Starting with Vietnam, around July 9, the Trump administration announced adjusted tariffs in batches for various countries. As an emerging manufacturing hub, East Asia is a key focus for the U.S. to “rebalance” its trade structure. Vietnam’s “surrender agreement” has cast a heavy shadow over other economies in the region.
A 20% reciprocal tariff, a 40% “transshipment” tariff, full market access, a $10 billion order for 50 Boeing passenger jets, 24 F-16 fighter jets, and a $1.5 billion golf resort project with Trump’s private business group—Vietnam has provided the East Asian region with an embarrassing example of compromise and an unattainable standard of negotiation.
From another perspective, Vietnam’s sweeping concessions have secured temporary bilateral trade stability, welcomed by its exporters and foreign investors, and have bolstered domestic support for Vietnam’s new political leadership by sustaining economic growth. However, this temporary stability has weakened Vietnam’s standing within ASEAN.
In the first half of 2025, Vietnam benefited from a “stockpiling effect” during a trade war truce, with U.S. importers accelerating purchases, leading to a GDP growth of 7.52%—a record since 2011. During the same period, Vietnam attracted $21.51 billion in FDI, the highest since 2009. These impressive figures have temporarily strengthened the Hanoi regime’s domestic legitimacy.
Vietnam secured better tariff terms than its competitor Mexico (30%) and most ASEAN members except the Philippines, possibly even outperforming another rival, India. However, this has isolated Vietnam regionally.
From a medium- to long-term strategic perspective, Vietnam’s fate depends on its largest importer, China, and its ability to achieve industrial complementarity with neighbors to mitigate regional discontent toward Hanoi. Failure to gain neighbors’ understanding could hinder raw material imports and intensify competitive pressures on labor costs.
To this end, Vietnam is pursuing deeper cooperation with Cambodia and Pakistan. However, its relationship with Beijing remains uncertain.
In February, Vietnam and Cambodia held a summit in Ho Chi Minh City, signing a 2025-2026 bilateral trade agreement that offers preferential tariffs on exports and mutual commitments to cooperate in infrastructure, cross-border trade, and investment.
Given the historical tensions between the two nations, this shift highlights their determination to prioritize economic development and overcome political barriers. For Cambodia, Vietnamese investment helps balance Chinese capital, while for Vietnam, rising domestic labor costs can be offset by outsourcing to Cambodia.
The Vietnam-Cambodia cooperation model’s prospects remain uncertain, as bilateral trade agreements under U.S. pressure pose new challenges for ASEAN. The balance of competition and cooperation among members raises questions about whether these developments serve ASEAN’s broader interests.
In July, Vietnam and Pakistan held their fifth trade cooperation meeting, advancing toward a free trade agreement (FTA). Current progress focuses on trade in raw materials like cotton and textiles, Vietnam intends to consolidate its position in the global textile industry.
One of Vietnam’s goals in diversifying raw material imports is to reduce its heavy reliance on China. However, unless Hanoi rejects Chinese capital, these efforts are unlikely to succeed.
The key question is whether Vietnam can leverage lower U.S. tariffs to shed its role as a “China transshipment hub” and become an “East Asia transshipment hub.” The answer is no, as the 40% “transshipment tariff” allows the U.S. to sanction Vietnam at any time.
Moreover, the Philippines faces the same 20% reciprocal tariff without additional conditions, and foreign investors could opt for Manila instead. However, strained China-Philippines relations make it unlikely for Manila to replace Vietnam as a transshipment hub.
Regardless, China remains the pivotal force in East Asia. If Beijing chooses, it could secure lower reciprocal tariff terms than other regional economies, which is the primary reason East Asian countries are hesitant to follow Vietnam’s lead in conceding to the U.S.
For now, Beijing is unlikely to react to the U.S.-Vietnam agreement and will instead focus on negotiating with the U.S. while prolonging talks. Although other economies might compromise with the U.S. during U.S.-China negotiations, Beijing will not hesitate to impose sanctions if its interests are harmed, to avoid being at a negotiating disadvantage.
A secondary reason why the East Asian economies, with the exception of Taiwan, will not accelerate negotiations as a result of the U.S.-Vietnam agreement is that the Trump administration will not guarantee the continuity of the agreement, and even, in the case of Vietnam, Washington even unilaterally altered the agreement reached between the two parties.
According to POLITICO, Vietnam’s negotiating team believed the agreed tariff was 11% until Trump unexpectedly raised it to 20%.
This is Trump’s tactic with other nations, sacrificing Vietnam’s interests to lower expectations for tariff exemptions and setting 20% as the minimum threshold. In fact, the Philippines’ tariff was raised from 17% to 20%, It is not out of US dissatisfaction with the Philippines, but to set a bottom line.
Before announcing new tariffs, many East Asian countries made significant efforts for lower tariffs: Indonesia announced a $34 billion deal to increase fuel imports and investments in the U.S.; Thailand proposed achieving trade balance with the U.S. in 7-8 years; South Korea accepted high tariffs on its steel, cars, and parts. Yet, these efforts resulted in continued high tariffs, leaving these nations frustrated and resentful toward the U.S.
Appeasement has proven ineffective, agreements are torn up, and it doesn’t even eliminate instability, making most countries reluctant to commit to the U.S. and more inclined to make tacit agreements with other countries to avoid being broken by the U.S. Thus, the progress of U.S.-China negotiations remains the key reference for other nations.
If most countries view Vietnam as a cautionary tale and adopt a wait-and-see approach, Washington will struggle to build leverage against Beijing to secure favorable outcomes.
Among Southeast Asian countries, with the exception of Cambodia, whose share of exports to the United States is as high as 37% of the country’s exports, the share of other major countries is significantly lower than that of Vietnam: Indonesia (10%), Thailand (18%), Malaysia (13%), the Philippines (17%), Japan (20%), and South Korea (15%). Even if they lose part of the U.S. market, these countries face less pressure to find alternatives.
This explains Vietnam’s cooperation with Cambodia and why other regional countries will not make the same level of concessions to the U.S. as Vietnam did. Ultimately, China’s stance remains the biggest variable and the greatest challenge for the U.S.
