Understanding the 20% Reciprocal Tariff the U.S. Imposed on Vietnam
Current information about the new tariff rates is still only a “preliminary framework,” with many key details yet to be finalized—particularly the criteria for determining “transshipped” goods and tariffs for specific product categories.
On July 2, 2025, U.S. President Donald Trump announced that a trade agreement had been reached with Vietnam. Under this agreement, the U.S. will impose a 20% tariff on exports from Vietnam and a 40% tariff on transshipped goods, while Vietnam will cut import tariffs on U.S. goods to 0%.
According to KBSV Securities, although the 20% reciprocal tariff is higher than market expectations in recent days, it is still seen as an acceptable outcome since it is significantly lower than the previously proposed 46%. Vietnam is one of the three countries to reach an early deal with the U.S.
However, this 20% rate is only part of an initial framework. Many specifics remain unresolved, especially how “transshipment” is defined and how tariffs will be applied to different goods.
Based on this, KBSV outlines two possible scenarios:
Scenario 1: The 20% is a cumulative tariff on Vietnamese exports
If the tariff is interpreted similarly to the 55% tariff imposed on China, then the 20% may already include the Most-Favored Nation (MFN) tariff of 5–15% that Vietnamese products currently face in the U.S., plus an additional reciprocal tariff of about 10%.
This scenario is considered relatively positive as it is much lower than the initially announced 46%, and the difference is not significant compared to the ~10% universal tariff during the temporary suspension period.
However, the actual impact will vary across sectors. For example, electronic components, which previously faced only a ~1% import tax, may now see a sharp increase in cost due to the 20% tariff.
Scenario 2: The 20% is only the reciprocal tariff
In this case, the final tariff on Vietnamese goods would be higher, as the 20% would be added on top of existing MFN rates. The key factor here would be comparing Vietnam’s rate with those imposed on other countries, rather than focusing on the absolute rate.
Vietnam is currently the third country to finalize an agreement with the U.S. (after the UK and China). Vietnam’s 20% reciprocal tariff remains competitive, compared to China’s 10–30% (depending on the product) and not far off from the UK’s 10% minimum.
Implications and Outlook
Overall, KBSV notes that the actual announcement is less favorable than earlier market rumors, which may lead to short-term adjustments. However, the 20% tariff is still significantly better than the originally proposed 46%, and the real impact depends on how the U.S. treats other countries.
If the tariff rates imposed on other countries are not significantly lower than Vietnam’s—less than a 10% gap—then the negative effects on exports, FDI shifts, and trade flows may be mitigated. Vietnam’s strengths such as attractive FDI policies, low labor costs, and a strategic geographic position in regional supply chains can help maintain its competitiveness.
On the other hand, Vietnam’s 0% import tariff on U.S. cars may increase market access for U.S. automakers, intensify competition, and potentially impact domestic companies’ profit margins.
Meanwhile, the 40% tariff on transshipped goods adds another layer of complexity. The exact definition of “transshipment”—whether based on material content or production stages—has not been released, and this will be crucial to assess the real impact.
Additionally, exchange rates will be an important factor to monitor in the near future, as the new U.S. tax policy could influence the strength of the USD more directly than the cross-border movement of foreign currency into Vietnam.
