From tariffs to triumph,Vietnam holds the key to US trade strategy

The next three months offer a rare chance for the US to turn tariff tensions into a durable framework for fairer trade.

Hours after the United States paused its stinging 46 per cent tariff on Vietnamese exports, a reprieve granted for 90 days, both nations signalled their intent to strike a deal. This narrow window arrives at a pivotal moment in the Trump administration’s global trade war. With economic disruption and tariff tensions simmering across multiple fronts, from stalled talks with the European Union to lingering disputes with India and Malaysia, seizing on Vietnam’s eagerness to accommodate offers the administration a rare opportunity to both demonstrate that its “tough love” approach can yield swift wins without escalating conflict while undercutting China’s attempt to position itself as a credible alternative.

Vietnam’s scramble to avoid tariffs began months ago. In March, Hanoi slashed import duties on US liquefied natural gas, ethanol, and agricultural goods, a pre-emptive bid to ease tensions. By early April, as the tariff impost loomed, Vietnam offered to buy more American defence equipment and expedite orders for Boeing jets.

But the window for talk is fleeting. With the United States maintaining 10 per cent blanket tariffs on most imports and struggling to resolve disputes with larger partners like the European Union, a Vietnam deal offers low-hanging fruit to showcase mutually beneficial progress.

The urgency stems from three factors.

First, Vietnam’s willingness to negotiate contrasts sharply with the gridlock elsewhere. While talks with the EU remain bogged down in agricultural disputes and India resists US demands on digital trade, Vietnam’s concessions on market access and regulatory reforms provide a clear path to a deal.

Second, the US-Vietnam relationship is at a diplomatic high point, historically speaking, having been elevated to a Comprehensive Strategic Partnership in 2023. Striking a trade agreement now would enhance this goodwill ahead of the 30th anniversary of normalised relations in 2025.

Third, global supply chains are still reeling from the US-China trade war. A deal with Vietnam would lock in the “China+1” manufacturing shift, ensuring American companies retain access to competitive alternatives while further isolating Beijing.

Vietnam’s rise as a manufacturing hub is a direct consequence of the US-China trade war. When tariffs hit Chinese goods, firms including Apple and Intel shifted production to Vietnam, reducing reliance on Beijing. A US-Vietnam deal would accelerate this trend, offering tariff relief in exchange for Vietnamese commitments to curb trans-shipment of Chinese goods and deepen supply chain integration with US firms. This would marginalise China’s role in global trade networks while positioning Vietnam as a reliable partner – a narrative Beijing is desperate to counter as it markets itself as a stable alternative to US volatility.

A deal would also send a message to other nations: constructive engagement pays. Malaysia and Thailand, both facing US tariff threats, are watching closely. If Vietnam secures favourable terms by addressing US concerns, such as intellectual property protections and digital trade barriers, it will pressure others to follow suit. This is particularly vital as the administration seeks to rebalance relationships without triggering broader trade wars.

Critics may argue that concessions undermine US leverage, but the reality is more nuanced. Vietnam’s tariff cuts on LNG and agriculture directly benefit US exporters, creating jobs in states critical to the administration’s political base. Meanwhile, addressing currency manipulation, a longstanding US grievance, would create a template for future deals, including with China. The alternative – letting tariffs take full effect – risks disrupting supply chains for US retailers and manufacturers, many of whom shifted production to Vietnam precisely to avoid China tariffs.

The next three months offer a rare chance for the United States to turn tariff tensions into a durable framework for fairer trade. By securing a swift deal with Vietnam anchored in commitments on market access, regulatory reforms, and supply chain integrity, the administration can demonstrate that its tough stance yields concrete results without escalating conflict. More importantly, it can solidify a vital partnership that helps diversify supply chains away from China, reinforcing America’s economic security and geopolitical influence in the Indo-Pacific.

For Washington, this is not just about Vietnam: it is about setting a precedent for trade diplomacy that balances pressure with pragmatism before the 90-day window closes.

By Brian R Braun – The interpreter / Lowy Institute – April 23, 2025