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TWN
Info Service on WTO and Trade Issues (Jul25/02) Geneva, 4 Jul (D. Ravi Kanth) — United States President Donald Trump has announced that Washington struck a “Trade Deal” with the Socialist Republic of Vietnam wherein the US will impose a 20% tariff on all Vietnamese goods entering the American market, while US exports to Vietnam will be subjected to a zero percent tariff. Against the backdrop of the seemingly “extortionary” tariff spree by the US in alleged violation of the multilateral trade rules, many countries appear to be racing to conclude trade agreements with the US before the deadline of 9 July when President Trump’s reciprocal tariffs against various countries are reinstated, said people familiar with the development. In a post on his social media website Truth Social on 2 July, President Trump declared that “it is my Great Honor to announce that I have just made a Trade Deal with the Socialist Republic of Vietnam after speaking with To Lam, the Highly Respected General Secretary of the Communist Party of Vietnam.” He said, “It will be a Great Deal of Cooperation between our two Countries,” adding that “the Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping.” President Trump further said: “In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade.” “In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff,” President Trump said, suggesting that it is his opinion that “the SUV or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam.” “Dealing with General Secretary To Lam [of Vietnam], which I did personally, was an absolute pleasure,” he said. However, the two sides are yet to announce the full details underpinning the “Trade Deal”. For example, it is not clear whether the 20% US tariff on Vietnamese goods will include the baseline tariff of 10%, and whether there will be any other conditions, a former trade envoy of an Oceanic country told SUNS. More importantly, it is unclear whether President Trump’s mention of a zero percent tariff on American goods entering Vietnam would only include industrial goods, or whether heavily subsidized genetically modified (GM) farm products as well as chlorine-treated poultry products would also be included, the envoy said. “The problem is neither side has provided details without which it is difficult to assess the likely impact of zero percent tariffs on American goods entering the Vietnamese market,” the envoy suggested. In addition to the 20% tariff, the US will also charge a 40% “transshipping” tariff, apparently in an attempt to crack down on companies transferring Chinese products to other countries for final shipment to the US to avoid high levies on these products. A report in the Financial Times on 3 July, quoting a former American trade official, said “the 20 percent baseline tariff for Chinese imports is higher than expected, undoubtedly causing angst among other trading partners trying to finalize deals.” Given the “strong interest” in reaching a deal with the US, as 30% of Vietnamese exports are destined for the American market, the rising Vietnamese exports to the US are also due to many companies having moved from China to Vietnam, the FT report suggested. It is well known that countries like Vietnam and Indonesia among others are being caught in the crossfire of President Trump’s unilateral trade war that has almost destroyed the rules-based global trading system. So far, the US has concluded a limited trade agreement with the United Kingdom, and later a partial trade deal with China to secure a trade truce, and now, it has struck an agreement with Vietnam, causing further uncertainty in the global trading system, said people familiar with the development. CHINA CRITICIZES TRADE DEAL Meanwhile, China has seemingly expressed anger over the US-Vietnam trade deal, which it said should not target third parties or harm its own interests. Commenting on the 40% tariff imposed by the US on any goods deemed to be transhipped through Vietnam, potentially affecting some Chinese products passing through that country, the spokespersons of both China’s Foreign and Commerce Ministries sharply criticised the US-Vietnam trade deal. The Chinese Foreign Ministry spokesperson Ms Mao Ning said on 3 July that China “consistently advocates resolving economic and trade disputes through equal-footed dialogue and consultation, and that relevant negotiations and agreements should not target or harm the interests of third parties.” Also commenting on the trade deal, China’s Commerce Ministry (MOFCOM) spokesperson, Mr He Yongqian, said that the US imposition of so-called reciprocal tariffs on global trading partners is a typical act of unilateral bullying, which China firmly opposes, according to a report in China’s Global Times. He emphasized that China’s position is consistent: “We welcome all parties resolving trade disputes with the US through equal consultations, but we firmly oppose any party reaching agreements at the expense of China’s interests. Should such a situation arise, China will resolutely take countermeasures to safeguard its legitimate rights and interests.” He said that China has noted the relevant situation and is “conducting an assessment”. According to an expert on International Economic Law at the University of Hong Kong, “the new US-Vietnam deal is not just about trade; it is meant to block the flow of Chinese goods that often move through Vietnam to dodge existing US duties,” the FT reported. Further, “this fits a much wider trend: the US is lining up with countries neighbouring China to tighten economic co-operation and at the same time, [make] it harder for Beijing to stretch its supply chain influence.” In a way, the US-Vietnam deal could create potential tension among several South East Asian countries and China for seemingly drawing out a “new normal” in global supply chains, which appear to be dominated by China at this juncture, said a trade envoy, who asked not to be quoted. China appears to consider the US-Vietnam deal as endangering its interests, which could have a major impact on the US-China trade talks to conclude a comprehensive trade deal. “This (US-Vietnam deal) could certainly lead to a renewed escalation of US-China trade tensions if the US insists on very stringent restrictions by third parties on imports from China,” said Frederic Neumann, chief economist at HSBC, according to the FT report. JAPAN TRADE TALKS While President Trump has swiftly concluded a trade deal with Vietnam, the same has not happened with Japan, which was one of the first countries to start bilateral negotiations with the US, as Tokyo seemingly stood against US demands on sweeping market access for US rice. From the start of the trade talks, Japan appears to have made it clear to senior US trade officials, including US Commerce Secretary Howard Lutnick and the US Trade Representative (USTR) Ambassador Jamieson Greer that it will not agree to any deal that preserves President Trump’s 25% auto tariff, according to people familiar with the discussions. On 30 June, President Trump wrote in his Truth Social media website that Japan “won’t take our RICE, and yet they have a massive rice shortage,” despite Japan importing hundreds of thousands of tons of US rice annually under a WTO agreement. President Trump threatened that “we’ll be sending them a letter,” implying that Washington will decide how much Japan will have to pay. On 29 June, President Trump told a news broadcaster that a letter to Japan might say: “Dear Mr. Japan, here’s the story. You’re going to pay a 25% tariff on your cars, you know? So, we give Japan no cars. They won’t take our cars.” The Trump administration has repeatedly changed the “goalposts” in bilateral trade talks with countries, moving from tariffs to non-tariff barriers, and then isolating China while also spreading uncertainty, like a proverbial “Covid virus”, through the global trading system, said a former trade envoy who asked not to be identified. On 27 June, the US Treasury Secretary Scott Bessent indicated that some countries could get an extension on the 90-day deadline on the reciprocal tariffs, while President Trump brought more uncertainty in the bilateral trade talks by threatening at a news conference that “we can do whatever we want”. “We can extend it, we can make it shorter. I’d like to make it shorter,” President Trump said. Later on 1 July, he said that he is “not thinking about” extending the deadline. The US, in addition to its baseline tariff of 10% on all countries, also doubled its tariffs on imports of steel and aluminium products from 25% to 50% with no prior warning. The 50% tariff on imports of steel appears to have hit the Indian steel companies hard as this is a major export item for India. “The administration’s bellicose approach also became a political issue in some countries it was negotiating with, encouraging resistance to the US rather than cooperation,” according to a report in the Wall Street Journal. “We sometimes forget that other countries have politics, too, and trade has a way of spurring on domestic politics because of the direct and indirect effects it has on particular constituencies,” said Michael Froman, the US Trade Representative under former President Barack Obama and current president of the Council on Foreign Relations. “MINI TRADE DEAL” WITH INDIA As India is seemingly racing to conclude a mini-trade deal with the US, it appears that some sensitive sectors and issues with deeper political implications may not be part of the immediate deal, President of the Confederation of Indian Industry, Mr Rajiv Memani, reportedly said on 3 July. He said both sides are reportedly aiming to secure early gains while deferring more complex matters. However, a former Indian government official on tariff policy during the Uruguay Round of trade negotiations told the SUNS on 3 July that “India has more to lose and very little to gain from the tariff negotiations.” The official, however, said that “I need to see the details before giving my final judgement.” “As you are aware, President Trump has no powers to reduce the WTO bound tariffs, and approval from US Congress is required for this purpose,” the official said. Elaborating on the tariff picture, the former Indian official asked, “Now, [how do] you consider, for example, reduction in steel and aluminium tariffs from 50% to 25% or for that matter exemption from the threat of imposition of 26% [reciprocal] tariffs from 9 July as concessions to India?” +
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