US-Vietnam Tariff Deal Targets Chinese Goods Rerouted via Southeast Asia

The United States and Vietnam have established a two-tier tariff system aimed at preventing goods transshipped through Vietnam—primarily to circumvent US duties—from entering American markets. Under the agreement, products genuinely manufactured in Vietnam will face a 20% tariff, while those deemed to be merely passing through will incur a 40% levy. Analysts note the effectiveness of this measure hinges on strict definitions and enforcement of "Made in Vietnam" labeling, according to Bloomberg reporting.

China has increasingly utilized Vietnam as an export conduit to the US market in recent years, with many Chinese manufacturers relocating segments of their supply chains to Southeast Asia to avoid higher US tariffs. While technically legal, Vietnam's exports—including earbuds, smartphones, and electronics—often incorporate significant Chinese components before final assembly and shipment to the US, complicating origin determination.

Roland Rajah of Sydney's Lowy Institute emphasizes the pivotal question will be how stringently US authorities apply the higher tariff threshold, warning that overly broad implementation could prove economically disruptive. Data reveals Chinese components accounted for nearly 28% of Vietnam's US-bound exports in 2022, a dramatic increase from 9% in 2018.

Regional authorities across Southeast Asia have intensified crackdowns on fraudulent origin labeling this year. South Korean customs confiscated $20 million in mislabeled goods destined for the US in April, while Malaysia has centralized its certification system and Thailand has identified high-risk product categories. Cambodia's exporters report significantly lengthened inspection processes for US-bound shipments.

Despite these measures, analysts like Pantheon Macroeconomics' Duncan Wrigley remain skeptical about completely stemming indirect Chinese exports, noting alternative routing and value-added processing may continue to circumvent restrictions. As negotiations continue on finalizing origin rules, experts caution that without rigorous enforcement and clear guidelines, supply chain rerouting may persist through other channels.