Goodbye Beijing, Hello Hanoi: Trump’s Trade Pact with Vietnam

July 7th, 2025
Sophia Amundgaard

Since April, the Vietnamese economy has surged, boasting a gross domestic product (GDP) expansion of 7.96% as its markets braced themselves for the Trump Administration's 46% tariff levy. As of Wednesday, Hanoi has narrowly escaped that fate after Vietnamese President Lương Cường signed the first of Trump’s trade pacts in Asia. But Vietnam isn’t out of the woods yet.

The Deal

Compared to Trump's Liberation Day reciprocal tariffs, this deal dramatically reduces the levy on Vietnamese exports to just 20%. Though still double the universal 10% tariff, this deal is critical, as the US remains Vietnam's largest export market. Additionally, the pact enables Vietnam to import American products tariff-free, or as Trump put it on Truth Social, “OPEN THEIR MARKET TO THE UNITED STATES.”

More crucially, it established a 40% levy on transshipments—goods transferred from one vessel or route to another mid-shipment—which have long been weaponized by China to circumvent American tariffs. In an April interview, Trump asserted that, “Vietnam sells us $15 for every $1 that we sell them and about $5 of that is just Chinese product that comes into Vietnam,” citing the process as a driver of America’s $123.5 billion trade deficit with the nation.

China’s Stake

An attack on transshipments could spell disaster for the vulnerable Chinese economy as it anticipates getting hit with tariffs as high as 145% after Trump’s 90-day pause expires on the 9th.

As of 2024, 69% of surveyed Chinese manufacturers reported a desire to move overseas following Trump’s reelection and dedication to restructuring American foreign policy. However, as the administration's America First plan continues to expand, the cost of domestic manufacturing in China may skyrocket above predetermined levels, signaling a significant increase in offshoring.

The trade pact will only serve to exacerbate this crisis. In fact, despite maintaining their position as Vietnam’s largest trade partner, almost a third of Sino-Vietnamese trade consists of transshipments.

China has thus far been able to avoid the direct impacts of Trump’s tariff war. Yet, as TIME analysts note, a recent surge in shipment rerouting to nations like Malaysia and Indonesia suggests, “China was able to continue its flow of goods to the US through transshipments,” meaning a crackdown on transshipments could reveal even more faults in the Chinese economy.

China’s well aware. As spokeswoman He Yongqian asserted on Thursday, "We are happy to see all parties resolve trade conflicts with the US through equal negotiations but firmly oppose any party striking a deal at the expense of China's interests”.

Implications for Vietnam

Vietnam may have dodged the initial bullet, but it now finds itself in the crosshairs of a broader, difficult-to-manage conflict.

Economist Xu Tianchen outlines that, “the bigger structural issue is that China is the biggest producer in the world and the US is the largest consumer in the world…If you close the loophole for Vietnam, then other connectors will emerge,” meaning Cường has a series of difficult decisions to make between Trump and Xi.

Further burdening Vietnam is the weight of regulation. UCSD associate Caroline Freund posits that “the thing about trade is when there are huge arbitrage opportunities, people are going to find a way to take advantage of them, legally or illegally,” asserting that there’s only so much Vietnam can do to trace transshipments. However, by failing to catch them, Hanoi runs the risk of losing the US entirely.

Extemp Analysis by: Sophia Amundgaard

Identifying a question’s driver is imperative to effectively answering it, so let’s evaluate:

Question: Can Vietnam effectively balance its ties to China amid tariff tensions?

AGD: This speech will likely be super content-heavy and rather complex, so I recommend keeping the intro light, both in a humorous and length sense. As per usual, there are a lot of easy grabs for tariffs and/or any kind of relationship with China. One that comes to mind initially (thanks to r/nottheonion) is a republican lawmaker suggesting “kids don’t need toys, they need tariffs”. Feel free to go more specific to Vietnam or China if you please, but do not feel trapped.

Background: In extemp, we draw a lot of prompts that are motivated by recent developments even if they don’t explicitly outline them—in this case, it’s Trump’s tariff pact with Vietnam that complicates its relationship with China. After reading the above article, it’s also clear that transshipments are what really threaten Xi Jinping. It is crucial we outline these specific developments in our background, particularly in defining transshipments and their economic significance for all three parties. We almost want to approach our context by treating this question as a triad between China, Vietnam, and the US.

SOS: An easy stat for our significance is ⅓ of trade between China and Vietnam being transshipments. Otherwise, think about the stakes for Vietnam and China—why are we asking this question now and who does it really impact? Try to get specific rather than painting with a big brush.

Answer: There are a lot of ways to approach this question. Realistically, there are going to be more points to address and research if we answer no. Here are a couple umbrellas and/or topics to consider:

Enforcement ambiguity
Backlash from Beijing
Over-reliance on China
Proxy nature (does Vietnam even have any leverage?)

Points: This question can be really confusing, but breaking it down we can address our main points in three parts:

An aspect of the China-Vietnam relationship affected by Trump’s trade pact
If Vietnam can/will address it in a way that maintains the nations’ relationship
Impact/why Vietnam’s (in)ability to do so will drive the two nations apart

Reminders: Don't trap yourself in over specific points, instead, approach the question by looking at the state of relations between China and Vietnam and breaking your research down into two parts:

Figuring out how the trade pact impacts it
Analyzing if Vietnam can avoid the negative impacts of the above

Remember to define key terms and also ensure that your background really lays out the urgency of the question. Clarity is key in a complicated speech like this—both in content and substructure, so take it slow. I’d also recommend including as much humor or tone shifts as possible without dramatizing the topic.