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The US has implemented a new executive order, on July 31, 2025, that maintains existing rates for Vietnamese imports while imposing modified reciprocal tariffs on other countries. This framework, which came after extensive trade negotiations, offers a mixed bag of implications for Vietnam’s exporters as they navigate the competitive landscape against regional peers.
On July 31, 2025, US President Donald Trump signed a new executive order imposing additional tariffs, ranging from 10 to 41 percent, on imports from 68 countries and the EU. While there are many newly announced rates for US trade partners, the rates for Vietnam have stayed the same as previously stated.
On July 2, 2025, President Trump announced a 20 percent tariff on several of Vietnam’s exports and a 40 percent duty on transshipments from third countries. Before these rates were announced, the US President and Vietnam’s General Secretary To Lam had spoken on the phone.
With the official rates significantly lower than the 46 percent initially threatened, both sides claimed that the trade negotiations, which lasted more than two months, had yielded a win-win result. Vietnam was the third country to announce a tariff agreement with the US, following that of the UK and China.
Also read: Understanding the US Tariff List: Implications for Vietnam
There are two annexes attached to the executive order.
Annex I, which prescribes the modified reciprocal rates by country or territory
It will replace the older set of percentage-based import taxes on goods from certain countries with new rates.
Accordingly, around 40 countries will pay a 15 percent tariff rate, which is the tariff floor for those who export more to the US than they import from the country. Meanwhile, a 10 percent tariff rate will be applied to imports from countries with which the US has a trade surplus. This rate will be effective with respect to goods entered for consumption, or withdrawn from the warehouse for consumption, from August 7, 2025.
Annex II, which prescribes the modified US Harmonized Tariff Schedule
These are product-specific tariffs effective with respect to goods entered for consumption, or withdrawn from the warehouse for consumption, from August 7, 2025.
The tariffs from both annexes will take effect on August 7, 2025, to give US Customs and Border Protection (CBP) enough time to implement the necessary changes for collecting the new duties.
In alignment with Executive Order 14257, issued on April 2, 2025, a number of product categories are exempt from the application of reciprocal tariff rates outlined in the latest executive action. Key exclusions include:
This exemption does not apply to goods subject to the 10 percent baseline reciprocal tariff.
Under Section 3 of the executive order, any article found by the US CBP to have been transshipped in order to evade applicable duties will be subject to enhanced enforcement measures. Specifically:
Furthermore, CBP will not grant mitigation or remission of penalties assessed in such cases, consistent with US law. This underscores a strict enforcement stance against transshipment as a means of tariff circumvention.
Earlier this July, the US President Trump made his announcement via Truth Social ( a social media platform), just days before the July 9 deadline of the 90-day tariff truce. While providing no substantive clarification on how “transshipped” products will be identified, Trump claimed the deal means Vietnam will “open their market to the United States” with US businesses being able to sell products into Vietnam at “ZERO Tariff.” He also predicted that sport utility vehicles (SUVs) will be among the US exports benefiting from the agreement with Vietnam.
While mentioning the 20 percent tariff on imports from Vietnam, President Trump has not clarified whether this new levy is an addition to or a replacement for previous tariffs.
On July 2, Vietnam’s Ministry of Foreign Affairs announced the tariff agreement, noting that the US President reaffirmed his administration’s commitment to working with Vietnam on issues affecting bilateral trade, especially in areas both sides prioritize. Meanwhile, To Lam urged the US to promptly recognize Vietnam as a market economy and remove export restrictions on certain high-tech products.
The two leaders also discussed steps to strengthen the Comprehensive Strategic Partnership in the years to come. They agreed to enhance delegation exchanges and high-level contacts, and to boost cooperation in economics, trade, and investment, with a focus on key areas such as science and advanced technology.
Overall, experts believe the 20 percent rates for Vietnam can be perceived either as a good or a bad deal for producers and exporters from the country, depending on how they leverage other competitive edges that Vietnam provides.
According to Dragon Capital, the resolution strengthens Vietnam’s regional competitiveness, offering lower tariff exposure compared to Indonesia (19 percent) and the Philippines (20 percent), while maintaining a significant margin over China’s 55 percent rate. By eliminating a key macroeconomic uncertainty that previously threatened to shave 1.4 to 2 percent off GDP growth, the move reinforces investor confidence and mitigates the risk of capital flight. Although discussions on transshipment classifications are ongoing, the overall framework safeguards Vietnam’s export-oriented growth strategy and solidifies its position as a leading alternative in Asia’s supply chain restructuring.
In addition, Vietnam still offers distinct merits in comparison with many of its regional counterparts, such as:
Country/Territory
April 2, 2025, announced rate
July 31, 2025, modified rate
Bangladesh
37%
20%
Brazil
10%
10%
Brunei
10%
25%
Cambodia
49%
19%
European Union: Goods with Column 1 Duty Rate > 15%
20%
0%
European Union: Goods with Column 1 Duty Rate < 15%
20%
15% minus Column 1 Duty Rate
India
26%
25%
Indonesia
32%
19%
Japan
24%
15%
Laos
48%
40%
Malaysia
24%
19%
Myanmar (Burma)
44%
40%
Philippines
17%
19%
South Korea
25%
15%
Taiwan
32%
20%
Thailand
36%
19%
Vietnam
26%
20%
Despite being significantly lower than the 46 percent rate, the newly announced 20 percent tariff is double the current 10 percent tariff rate that the US imposed on Vietnamese imports on April 21, 2025.
Many experts believe that the new tariff can be seen either as a relief from the earlier threat or as a greater burden to US importers and consumers. Increasing the tariff on Vietnamese goods to 20 percent will raise costs for US importers, potentially leading to pass-down costs for suppliers or higher prices for consumers.
According to CNBC, a 10 percent US tariff on Vietnamese goods would result in an approximate 8 percent increase in the cost of imported men’s sweaters. Meanwhile, under the 46 percent tariff initially imposed by President Trump on Vietnam, the price of such sweaters would rise by approximately 35 percent.
One notion is that, according to Bloomberg, some officials in the US government want tariffs for Vietnam and others in Southeast Asia to be sufficiently lower than those imposed on China, in order to encourage production to leave that country.
Also read: Vietnam-US Trade and Investment Relations: Q1 2025 Update
Vietnam’s Key Exports to the US, Q1 2025
Items
Value (US$ billion )
Proportion
Total
31.39
100%
Computers, electrical products, spare-parts and components thereof
7.47
24%
Machine, equipment, tools and instruments
5.26
17%
Textiles and garments
3.78
12%
Telephones, mobile phones and parts thereof
2.74
9%
Wood and wooden products
2.13
7%
Toys and sports requisites; parts and accessories thereof
2.06
7%
Foot-wears
1.97
6%
A 40 percent rate is set to be imposed on goods deemed to be “transshipping,” which has not been supported by guidelines. Experts suggest this targets Chinese-origin goods minimally processed in Vietnam before re-export to the US.
Currently, a key tool for determining transhipments is the Country of Origin Marking on US imports.
According to the US Customs and Border Protection (USCBP), every article of foreign origin entering the US must be legibly marked with the English name of the country of origin unless an exception from marking is provided for in the law. The marking’s purpose is to inform the final buyer in the US about where the product was manufactured.
The most effective marking integrates with the product itself, such as via branding, stenciling, stamping, printing, molding, or similar techniques. Other marking methods can also be acceptable, provided that they remain legible and visible until the product reaches the final US purchaser. The marking must withstand handling, meaning it should only be defaced, destroyed, removed, altered, obliterated, or obscured through intentional actions.
USCBP clarifies that the country of origin is where the article is manufactured, produced, or grown. The country of origin of an article may change in a secondary country in one of the following situations:
While waiting for further guidelines from both countries, businesses shall refer to this regime to avoid possible product labels as “transshipment”.
Also read: The Impact of Tariffs on Vietnamese Exports: US-Vietnam Trade Relations Under Trump 2.0
Case study: Handling of incorrectly marked goods from Executive Order 13936
Executive Order 13936, issued by the US, requires goods produced in Hong Kong to be marked as “China” for the purpose of origin marking, rather than “Hong Kong.” This change, effective November 9, 2020, is based on the determination that Hong Kong is no longer sufficiently autonomous to warrant separate treatment under US law. While the marking is changed to “China,” the country of origin for duty purposes remains Hong Kong.
Although it bears little resemblance to the case of Vietnam, businesses could study the order as a precedent for handling goods that are not properly marked. Accordingly, goods that are not correctly marked after the transition period may be brought into a Foreign Trade Zone (FTZ) to be properly marked under a permit to manipulate issued by the Port Director. Similarly, goods that are improperly or falsely marked may be brought into an FTZ under a permit to correct or remove such markings in order to comply with laws and regulations.
China is likely to respond to the latest deal. The question is how. Beijing has indicated it would react to deals that harm Chinese interests, and the higher tariff on goods transshipped through Vietnam might be such a response. If China, Vietnam’s largest trading partner and a key source of inputs, retaliates, it could impact Vietnam’s economy. Bloomberg estimates Vietnam could lose 25 percent of its US exports in the long term, risking over 2 percent of its annual Gross Domestic Product (GDP).
Neither party’s statements specify a formal threshold for determining transshipment status. Trade analysts anticipate that the US government will enforce a near-zero tolerance standard, potentially flagging goods with as little as one percent Chinese-origin content. Although trade agreements usually define origin through value-added or transformation criteria, no specific origin thresholds have been officially announced for this agreement.
Other clarifications are expected for the agreement’s rules of origin and safe harbors.
If you want to understand how supply chain engineering could help your organization, get in touch with our Business Intelligence team.
(This article was originally published on July 3, 2025. It was last updated on August 1, 2025.)
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