Shoes, electronics and clothing are just some of the goods that could get more expensive under the trade agreement President Donald Trump announced with Vietnam on Wednesday.
Wait — how’s that possible?
For the past three months, goods shipped from Vietnam to the United States were tariffed at a minimum 10% rate, a reprieve from the 46% rate that briefly went into effect in April before Trump announced a pause.
Trump claimed the delay would give countries more time to negotiate trade deals with the US. As his self-imposed July 9 deadline for deals approaches with few new agreements in place, Trump has threatened to raise tariffs again.
But here’s the kicker: Sealing a deal, or a framework for one, doesn’t prevent higher import taxes, either.
The agreement Trump announced via social media calls for a minimum 20% tariff on Vietnamese goods exported to the US. That’s double the rate US businesses are currently paying. In return, Trump said that Vietnam agreed to open its economy to trade with the US, including not tariffing American goods.
Many details remain unknown, including whether anything has been finalized. Vietnam’s state-run news outlet, Việt Nam News, referred to the agreement on Wednesday as “a framework.”
“Obviously this is not good news for American consumers,” said Clark Packard, a trade policy research fellow at the libertarian-leaning Cato Institute. Vietnam is the sixth-top source of foreign goods shipped to the US, a ranking that’s steadily risen over the past few years as shipments from China to the US have declined. Among the top goods the US buys from Vietnam are electronics, apparel, footwear and furniture, according to US Commerce Department data.
That makes it all the more likely Americans will be impacted by the higher tariff rates. “Certainly American consumers will ultimately bear the burden here,” Packard told CNN.
Tariffs are taxes on imported goods, making them more expensive to buy. Businesses foot the initial tariff bill for imported goods, but they often pass on some of those costs to consumers by raising prices.
But many businesses will absorb some or all of those tariff costs to avoid losing customers. And businesses often stockpile inventory ahead of tariffs, delaying cost increases for themselves and for customers.
Eventually, though, they may run out of options to protect consumers from higher prices.
“The Administration has consistently maintained that the cost of tariffs will be borne by foreign exporters who rely on the American economy, the biggest and best consumer market in the world,” White House spokesman Kush Desai said in a statement to CNN. Desai said recent inflation readings, which have yet to show widespread price increases even as tariffs on virtually everything the US imports have increased since April, are proof of that.
Trump’s tariffs are intended to “level the playing field for American industries and workers,” Desai said. In other words, by raising the cost of foreign-made goods, Trump hopes to induce more businesses to produce goods domestically.
However, it can take several years for businesses to onshore manufacturing. In the meantime, they may be stuck importing products from places like Vietnam.
Caleb Petitt, a research associate at the Independent Institute, a libertarian-leaning think tank, disputed the idea that American businesses will benefit from the tariffs because many rely on components produced abroad, as well as billions of dollars worth of finished goods.
“These tariffs will not help American industry and will burden American consumers with higher costs and uncertainty about the market,” he said.
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