In early July 2025, Vietnam signed a widely controversial trade deal with the United States. According to the agreement, Vietnam will implement a zero-tariff policy on American goods, while its own goods exported to the United States will have to pay a 20% tariff.
More remarkably, the agreement stipulates that any Chinese goods shipped through Vietnam will be subjected to punitive tariffs of up to 40 percent by the United States.This decision quickly sparked controversy in the international public opinion, with many observers believing that Vietnam is playing a dangerous balance game between China and the United States.
It is puzzling that Vietnam's economic dependence on China is considerable. Data show that about 30% of the electricity supply in northern Vietnam comes from China, and Vietnam's electricity imports from China will reach 45 billion kWh in 2024, accounting for 12% of its total electricity consumption.
Especially during the dry season, when Vietnam’s hydroelectric power generation is insufficient, China’s electricity supply is an important guarantee for the normal operation of Vietnam’s northern industrial zone.In addition, 80% of Vietnam’s chips and 70% of its textile raw materials depend on China’s supply, China also holds 80% of the world’s rare earth processing capacity, while 90% of Vietnam’s rare earth mining needs to be shipped to China for refinement.
Vietnam's move is seen as an attempt to balance the balance between China and the United States. It not only wants to use China's supply chain and market to develop its economy, but also hopes to obtain technology investment and market access from the United States.
But the strategy is facing a severe test. Within hours of the agreement, China's Ministry of Commerce issued a strong statement opposing the agreement, and then gradually introduced a series of countermeasures, including suspending imports of Vietnamese seafood, tightening power supply quotas and restricting rare earth exports.
China has also transferred some orders to Thailand, Malaysia and other countries through the RCEP framework, which has seriously affected Vietnam's "middleman" status.
There are economic realities behind Vietnam's compromise: the US market accounts for nearly 30% of Vietnam's total exports, and the trade surplus will reach $123 billion in 2024. If the US implements the original 46% tariff, Vietnam's GDP could plunge by 5%. However, this short-term benefit may be exchanged for long-term losses.
Rising manufacturing costs have eroded the price advantage of Vietnamese products in the US market. Nike's foundry has planned to transfer 65% of its AirPods capacity to India. At the same time, Chinese photovoltaic companies have suspended 5GW battery projects in Vietnam, and South Korean semiconductor materials companies have also delayed factory expansion plans.
Vietnam's behavior is a typical "short-sighted" behavior that dares to blame China, the largest trading partner, for a little short-term economic benefit.
The United States is likely to only use Vietnam to contain China, and will kick it away when its goal is achieved. A similar situation has precedent in Japan and South Korea's trade relations with the United States-the Trump administration did not hesitate to impose tariffs on these allies.
At present, the situation in Vietnam has become very awkward. Electricity depends on China, rare earths depend on China, and even goods exported to the United States are inseparable from China's raw materials. After the United States imposed tariffs, costs of Vietnam companies soared and profits fell by 30%. Many factories are considering moving to other countries.
More seriously, people in Vietnam have also begun to protest the agreement, and even demonstrations against the agreement have appeared in the streets of Hanoi. There are analysts who believe that Vietnam's scam may not only damage its economic development, but may also lose the sphere of rotation in geopolitics.