Countering China, Washington and Hanoi Sign Preliminary Trade Agreement

Fifty years after the last American forces left Saigon, the United States is expanding its ties — economic and military — with Vietnam. On July 2, President Donald Trump announced that the United States had signed a preliminary trade deal with Vietnam following months of negotiations.

The agreement, which is the first trade deal announced among America’s Indo-Pacific allies and partners since Trump took office, will strengthen relations between Washington and Hanoi while preventing China from circumventing American trade restrictions.

Agreement Lowers Tariffs, Limits Chinese Transshipment to U.S. Market

The preliminary agreement will effectively preserve Vietnam’s access to American markets while constricting a key transshipment point for Chinese goods intended for the United States. Under the terms of the deal, the United States will not impose 46 percent tariffs on Vietnamese imports that were scheduled to take effect July 9. Tariffs will instead be set at 20 percent on Vietnamese goods, while Vietnam will eliminate all duties on U.S. imports. Hanoi has also promised to lower its non-tariff barriers, including strengthening intellectual property protections for foreign firms and providing preferential market access to U.S. agricultural and aerospace goods.

The United States will also impose a 40 percent tariff on Chinese goods exported through Vietnam, resolving a long-standing irritant between Washington and Hanoi. Chinese products have previously accounted for 40 percent of Vietnam’s overall exports, allowing Chinese firms to enter the American market under artificially low tariff rates. This tariff will also complement recent efforts by Vietnamese authorities to prevent transshipment, including tighter policing of rules of origin certification.

Beyond Trade, Hanoi Seeks Closer Ties With Washington

Both Beijing and Washington have sought to strengthen their influence over Hanoi, a rising regional power. Chinese paramount leader Xi Jinping visited Vietnam in April to sign more than 40 agreements with Hanoi to strengthen trade ties and promote cross-border investment in infrastructure, science, and technology. Vietnam has also been a key destination for Chinese manufacturers seeking to expand their regional operations, hosting substantial investments from Chinese electric vehicle and solar panel firms.

Nonetheless, Vietnam has steadily grown closer to the United States as a key security partner, particularly as Hanoi has raised defense spending over the past several years. Following Xi’s visit, 19FortyFive, a defense news outlet, reported that Vietnam had agreed to purchase up to 24 F-16 fighters, ending Hanoi’s long-time dependence on Russia for advanced aircraft. The potential sale follows an increase in military outreach by Washington, including a port call by the aircraft carrier USS Ronald Reagan to Da Nang in 2023 and an expanded program to sell Coast Guard cutters to Vietnamese maritime law enforcement following territorial disputes between Hanoi and Beijing.

The Trump Administration Should Use This Momentum to Sign Japan, South Korea Agreements

The new agreement is an effective first step in closing China out of its neighboring markets by raising the cost of transshipment while giving Washington a strong opening to cement economic and defense ties with a key regional partner.

The United States should use the momentum generated by this agreement to finalize new trade deals with both Japan and South Korea, both of which remain deeply integrated in American supply chains. Pivoting from the Vietnamese deal, these agreements should prioritize strong market access commitments while preventing China from circumventing U.S. duties, allowing American firms to build trusted supply chains and enhance economic integration.

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.