Arya News - Vietnam secures a 20% tariff deal with the US, leaving Thailand to face potential higher costs and competitive disadvantages in exports to the US market.
BANGKOK – US President Donald Trump on Thursday announced a successful trade agreement with Vietnam, confirming a 20% import tariff on goods sent to the United States. This agreement was finalised before the looming deadline of July 9 after several rounds of intense negotiations.
According to Bloomberg, Trump shared the news on social media, revealing that the US would impose a 20% tariff on Vietnamese exports and 40% on goods transshipped through Vietnam from other countries. In return, Vietnam will eliminate its import duties on US products entirely.
This deal with Vietnam marks the third trade agreement following similar ones with the UK and China, with partner countries rushing to reach agreements with the US before the July 9 deadline. Initially, Vietnam faced a 46% import tariff, imposed as part of Trump’s early April tariff retaliations against dozens of countries. However, this was later reduced to 10% to facilitate further negotiations.
Vietnam has proven a challenge for the Trump administration, with some senior advisers viewing it as a strategic partner in countering China’s influence in Asia. Additionally, Vietnam has become a key supplier of goods to US consumers, especially since manufacturers have shifted production from China to Vietnam. Vietnam is a major supplier of textiles and sportswear, with factories producing goods for companies like Nike, Gap, and Lululemon Athletica.
In 2024, Vietnam was the sixth-largest supplier of goods to the US, exporting nearly $137 billion. Vietnam had a trade surplus with the US, ranking third after China and Mexico. Exports surged by 35% in May, as Vietnam sought to ship goods before the deadline.
Thai exporters concerned about rising costs compared to Vietnam
Thanakorn Kasetsuwan , president of the Thai National Shippers’ Council (TNSC), expressed concerns about Vietnam’s success in negotiating a 20% tariff deal with the US. He noted that while there are both advantages and disadvantages to this deal for Vietnam, it could disadvantage Thailand, especially if Thailand’s own tariff negotiations result in a similar figure.
One area where Thailand has an advantage is in addressing the issue of transshipment fraud, where goods from other countries are mislabelled as Thai products for export to the US. This has shown the US that Thailand is committed to preventing such practices, which could give Thailand an opportunity to negotiate a lower tariff.
However, Vietnam’s success in securing a 20% tariff, particularly the zero percent tariff on imports from the US, gives it a competitive edge over Thailand. Thailand cannot offer such favourable terms, as it must protect domestic production. This puts Thailand at a disadvantage in trade negotiations with the US.
“Vietnam has done well to secure a 20% deal. If Thailand receives a similar tariff, we will be at a disadvantage because Vietnam’s production costs are much lower than ours. This means Vietnam holds a competitive advantage when exporting the same goods to the US,” Thanakorn explained. “We hope that our negotiation team will manage to secure a better deal than Vietnam.”
Thailand must secure lower tariffs than Vietnam
Sanan Angubolkul , Honorary Chairman of the Thai-Vietnam Business Council, stated that the trade agreement between the US and Vietnam will affect Thai investors in Vietnam. However, the extent of the impact will depend on the outcome of negotiations with other countries, such as Thailand, Indonesia, and Malaysia.
The conclusion of Vietnam’s tax agreement has made it more difficult for Thailand to secure a 10% tariff or lower than 20%. While Vietnam does not impose import taxes on US goods, the US still imposes a 20% import tax on goods from Vietnam.
If the US applies the same tariff to Thailand as it does to Vietnam, Thailand will be at a disadvantage, as Vietnam’s production costs are 5-10% lower than Thailand’s. Therefore, the best outcome would be to negotiate a tariff lower than Vietnam’s, although this is unlikely, as Vietnam agreed to a 0% tax rate to avoid a 46% tariff, which would have had a severe impact on Vietnam.
“Vietnam works quickly, while Thailand has more complex and slower procedures. Decisions in Thailand involve more conditions than in Vietnam, and it seems unlikely that Thailand will achieve a 0% import tax or exemption for US goods,” Sanan said.
Additionally, the economic impact of a 20% tariff on Vietnam is estimated to affect its GDP by 1%. If the tariff reaches 40%, the impact on GDP could be 2.0-2.5%.
Confidence in Thailand’s lower tariffs compared to Vietnam
Visit Limlurcha , Vice President of the Thai Chamber of Commerce and President of the Thai Future Food Trade Association, stated that Vietnam is the first ASEAN country to reach a deal with the US. The 20% tariff will set a benchmark for other countries negotiating with the US. However, details of the deal, beyond the 20% tariff reduction, are still unclear.
Thailand’s negotiations will focus on two key points:
1. If the tariff for Thailand is the same as Vietnam’s, Thai exports to Vietnam will continue.
2. If the tariff for Thailand is slightly higher but still competitive, it will remain within a manageable level.
Thailand has already submitted five proposals and will see if Deputy Prime Minister Pichai’s negotiation team can offer additional suggestions. Visit is confident that Thailand’s tariff will likely be lower than Vietnam’s, based on the trade balance, as Vietnam has a higher trade surplus than Thailand. Additionally, Thailand has shown genuine efforts in addressing the issue of transshipment fraud with the US, which has been actively addressed during the negotiations.
Vietnam’s deal offers insight for Thailand’s tariff negotiations
Kriengkrai Thiennukul , Chairman of the Federation of Thai Industries (FTI), told Krungthep Turakij that the trade agreement between the US and Vietnam serves as a “test answer” for Thailand, which is also negotiating with the US. Thailand, like Vietnam, belongs to Southeast Asia and has a similar economic structure, so it may face similar tariff measures.
Thailand has just begun direct negotiations with the US Trade Representative (USTR) on July 3, following initial online discussions. The fact that the US reached a deal with Vietnam first is due to Vietnam negotiating before Thailand.
“If Vietnam successfully reduced its tariff from 46% to 20%, we should aim to negotiate Thailand’s tariff to 15%, which would be competitive. As for the 40% tariff on Vietnamese transshipped goods, we may negotiate it down to 30%, based on the same reference proportions. Alternatively, we may be subject to the same 40% tariff as Vietnam, as the US is strictly monitoring each industry to block competitors,” Kriengkrai said.
Kriangkrai further explained that the issue of transshipment fraud is affecting Thai exports to the US and has caused significant harm to over half of the 47 industrial sectors under FTI. If left unaddressed, it could weaken Thailand’s industries and SMEs, potentially leading to business closures.
WHA Group CEO discusses investment boost in Vietnam
Jareeporn Jarukornsakul , Chairman of the Executive Committee and Group CEO of WHA Corporation Public Company Limited (WHA Group), spoke to Krungthep Turakij about the impact of the US’s tariff deal with Vietnam. She stated that the Vietnamese industrial parks will benefit from the reduced tariff, which has gone from 46% to 20%, as it addresses initial confusion among clients who had expected a lower rate.
Regarding Thailand’s negotiations, she noted that the expected tariff may drop from 36% to 18%, with hopes to push it further down to 10%. This remains closely watched.
Jareeporn added, “If Thailand faces a tariff lower than or equal to Vietnam’s, it will be beneficial for the country. Based on a survey conducted when the US first imposed tariffs, 70% of clients exporting to the US felt they could manage with a 10% tariff. Meanwhile, 30% said they could accept a tariff up to 20%. Therefore, it’s crucial to monitor the outcome.”
“If Thailand faces a tariff of 18%, or even lower, it would be promising. We hope it will be lower than Vietnam’s tariff. As for Vietnam being a competitor, it’s not always a direct rivalry, as investment decisions depend on what industries require,” she concluded.