China and Vietnam have agreed to increase trade and investment flows between themselves days after the Southeast Asian nation entered a new trade deal with the US, Reuters reports.
The agreement was nutted out between Premier Li Qiang and Vietnamese Prime Minister Pham Minh Chinh on the sidelines of the BRICS summit in Brazil, which wound up on Monday. Chinh also announced that Vietnam would start building a new railway to China in December, and urged Li to prioritise construction cooperation.
Last week, Vietnam entered into a preliminary trade pact with the US that observers have described as being designed to hurt China via a 40 percent tariff on transshipments to the US through Vietnam from third-party countries.
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Details on the transshipment levy have not yet been made public, but Vietnamese manufacturers are known to source many components and materials from China. Questions remain around how “transshipment” and “Made in Vietnam” will be defined.
“If it only applies to pure transshipments – goods sent from China to the US via Vietnamese ports, without any local assembly – then there should hardly be any impact on Vietnam,” Frederic Neumann, chief Asia economist at HSBC Bank, told CNBC.
However, if the 40 percent rate applies to “all Vietnamese goods with even a minimal share of Chinese components, the disruptions could be significant,” he added.
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The US agreement with Vietnam was only Washington’s second successfully renegotiated trade deal after US President Donald Trump announced his so-called reciprocal tariffs back in April, which were subsequently put on pause until a deadline 9 July. The UK was the first country to announce a new trade deal with the US.
Vietnam’s new deal will see its exports to the US slapped with a 20 percent import tariff rather than the 46 percent reciprocal tariff that had been set to start today. US exports to Vietnam, meanwhile, will not incur any tariffs.
