A new trade agreement between the United States and Vietnam, announced by former President Donald Trump, has set new tariff rates for Vietnamese exports, though initial market reactions, particularly in Hanoi, have been lukewarm. This deal comes just days before a broader July 9 deadline set by Trump for other nations to finalize trade pacts, aiming to avoid his previously announced “reciprocal” levies.

Under the terms of what Trump dubbed the “Great Deal of Cooperation,” imports of Vietnamese goods into the US will face a 20 percent tariff. This is a significant reduction from the 46 percent levy initially proposed as part of the April 2 tariff blitz. Additionally, goods that pass through Vietnam to circumvent steeper trade barriers, a practice known as “transshipping,” will incur a 40 percent tariff. On Vietnam’s part, the agreement stipulates that the nation will provide total access to its markets for US products, meaning American goods can be sold into Vietnam at zero tariff. Vietnamese officials have confirmed this as a framework agreement, reiterating their commitment to preferential market access for US goods, including large-engine vehicles, and pushing for US recognition of Vietnam as a market economy and the lifting of restrictions on high-tech exports.

Despite the tariff reduction, traders in Hanoi were unimpressed, with the Vietnamese capital’s stock market falling in early trade. This sentiment was echoed across much of Asia, where stocks struggled on Thursday. While Wall Street’s S&P 500 and Nasdaq achieved record closes, this did little to lift buying sentiment elsewhere. Major Asian markets including Hong Kong, Shanghai, Tokyo, Sydney, and Wellington all experienced declines, though Singapore, Seoul, Taipei, Manila, and Jakarta saw slight gains. Dealer caution stemmed from the fact that Vietnam must still pay significant tolls, and uncertainties surrounding the definition and enforcement of “transshipping” provisions. The deal provided some hope that other governments could reach agreements with Washington, yet with only three countries having done so before the deadline, worries persist about fresh market turmoil if Trump’s “Liberation Day” measures fully kick in.

The broader economic landscape also influenced market sentiment. The US dollar eased as traders increased rate cut bets after data unexpectedly showed the private sector shed jobs in the prior month for the first time since March 2023, suggesting a slackening labor market. This occurred ahead of the much-anticipated non-farm payrolls report, which guides Federal Reserve policy. While two rate cuts are widely expected this year, there’s growing speculation of a third, possibly as early as the July meeting. Meanwhile, US Treasury yields rose amidst fresh worries in the bond market over Trump’s proposed tax-slashing budget bill, which independent analysis suggests could add $3 trillion to the already colossal US national debt, potentially dealing a blow to the world’s largest economy.

Vietnam has emerged as a major manufacturing hub for global brands such as Nike, Apple, Gap, and Lululemon, largely benefiting from firms relocating factories out of China to avoid tariffs imposed during Trump’s first term. Initially, share prices of companies manufacturing in Vietnam rose on news of the deal, though these gains were trimmed once the 20% tariff became clear. Adam Sitkoff of the American Chamber of Commerce in Hanoi expressed optimism, noting the deal leaves Vietnam in a good position for companies shipping goods to the US. Separately, the Trump family has announced significant development projects in Vietnam, including a $1.5 billion investment in hotels, golf courses, and luxury real estate with Kinh Bac City Development, and plans for a Trump Tower in Ho Chi Minh City.

This agreement, similar to recent trade deals with Britain and China, is more of a framework than a final pact. Nevertheless, it provides a diplomatic and economic win for Donald Trump as numerous nations scramble to negotiate and avoid stiffer tariffs ahead of the looming deadline for his “America First” economic policy.