Why Vietnam Won’t Be a Safe Workaround for U.S. Tariffs on China

For U.S. manufacturers relying on Vietnam to sidestep tariffs on Chinese goods, the landscape is about to shift dramatically. President-elect Trump’s upcoming trade policies will close the loopholes that made third-country workarounds possible.

With Vietnam now the third-largest trade surplus holder with the U.S., it is squarely in the crosshairs. With new tariff measures and stricter enforcement on the horizon, Vietnam is no longer the easy alternative it once seemed.

Vietnam’s Rising Trade Surplus: A Red Flag

U.S. government data shows that trade between Vietnam and the U.S. surged from $30 billion in 2013 to over $139 billion in 2023—an impressive 360% increase. Meanwhile, Vietnam’s government reports that in the first 11 months of 2024 alone, the trade surplus with the U.S. reached $95.4 billion, marking a 26.7% increase compared to the same period last year. This rapid growth has positioned Vietnam behind only China and Mexico in terms of trade imbalance, a position that has historically drawn scrutiny from Trump’s administration.

This trend isn’t new. In 2019, the Trump administration imposed tariffs of over 400% on Vietnamese steel after uncovering evidence that Chinese steel was being rerouted through Vietnam. Trump also warned Vietnam could face sweeping tariffs unless trade imbalances narrowed.

With Trump’s renewed focus on preventing “third-country workarounds,” Vietnam’s role as a manufacturing hub is now under threat.

Closing Loopholes: New Tariff Measures Are Coming

Trump’s trade agenda includes measures targeting goods routed through third countries like Vietnam:

• Extending tariffs to goods produced by Chinese-headquartered companies operating in countries such as Vietnam.
• Tightening rules of origin to include products with Chinese-sourced inputs, even if final assembly occurs in Vietnam.
• Using Section 338 of the Tariff Act of 1930 to impose tariffs of up to 50% on countries perceived to disadvantage U.S. commerce.

For U.S. manufacturers, these changes mean heightened risks—goods could face delays, increased costs, and scrutiny at U.S. ports, regardless of where final production takes place.

Rerouted Goods: Key Industries Under Scrutiny

Vietnam’s role as a transit point for Chinese goods has already put certain sectors under U.S. scrutiny, including:

• Steel and Aluminum: Vietnamese steel was previously subject to steep tariffs due to rerouting, a precedent that other metals could follow.
• Electronics and Components: Vietnam imports significant amounts of Chinese parts, making these products vulnerable to stricter rules of origin.
• Textiles and Magnets: Reports reveal that some Chinese goods have been relabeled as ‘Made in Vietnam’ to bypass U.S. tariffs

While studies by Harvard Business School show that only 1.8% of Vietnamese exports to the U.S. involve actual rerouting, perception alone has been enough to trigger policy action in the past. For manufacturers, this means even legitimate goods could face enforcement delays or higher duties.

Vietnam’s Dependence on China: A Double-Edged Sword

Vietnam’s success as a manufacturing hub is heavily reliant on China. About 40% of Vietnam’s electronics imports, for example, come from Chinese suppliers, and this reliance extends across multiple industries.

This interconnectedness raises a critical vulnerability: as the U.S. cracks down on goods with Chinese content or investment, Vietnam becomes collateral damage. Even efforts by Vietnamese authorities to strengthen origin enforcement or screen Chinese investments may not be enough to avoid the fallout.