US-Vietnam trade deal offers cautionary lessons for India, says GTRI Report

New US-Vietnam trade agreement raises concerns for Indian exporters, offering key lessons on competition and partnership in regional value chains.
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A new trade agreement between the United States and Vietnam is raising concerns and offering key lessons for India, especially for Indian exporters who see Vietnam as both a competitor and a partner in regional value chains, according to a report by the Global Trade Research Initiative (GTRI).

The report highlighted that despite a historic trade agreement signed in 2000 that allowed Vietnamese goods to enter the US at concessional tariffs of 2 to 10 per cent, the new deal imposes a flat 20 per cent tariff on all Vietnamese exports to the US. This move could affect Vietnam’s export flow worth $135 billion and reverse two decades of trade liberalisation.

GTRI stated, “For Indian exporters eyeing Vietnam as a competitor and partner in regional value chains, the deal presents both cautionary lessons and strategic implications.” The new agreement, announced by US President Donald Trump, provides duty-free access to US exports entering Vietnam. However, it sharply increases tariffs on Vietnamese goods exported to the US, reducing the earlier proposed rate of 46 per cent but still doubling or tripling the rates allowed under the 2000 Bilateral Trade Agreement (BTA).

Vietnamese goods such as textiles, footwear, seafood, furniture, handicrafts, and agricultural products had benefited from low tariff access to the US market since 2001, helping Vietnam grow its exports from just $800 million to over $135 billion. The report warned that the new flat 20 per cent tariff will erase this advantage and may weaken Vietnam’s competitiveness in the American market. Another concern raised in the report is the US decision to impose a 40 per cent tariff on goods routed through Vietnam but originally made in countries like China.

Experts say this move is legally questionable and inconsistent with World Trade Organisation (WTO) rules, as transhipment does not change the country of origin. GTRI noted that the timing of this deal is critical for India, which is in the final stages of negotiating its own trade agreement with the US. Indian negotiators are advised to learn from Vietnam’s experience, particularly the risks of reversing previous concessions, applying blanket tariffs, and unclear rules around the origin of goods.

The report concluded that Indian exporters and policymakers must watch closely as the US reshapes its trade policies in Asia to identify both opportunities and red flags.

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Published on July 3, 2025