Vietnam has entered a critical phase in its trade relationship with the United States, reportedly working to finalise a bilateral agreement that would reshape tariffs and market access. The move comes as Washington seeks to tackle the significant structural deficit it runs with Hanoi. Deputy Prime Minister Bui Thanh Son confirmed that talks are underway for a “fair and balanced” pact, reflecting both sides’ urgency. The United States is targeting the imbalance, with Vietnam’s surplus over U.S. goods reaching more than US$100 billion in the first ten months of the year. This scale of one-direction trade has become untenable in Washington’s view, prompting efforts to recalibrate the bilateral arrangement.

From Vietnam’s perspective, the deal offers an opportunity to lock in preferential access and avoid punitive tariffs. U.S. officials have stressed that any agreement should reduce the U.S. trade deficit with Vietnam by expanding American exports while controlling Vietnam’s exports under the 20 percent reciprocal tariff rate agreed in principle. For Hanoi, accommodating those pressure points means striking a delicate balance between preserving its export-oriented growth model and satisfying U.S. demands for structural change in sourcing and market access.

Structural Drivers: Imbalance, Tariffs and Strategic Supply Chains

At the core of this negotiation is the trade imbalance. The U.S. has identified Vietnam as the country with its largest goods trade deficit after China and Mexico. Many Vietnamese exports to the U.S. consist of apparel, footwear, electronics and consumer goods—markets where U.S. industrial capacity has shrunk. The sheer volume of Vietnamese goods entering the U.S. has triggered policy attention, with Washington viewing the imbalance as a symptom of unfair trade practices or under-reciprocated access.

On the tariff front, the United States maintains a 20 percent reciprocal tariff rate on imports from Vietnam, while Vietnam has offered concessions in market access for U.S. products. The discussions include the possibility of exempting select Vietnamese goods from the U.S. tariff regime, and in return, Vietnam committing to drop or reduce tariffs on a broad suite of American exports—such as agricultural and industrial goods. The tariff mechanism thus serves as a negotiation leverage point: the U.S. holds tariffs as a stick for imbalance, Vietnam offers softened access to U.S. goods as a carrot.

Another structural driver is the strategic repositioning of supply-chains. Vietnam has emerged as a major manufacturing hub for U.S.-bound goods, often as an alternative to China. That role makes it sensitive to U.S. policy shifts seeking to diversify supply and penalise what Washington sees as unfair trans-shipment or routed goods. Accordingly, Vietnam is offering in the talks to strengthen transparency and rule-out routes that effectively “dump” goods into the U.S. via Vietnam, thereby aligning supply-chain practices with U.S. expectations of reciprocity and risk control.

Why Vietnam Is Moving Now: Economic Incentives and Risk Mitigation

Vietnam’s embrace of this trade negotiation reflects both incentives and risk. Firstly, by clinching a deal now, Hanoi reduces its exposure to aggressive U.S. tariff actions. Previous precedents showed that large trade surpluses triggered threatened tariffs of up to 46 percent on Vietnamese goods. Vietnam has responded with its own tariff cuts on U.S. imports—on liquefied natural gas, ethanol and vehicles—earlier this year to pre-empt harsher measures. The current deal-driven approach offers a more structured pathway to stability.

Secondly, getting reciprocal market-access commitments from the U.S. is economically appealing for Vietnam. For example, Vietnam is seeking to be recognised as a “market economy” by the U.S., thereby lifting constraints on high-tech exports such as advanced semiconductors and critical minerals. The country also wants U.S. firms to increase investment, supply-chain participation and technology-transfer arrangements, which supports its medium-term industrial upgrading agenda.

Thirdly, the deal gives Vietnam a stronger negotiating position in its relations with China, ASEAN and global supply-chains. By aligning closer with U.S. trade frameworks and diversifying away from over-dependence on China-linked export channels, Vietnam boosts its strategic profile. That matters as global companies reconsider supply-chain risk and as U.S. trade policy emphasises “friend-shoring.” For Vietnam, that shift presents both challenge and opportunity.

Negotiation Dynamics and What’s on the Table

Key to the path ahead are three negotiation levers: tariff-exemption lists, U.S. export access, and lingering timing and structural questions. On the tariff-exemption front, Vietnam is pressing for certain products—such as coffee and other agricultural goods—to be excluded from the U.S. 20 percent tariff, thereby preserving key export lines. Meanwhile, the U.S. is pushing for Vietnam to open up its market to more U.S. cars, farm goods and industrial goods, signalling deeper liberalisation and reciprocity.

In terms of access, Vietnam wants the U.S. to lift restrictions on exports of high-tech goods, such as semiconductors, rare earths and advanced electronics—areas where the U.S. fears supply-risk and competition. Vietnam has committed to buy U.S. agricultural products—memoranda of understanding worth billions of dollars have already been signed. Those purchases serve as signalling devices to Washington that reciprocal trade flows will increase.

Timing is also crucial. Vietnam is aiming to finalise the agreement ideally by December, depending on how the U.S. legal and regulatory processes (including any Supreme Court review of tariffs) play out. The urgency reflects Vietnam’s recognition that export momentum could be disrupted if tariffs escalate or the U.S. supply-chain pivot accelerates without prior accommodation.

Why the United States Is Driving the Push

From the U.S. standpoint, the Vietnam deal is about more than one trading partner—it is a lever to rebalance trade, protect industrial jobs and restructure supply-chains away from adversarial geographies. By targeting Vietnam, the U.S. seeks a high-profile case: Vietnam has long been a beneficiary of trans-shipped exports and leveraging low-cost manufacturing for U.S. consumption. A deal with Vietnam sends a signal to other partners about the cost of imbalance and reliance.

The U.S. also sees Vietnam as part of a broader strategic pivot in Asia. With supply chains shifting from China to other hubs, and concern about technology transfer and critical-minerals sourcing rising, the U.S. wants Vietnam aligned with its industrial-security agenda. In return, giving U.S. firms better access to Vietnam reinforces the commercial dimension of the relationship and cements Vietnam’s role as an allied partner in Asia.

Moreover, reducing the U.S. trade deficit is a domestic political imperative. While trade deficits do not directly equate to loss of jobs, they serve as weaponised narratives in U.S. politics. A bilateral deal with Vietnam thus offers Washington a demonstrable outcome: lower tariffs, improved access for American goods, and a narrative of re-balancing.

Risks and Structural Hurdles in the Deal

Despite momentum, significant risks remain for both sides. For Vietnam, too rapid liberalisation could expose its domestic industry to stronger U.S. competition before local firms are ready. That may trigger internal social or political backlash, especially in labour-intensive sectors. The long-term structural adjustment from low-cost export-assembly toward higher-value goods requires careful calibration.

For the U.S., the question is whether a deal with Vietnam will meaningfully reduce the trade deficit. Many analysts argue that Vietnam’s surplus reflects broader structural factors—labour-cost differentials, foreign-investment flows, and global supply-chains—making it difficult to close that gap solely through one-off tariff and access adjustments. Without addressing root causes, the deal may paper over symptoms rather than transform trade flows.

Finally, companies and supply-chains are already embedded in Vietnam with China-adjacent components and regional networks. Changing that fabric takes time; rules on origin, trans-shipment and sourcing must be enforced. Otherwise, the U.S. risks repeating previous patterns where goods simply shift origin rather than economic substance.

If agreement is reached, the Vietnam-U.S. deal could serve as a model for future bilateral frameworks. It might intensify global competition for manufacturing location, reinforce U.S. demand for reciprocal access and strengthen Vietnam’s position in Asia. For Vietnam, committing to preferential access and structural reforms may attract more U.S. investment and elevate the country’s economic upgrading.

However, much rides on the details: the tariff-exempt lists, verification of origin rules, timing of market-opening, and follow-through on structural commitments. The next few weeks of negotiations in Washington will determine whether the deal is symbolic or substantive.

(Adapted from BusinessTimes.com.sg)