Vietnam faces a 10% tariff that is set to increase to 46%. The country has proposed reducing US tariffs to zero, but concerns have been raised about trans-shipment from China and other trade practices.
Peter Navarro expressed skepticism about the effectiveness of such tariff reductions, citing issues like the 10% VAT.
Tariff Reduction Discussions
While the US administration’s exact goals are uncertain, a deal to reduce tariffs on Vietnam could be viewed positively. Vietnam has seen benefits from companies relocating from China, yet mere relocation to Vietnam does not address the broader aim of shifting production back to the US.
The content above discusses the possibility of tariff adjustments between the United States and Vietnam, particularly whether rates levied on Vietnamese goods might be reduced. At present, there is already a 10% tariff, and it’s due to rise sharply to 46%. In response, Vietnam has suggested reducing these tariffs altogether—essentially calling for full elimination. But this has not gone without criticism.
Navarro, whose past involvement in international trade policy has been consistent and hardlined, questions whether removing such tariffs would actually deliver any real change. His concerns aren’t unfounded. He points to certain Vietnamese policies—like the 10% value-added tax (VAT)—that can offset any intended benefits from lowered US import taxes. Even if tariffs were adjusted, other costs remain in place for American consumers and businesses buying Vietnamese products.
And though Vietnam has become a more popular manufacturing destination as firms shift away from China, this changing tide in global production doesn’t necessarily translate to new jobs or factories in the United States. Moving production from one Asian country to another meets only part of what some in Washington argue is the ultimate objective: to bring back manufacturing capacity domestically.
Focus on US Commercial Strategy
Over the coming weeks, the discussion will likely stay focused on how trade with Vietnam fits into broader US commercial strategy. Expect ongoing concern about trans-shipment practices. This typically refers to goods originally made in one country—like China—being routed through another, in this case Vietnam, to avoid higher tariffs. Such practices haven’t escaped the attention of policymakers. And they’re unlikely to be overlooked now, especially when enforcement is back in the spotlight.
From our point of view, trade participants analysing short-term flows should pay closer attention to both the language used during bilateral negotiations and any draft language that may appear in policy briefings or official releases. Sharp moves in tariff levels—up to 46%—would almost certainly reprice contracts across most major sectors, notably electronics, furniture, and apparel.
Volatility in related forward curves is to be expected. We would monitor any indicators around shipment delays or re-routings through nearby hubs like Singapore or Thailand, which can suggest responses to shifting policy grounds before they’re officially reported.
The scope here isn’t just tariffs. Consider the broader trade policy environment, where interest in enforcement has grown steadily. Traders would do well to revisit exposure assumptions for suppliers known to source or assemble in Vietnam. Short-term adjustments to hedging as price gaps widen between expected and realised costs might become necessary.
In short, we’re watching for more than just a potential deal—changes in classification codes, increased scrutiny at ports, and possible retroactive duties are all elements that could trigger forced adjustments to spread structures. These can break historically correlated instruments temporarily. Spikes in margin requirements on high-volume contracts are not off the table.
Stay flexible on options positioning, particularly in sectors using heavy Vietnamese input. If you’re not yet working with dynamic delta hedges, now would be the time to stress test those systems. Timing your entries in the next roll period could help avoid slippage from sudden news-driven repricing.
