This month, Chinese logistics operations have been bustling in southern Vietnam, with warehouses near Ho Chi Minh City actively involved in packing cosmetics, clothing, and shoes for the fast-fashion retailer Shein. Recruiters are also on-site, seeking to fill hundreds of job vacancies.
In another industrial park managed by Alibaba's supply chain division, there is a constant flow of trucks, indicating a significant increase in activity fueled by Chinese investment in Vietnam. This investment has contributed to the country's appeal as a viable alternative for global companies looking to shift their manufacturing from China.
However, the ongoing trade tensions initiated during the Trump administration have complicated Vietnam's position, as the country faces the prospect of a 46 percent tariff. Vietnamese officials are urgently working to negotiate a deal before a 90-day moratorium on the new tariffs expires in early July, meeting with U.S. officials for two rounds of discussions this week.
The Trump administration is demanding that Vietnam take more robust action against companies that are transshipping goods from China through Vietnam to avoid tariffs. This practice has raised concerns, as it has been interpreted by U.S. authorities as undermining efforts to reduce reliance on Chinese imports.
Vietnam's challenge now is to substantiate that its exports to the United States are genuinely produced within its borders rather than being re-routed Chinese goods. The situation has been complicated by remarks from U.S. trade advisers, including references to Vietnam as a "colony of China."
During the previous administration, Vietnam benefited from tariffs imposed on Chinese imports, leading to a significant increase in its trade surplus with the United States from $38.3 billion in 2017 to $123.5 billion in 2024.
The trade dynamics changed drastically in April, with a substantial increase in Chinese imports into Vietnam, driven by high tariffs imposed on Chinese goods, which in turn caused a surge in Vietnamese exports to the United States. Following a temporary agreement between China and the U.S. to reduce tariffs, trade relations continue to evolve.
In an effort to address U.S. concerns, Vietnam has established a task force aimed at combatting smuggling and trade fraud, including the mislabeling of goods as "Made in Vietnam." Vietnamese officials have also engaged with U.S. Customs and Border Protection to improve cooperation and information sharing.
Despite these measures, U.S. officials maintain that Vietnam's actions have not sufficiently addressed the issue of transshipment, further complicating the bilateral trade relationship.
Economists have noted that Vietnam's dependence on China for intermediate goods complicates the verification of the origins of its exports. As production shifts from Chinese factories, the increase in Vietnamese exports may still largely consist of materials sourced from China.
While legitimate supply chain movements are occurring as companies explore manufacturing options in Vietnam, the U.S. administration remains vigilant against any transshipment activities. U.S. trade representatives argue that any products originating from China risk being categorized as transshipped, creating further obstacles for Vietnamese exports.
Disconnecting supply chains from China poses significant challenges, especially for industries such as textiles and garments that rely heavily on Chinese materials, with estimates suggesting that around 60 percent of the fabrics used in Vietnam are imported from China.
To bolster negotiations with the U.S., Vietnam has proposed increasing purchases of American goods, such as agricultural products and aircraft from Boeing, while also attempting to reduce the transshipment of Chinese goods.
Meanwhile, the influx of Chinese investment continues to shape Vietnam's industrial landscape. In Long An province, where many footwear and textile factories are located, Shein is actively recruiting workers, indicating a persistent demand for labor.
Recruiters are finding it challenging to fill positions, as many logistics companies are also in search of employees. Applicants are expressing concerns about low wages, indicating that the dynamics of supply and demand in the labor market remain complicated.