With just one week left until the July 9 trade deal deadline, which some suspect could have a similar adverse impact on markets as the first Liberation Day - even if stocks are completely oblivious to the risk - moments ago Trump gave a stark reminder just how high the trade stakes are when he announced that the US has made a trade deal with Vietnam.
According to the terms, Vietnam will pay the United States:
- 20% Tariff on any and all goods sent into our Territory,
- 40% Tariff on any Transshipping, which is squarely aimed at China which uses Vietnam as a reshipment/tolling hub.
Of the two, one can argue that the transshipment clause is more important because in recent weeks China had threatened that any country that makes a deal with the US at its expense would make it very angry. Which means that Xi is now terribly vexed.
In any case, in return for the tariffs, Trump said that "Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff."
Which is hardly a big deal, since the US barely exports to Vietnam.
what does matter is that a deal has been struck however, and now many other Asian countries will scramble to do the same, even if it is at terms that antagonize China (like in this case). Amusingly, Trump said that as a result of the deal, US SUVs will be a "wonderful addition" to various product lines within Vietnam.
It is my opinion that the SUV or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam. Dealing with General Secretary To Lam, which I did personally, was an absolute pleasure.
While stocks initially dipped on seeing the 20% print, they have since rebounded and recovered all losses, and trade at session highs, as algos remain completely oblivious that behind the scenes, huge tension is once again building up between the US and China, which is negotiating deals that Beijing will view as offensive, making the odds of an actual trade deal with Beijing much lower than most expect.
