The recent trade agreement between the United States and Vietnam has sparked discussions among experts regarding its potential implications for India. Signed on July 2, 2025, the deal, brokered by U.S. President Donald Trump and Vietnamese General Secretary To Lam, introduces new tariff structures that could impact trade dynamics in the region.
Key Aspects of the US-Vietnam Trade Deal
Under the agreement, Vietnam will impose a 20% tariff on all goods exported to the United States. Additionally, a 40% tariff will be applied to goods transshipped through Vietnam, a measure seemingly aimed at preventing the circumvention of U.S. tariffs on Chinese products. In return, the United States will have "TOTAL ACCESS" to Vietnam's markets with zero tariffs. This means that American products can be sold in Vietnam without any import duties.
Potential Impacts on India
Experts suggest that India needs to be cautious, particularly concerning trade negotiations with the U.S., given the terms of this new agreement. The flat 20% tariff and the 40% tariff on transshipped goods from Vietnam could have specific repercussions for India's exports. Sectors like pharmaceuticals and electronics, where India relies on imported components, might be affected by these transshipment tariffs.
India-Vietnam Relations
India and Vietnam have a longstanding relationship characterized by cultural, economic, and strategic ties. India has historically supported Vietnam, including during the Vietnam War, and was one of the few non-communist nations to back Vietnam during the Cambodian-Vietnamese War. In 1992, the two countries established significant economic relations, encompassing oil exploration, agriculture, and manufacturing. Defense cooperation has also been a crucial aspect of their partnership, involving military equipment sales, intelligence sharing, joint naval exercises, and training. This relationship was further solidified in 2007 when it was elevated to a "Strategic Partnership" and then to a "Comprehensive Strategic Partnership" in 2016.
Geopolitical Implications
The U.S.-Vietnam Comprehensive Strategic Partnership, which was formalized in September 2023, signifies a noteworthy development in Southeast Asia. It places the U.S. on par with Russia and China in Vietnam's diplomatic hierarchy. This partnership aims to bolster cooperation in various sectors, including trade, investments, science, technology, and climate action. It also serves as a counterbalance to China's growing influence in the Indo-Pacific region.
Navigating the Changing Landscape
In light of the evolving dynamics, India needs to carefully navigate its relationships with both the U.S. and Vietnam. While the U.S.-Vietnam deal could present some challenges, it also underscores the importance of India strengthening its ties with Vietnam. Vietnam's arms imports have decreased in recent years, which has impacted its defense trade with India. Closer cooperation with Vietnam, under India's Act East Policy, can enhance India's strategic depth and regional influence. Moreover, India and Vietnam can explore a Free Trade Agreement (FTA) to boost bilateral trade, and promote collaboration in areas like textiles and electronics.
Overall, the U.S.-Vietnam trade agreement introduces a new layer of complexity in the region. India must remain vigilant, assess the potential impacts on its trade interests, and proactively strengthen its strategic partnerships to maintain its position in the evolving geopolitical landscape.
