United States Secretary of Commerce Howard Lutnick has ruled out eliminating tariffs on Vietnamese goods, even if Vietnam removes all trade barriers on American imports.

He cited Vietnam’s significant re-export of Chinese products to the US as a primary concern.

During a Senate Appropriations Subcommittee hearing on June 4, 2025 Lutnick described such a trade arrangement as unfavorable for the US.

In 2024, Vietnam exported US$136.6 billion worth of goods to the US, while American exports to Vietnam totaled only US$13.1 billion, according to the Office of the US Trade Representative.

Lutnick noted that Vietnam’s dependence on Chinese materials, which are re-exported to the US, remains a major issue.

He said, “They buy US$90 billion from China, then they mark it up and send it to us.”

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Vietnam’s dramatic trade evolution creates unique tariff challenges

U.S.-Vietnam trade relations have undergone a remarkable transformation in just three decades, evolving from post-war adversaries to major trading partners.

After establishing diplomatic relations in 1995, bilateral trade surged from $451 million that year to $149.6 billion in 2024, representing a 331-fold increase12.

This growth was catalyzed by the 2000 Bilateral Trade Agreement, which reduced U.S. tariffs on Vietnamese goods from an average of 40% to just 3%, creating a significant competitive advantage for Vietnamese exporters3.

The resulting trade imbalance—Vietnam now exports $136.6 billion to the U.S. while importing only $13.1 billion—has created a $123.5 billion deficit that Secretary Lutnick specifically cited as unsustainable in his Senate testimony2.

This extraordinary trade evolution explains why simply eliminating remaining Vietnamese tariffs (which are already low on many U.S. goods) wouldn’t meaningfully address the structural imbalance that has developed over decades.

2️⃣ The China factor complicates trade negotiations

Vietnam’s position as both China’s neighbor and a manufacturing alternative creates complex dynamics in U.S. trade policy.

Secretary Lutnick’s claim that Vietnam buys “$90 billion from China, then they mark it up and send it to us” highlights concerns that Vietnam serves as a transshipment point for Chinese goods seeking to avoid U.S. tariffs4.

This integration is substantial—Vietnam-China trade reached $123 billion in just the first half of 2024, with Vietnam importing substantially more from China than it exports5.

Many U.S. brands, including Apple and Nike, rely on Vietnamese manufacturing that incorporates significant Chinese components, meaning tariffs on Vietnamese goods would ultimately impact American companies’ supply chains.

The U.S. has made significant requests in recent negotiations, including demands that Vietnam reduce its reliance on Chinese materials and components, showing that addressing the bilateral trade deficit now involves complex supply chain considerations beyond simple tariff adjustments6.

3️⃣ Vietnam’s economic vulnerability shapes its diplomatic balancing act

Vietnam’s export-dependent economy faces serious challenges navigating escalating U.S.-China trade tensions.

With U.S. imports accounting for a significant portion of Vietnam’s GDP, the threatened increase from 10% to 46% tariffs would substantially impact Vietnam’s economy, potentially causing job losses and production slowdowns in key industries like textiles and footwear7.

This vulnerability explains Vietnam’s active diplomatic efforts to negotiate with the U.S. while simultaneously strengthening economic ties with China, as evidenced by the 45 bilateral cooperation agreements signed during President Xi Jinping’s recent visit8.

Vietnam’s exports to the U.S. have nearly tripled since 2017 as manufacturers relocated from China, demonstrating how Vietnam has benefited from trade tensions while remaining vulnerable to policy shifts9.

Vietnam’s approach illustrates the delicate position of developing economies caught between competing major powers, forced to balance immediate economic needs against long-term strategic interests.

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