New trade terms grant Vietnam lower tariffs and potential market access while Sri Lanka scrambles to stay competitive
In a significant shift in US trade policy, former President Donald Trump announced that Vietnam will now face a 20% tariff on its exports to the United States—down from the originally proposed 46%. This new tariff structure, revealed through Trump’s social media platform Truth Social, also allows for “transshipped” goods—reportedly third-country exports via Vietnam—to be taxed at 40%.
While the specifics of the transshipment clause remain unclear, observers suggest it could allow Vietnam to re-export foreign goods to the US at a rate significantly lower than the original tariff, giving it a tactical edge in global trade routes.
“This will be a Great Deal of Cooperation between our two Countries,” Trump wrote, adding that in return, Vietnam has agreed to provide the US with “TOTAL ACCESS” to its domestic markets. This move suggests a broader strategic partnership between the two nations, likely to include sectors like nuclear energy and aerospace, with negotiations reportedly underway for Vietnam to purchase Westinghouse nuclear reactors and Boeing aircraft.
Vietnam has built its reputation as a global export powerhouse, bolstered by the US–Vietnam Bilateral Trade Agreement signed over a decade ago, which resulted in sweeping domestic legal reforms and low tariff structures on both imports and exports. Low food import taxes in Vietnam have also contributed to improved nutrition outcomes and overall economic resilience.
Meanwhile, Sri Lanka finds itself at a strategic disadvantage. With a 44% tariff still in place for its exports to the US and no finalized trade revision under Trump’s proposed tariff realignment, the island nation is racing to close the gap with competitors like Vietnam. Despite early bilateral talks with Washington, Sri Lanka continues to face high tariffs on many imports due to long-standing policies rooted in economic nationalism and import substitution, exacerbated by forex shortages and structural inefficiencies.
Trump’s revised tariff system—where nations with trade surpluses or balanced trade with the US are charged just 10%—puts further pressure on Sri Lanka to renegotiate its trade terms swiftly. Trump has pledged to issue formal letters by the July 09 deadline, signaling that time is running out for countries seeking tariff relief.