On July 2, 2025, a significant development unfolded in the complex web of global trade relations as General Secretary To Lam of Vietnam and U.S. President Donald Trump engaged in a pivotal phone conversation. This dialogue centered on the burgeoning Vietnam-U.S. partnership and the thorny issue of reciprocal tariffs, marking a notable step in smoothing bilateral trade tensions.
Both leaders expressed satisfaction with the robust growth in their countries' relations. They welcomed the agreement on a joint Vietnam-U.S. declaration that laid out a framework for fair, balanced, and reciprocal trade. President Trump praised Vietnam's commitment to granting preferential market access for American goods, including large-displacement automobiles—a sector often sensitive in trade talks.
Crucially, the United States pledged to significantly reduce reciprocal tariffs on many Vietnamese export products and vowed to continue cooperation to resolve outstanding trade issues, particularly in priority sectors. Meanwhile, General Secretary To Lam urged the U.S. to promptly recognize Vietnam as a market economy and to lift export restrictions on certain high-tech products, signaling Vietnam’s desire for deeper integration into the global market.
Shortly after this exchange, at 10:25 a.m. U.S. local time on July 2, President Trump announced on his social media platform, Truth Social, that he had secured a trade agreement with Vietnam. While he promised more details to come, the announcement was met with keen interest worldwide, as Vietnam became the third country—after the United Kingdom and China—to reach such a deal with the Trump administration.
According to POLITICO, the framework of the agreement stipulates that Vietnam will face a 20% tariff on all goods imported into the U.S., with a steeper 40% tariff on goods transshipped through Vietnam from other countries. In exchange, Vietnam has committed to opening its market to all U.S. imports at a zero percent tariff rate. This arrangement, though not a comprehensive free trade agreement, provides a breathing space for Vietnam’s key export sectors such as textiles, seafood, and wood products—industries that have long been vital to Vietnam’s economy.
Experts view the 20% tariff as a burden, yet a manageable one that preserves Vietnam’s access to the lucrative U.S. market. It affords Vietnamese businesses time to adjust amid uncertainties, especially with the looming July 9 deadline when the temporary suspension of reciprocal tariffs imposed by the U.S. is set to expire. This suspension, announced in April 2025, was part of a broader strategy by the Trump administration to negotiate multiple trade agreements within 90 days.
However, this initial agreement is more of a trade “framework” than a detailed treaty. It outlines some tariff reductions and leaves many specifics, such as rules of origin and sectoral commitments, to be ironed out in future negotiations. This is reminiscent of the U.S.’s earlier agreement with the United Kingdom, which abolished tariffs on some products but still requires further detailed discussions.
Voicing cautious optimism, Ms. Phan Thi Thanh Xuan, Vice President and General Secretary of the Vietnam Leather, Footwear, and Handbag Association, commented, “The tariff rate is still higher than we expected, and many important details about the rules of origin for different tariff levels remain unclear.” This uncertainty is significant because it affects how products qualify for the agreed tariff rates and ultimately impacts competitiveness.
On the U.S. side, Mr. Matt Priest, President and CEO of the U.S. Footwear Distributors and Retailers of America, expressed concern that the tariffs on Vietnamese footwear would raise prices for American consumers. He noted, “Vietnam is a critical country in the U.S. footwear supply chain, especially for athletic shoes. Many of these already face a 20% tariff. Adding new tariffs on top of that is not only unnecessary but economically harmful. The administration should recognize the existing high tariffs on footwear and avoid further straining household and business spending.”
The 40% tariff on transshipped goods also raises complex issues about product origins. Vietnam has repeatedly emphasized that most of its exports, especially those involving multinational corporations like Nike, Samsung, and Apple, comply with international rules of origin. These rules ensure that products legitimately qualify as “Made in Vietnam” by adding sufficient domestic value, aligning with global trade norms.
The announcement of the trade framework had immediate ripple effects in the U.S. financial markets. The S&P 500 index rose, with shares of companies linked to Vietnamese manufacturing gaining ground: Nike’s stock increased by 3%, Columbia Sportswear by 1.5%, Lululemon by 0.7%, and VF Corporation, owner of The North Face and Vans, by 2.4%. This uptick reflects investor optimism about reduced trade tensions and improved supply chain stability.
Yet, the broader U.S. economy faces challenges. On July 2, the ADP payroll report revealed a loss of 33,000 private-sector jobs in June 2025, marking the first monthly decline since March 2023. Despite this, economists anticipate that trade tariff agreements like the one with Vietnam could boost U.S. employment by as many as 100,000 jobs, underlining the high stakes of these negotiations.
Meanwhile, President Trump’s approach to trade negotiations has evolved. On July 3, he announced that the U.S. would begin sending letters to groups of 10 countries at a time, detailing the tariffs they would face—ranging from 20% to 30%—rather than pursuing individual agreements with over 170 countries. He acknowledged the complexity of negotiating with so many nations and emphasized that this letter-based approach was “much easier.”
This shift signals a pragmatic, if blunt, strategy to manage global trade relations. It contrasts with the earlier ambitious goal of securing 90 trade agreements in 90 days, a target met with skepticism by trade experts who understand the intricacies involved.
U.S. Treasury Secretary Scott Bessent indicated that about 100 countries might face a 10% reciprocal tariff, lower than initially planned, and predicted a series of trade agreements before the July 9 deadline. However, many countries remain without detailed negotiations, except for a few like the UK, which secured a deal maintaining a 10% tariff and concessions for sectors such as automobiles and aircraft engines.
Other major trade partners are negotiating under higher tariffs: 20% for the European Union, 26% for India, and 24% for Japan. Countries yet to engage in talks face even steeper tariffs—up to 50% for Lesotho, 47% for Madagascar, and 36% for Thailand—highlighting the uneven landscape of global trade tensions.
Vietnam’s agreement thus stands out as a significant milestone amid this complex backdrop. With a population nearing 100 million, Vietnam represents a substantial market and manufacturing hub. Its ability to secure a framework agreement with the U.S. not only benefits its exporters but also signals a willingness from both sides to engage constructively despite broader trade frictions.
As the July 9 deadline approaches, the coming weeks will be critical. The details of tariff rates, rules of origin, and sectoral commitments will shape the future of Vietnam-U.S. trade relations and influence the competitive dynamics in Asia and beyond. For now, the agreement offers a cautiously optimistic path forward, balancing economic realities with diplomatic pragmatism.
