Although the general tariff rate is 20%, it may vary depending on the type of product. These specifics are what Vietnamese negotiators must strive to include in the final documents to secure a truly favorable deal for Vietnam.

VietnamNet spoke with Professor John Quelch, former Vice Dean of Harvard Business School, regarding the current U.S. reciprocal tariff on Vietnam.

According to the White House directive dated July 31, 2025, the reciprocal tariff rate on Vietnamese goods is set at 20%. How do you assess this figure compared to tariffs imposed on other ASEAN nations?

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Professor John Quelch.

Professor John Quelch: First, the 20% rate is not too severe when compared to 19% in Indonesia and 19% in the Philippines. It's relatively aligned with general tariff rates across Southeast Asia. However, the critical issue lies in the specifics that are yet to be clarified. While the general rate may be 20%, certain goods or services may face lower or higher tariffs. These details are what Vietnamese negotiators must work diligently to include in the final documents to secure an optimal agreement.

The second point I’d like to address is the issue of transshipment, which has raised concerns in the United States. If a product is imported from another country and merely relabeled “Made in Vietnam,” the export profits might appear impressive, but the actual value added to Vietnam’s economy is minimal. If such exports don’t bring tangible benefits to the economy or the people, then they’re hardly worth pursuing. Washington expects more progress from Vietnam on this matter. If that happens, I believe the main tariff rate could drop below 20%.

How do you view Vietnam’s decision to accept a deal that reduced U.S. tariffs from 46% to 20%? Should this be considered a negotiation success or a “conditional discount” that Vietnam had to pay to be included in U.S. trade policy?

Remember, the 46% figure was based on a flawed assumption about the trade surplus between Vietnam and the U.S. That inflated figure justified a steep tariff. As I mentioned earlier, much of Vietnam’s export growth stems from transshipped goods that often contribute little actual value to Vietnam’s economy.

Some Chinese companies have invested in Vietnam and created real value by employing local labor. But in many cases, it’s merely about rerouting goods, resulting in negligible value addition. Therefore, using 46% as a basis for tariff calculation is highly questionable.

Now, with the 20% rate, Vietnam can look at regional peers like the Philippines and Indonesia and realize it isn’t in a significantly worse position. I believe this is the benchmark politicians are using to measure the success or failure of the agreement.

Similarly, if a country has a trade surplus with the U.S. - selling more than it imports - it typically faces a 10% tariff. More developed economies such as Japan, South Korea, and the European Union are taxed at 15%. So, I foresee three basic tariff brackets: 10%, 15%, and 20%.

Of course, the biggest issue is U.S.-China trade relations. Chinese negotiators are tough and operate from a very different position compared to other nations or trading blocs. The global tariff landscape and its economic implications will largely depend on how the U.S. and China manage their relationship.

Vietnam’s trade surplus with the U.S. reached $123.5 billion in 2024. In your view, is this a commercial success or a strategic vulnerability?

I see it as a short-term success. Clearly, Vietnam’s economy is being fueled by strong exports to the U.S. But in the long run, a more stable and balanced trade relationship would be better.

Vietnam should aim to attract more American investment and open its markets wider to U.S. goods and services. At the same time, Vietnam might consider investing in U.S. energy or purchasing more aircraft for domestic airlines. Such moves can help reduce the trade imbalance.

If import-export discrepancies become too large, negotiation and mutual investment are necessary to either reduce surpluses or deficits, depending on the situation.

There’s speculation that more U.S. products may enjoy zero-percent import tariffs in Vietnam. Do you think Vietnam risks becoming a consumer market rather than a manufacturing-exporting partner? Would this create internal economic imbalances?

Any policymaker must consider the source of growth. Is it coming from investment, domestic market expansion, or from exporting high-quality products?

Currently, Vietnam’s consumption-to-GDP ratio is appropriate for its development stage. I don’t see major internal imbalances. However, the increase in exports driven by transshipment does need to be corrected to establish a harmonious and sustainable trade relationship with the U.S.

Naturally, the U.S. understands Vietnam’s unique position in balancing relations with both China and the U.S. Each will try to pull Vietnam closer. Ultimately, there needs to be a compromise that satisfies both sides.

Will the 20% tariff increase the cost of Vietnamese goods and hurt their competitiveness? How will this affect key export industries?

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US President Donald Trump. Photo: NYT

If Vietnam’s export advantage is based solely on low costs - rather than quality, technology, or uniqueness - then as input costs like labor rise, product prices will follow, resulting in a loss of competitiveness.

That’s why, in China - once dubbed the “world’s factory” - there’s now a focus on developing a “high-quality production force.” This means investing in technology, creating hard-to-replicate products, and commanding higher prices. China no longer competes by producing shoes or garments like it did a decade ago.

Thin profit margins, high logistics costs, and lack of sustainable supply chains are key weaknesses for Vietnamese businesses. What should small and medium-sized enterprises do to avoid being excluded from the U.S. market?

International markets are fiercely competitive. American buyers like Walmart constantly evaluate prices, exchange rates, and supply chain costs. Therefore, it’s vital for Vietnamese firms to maintain strong communication with U.S. customers, understand their expectations on competitiveness, and provide support.

Businesses must differentiate themselves, respond quickly, and deliver on time - factors just as important as product quality. Build customer loyalty. It’s not easy, but it’s essential. Vietnam needs a solid two-year strategy to adapt.

Some businesses might consider bypassing regulations by routing goods through third countries. Do you think this raises legal risks and damages national credibility?

Yes, that risk is real. If Vietnam is seen merely as a relabeling hub for foreign goods, it would damage its reputation. Still, the short-term benefits of transshipment investments must be considered. It’s a political decision. Personally, I think caution is needed.

There are concerns that foreign direct investment (FDI) might shift from Vietnam to other ASEAN nations. Do multinational corporations weigh this possibility? What should Vietnam do?

The key is ensuring that companies like Intel, which have already invested in Vietnam, see positive outcomes. The quality of the workforce, training capability, and professional ethics are more critical than tax incentives.

Living standards also matter to international executives. Vietnam has an advantage here. But remember: without a skilled workforce, no amount of tax breaks can ensure operational efficiency.

Take Apple’s shift to India - not driven by taxes, but by India’s vast market and strong technical labor force. Vietnam needs to invest in STEM education, data science, and engineering to elevate its human capital.

Some fear that a 20% tariff leaves Vietnam “without enough incentives to retain investors, and without enough advantages to attract new ones.” What is your strategic solution?

It’s true that FDI competition is intense. But it’s not all about money. If you don’t have a competent workforce to run factories, incentives are meaningless.

Moreover, companies that chase tax breaks aren’t always reliable long-term partners. Vietnam should seek investors who believe in its sustainable development potential - not just short-term incentives. That’s the core strategy.

Professor John Quelch is a leading expert in international marketing, national and regional branding, FDI strategy, and global health policy. He previously served as Vice Dean of institutions such as Harvard Business School, London Business School, and China Europe International Business School (CEIBS).

He is currently a professor at the Miami Herbert Business School, University of Miami, where he also served as Vice Dean and Dean of the School of Public Health and International Studies. In addition to his academic work, he has served on the boards of major corporations and advised many governments and global companies on branding strategy.

Lan Anh

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