contrary to Trump’s objectives.

Stephen Olson emphasizes that while lower rates could shift competitive dynamics slightly, relocating production isn’t as simple as flipping a switch; there’s considerable uncertainty among Chinese firms regarding how stable any set tariff level would be under Trump’s administration.

At present, both countries appear committed to honoring their London agreement terms while showing signs of goodwill towards each other. Recent actions include lifting export license requirements for chip design software sales in China and approving ethane exports without additional red tape.

Treasury Secretary scott Bessent mentioned ongoing flows of rare earth magnets from China but noted they haven’t yet returned to pre-curb levels seen before early April’s restrictions were imposed by Beijing. He expressed optimism about future easing following their recent deal during an interview with Fox News.

In another positive progress regarding US-China relations, Liu Jianchao—a senior official within China’s Communist Party—shared optimistic sentiments about bilateral ties during his address at the World Peace Forum last week.He highlighted mutual benefits derived from cooperation between both nations while cautioning against erecting barriers which would ultimately harm all parties involved.Beyond Vietnam’s agreement though, Beijing remains wary about American efforts aimed at isolating it thru various trade deals ahead of looming deadlines like July 9 when higher reciprocal tariffs are set to kick in. The US is actively pursuing new agreements across Asia and Europe designed not only around limiting reliance on Chinese components but also addressing perceived unfair practices attributed specifically towards them; India is one such nation engaged in talks over “rules of origin.”

China has acknowledged awareness regarding developments stemming from the US-Vietnam deal while assessing its implications closely. A spokesperson reiterated their stance favoring equitable negotiations but firmly opposing any arrangements detrimental toward China’s interests—with warnings issued should such scenarios arise again reflecting familiar rhetoric previously encountered throughout these discussions.Olson advises caution against viewing the US-Vietnam agreement as indicative or predictive concerning washington’s strategy towards China given vastly different stakes involved shaped by geopolitical rivalries alongside power dynamics unique within those dialogues themselves.