May 8, 2025
The overwhelming number of questions from the audience underscores the high level of engagement and the relevance of the workshop's topics. While we regret that time constraints prevent us from addressing every query, we've meticulously reviewed and selected the most common and valuable questions for the broader group. For further inquiries, please contact our teams at [email protected] (Vietnam) and (Cambodia).
Part 1 | Government Efforts to balance bilateral trade with the US
Question 1. “How is the Vietnamese government responding to mitigate the negative impacts of new U.S. trade and tariff policies?”
Vietnam's Strategic Response to U.S. Trade and Tariff Policies
The Vietnamese government has been proactive in addressing the challenges posed by new U.S. trade and tariff policies. With a multifaceted approach that includes diplomatic negotiations, economic adjustments, strategic requests, and domestic measures, Vietnam aims to mitigate the negative impacts and foster a stable trade relationship with the United States.
Diplomatic Engagement and Negotiations
Vietnam has initiated formal negotiations with the U.S. to address countervailing tariffs. The first session of these talks was scheduled for May 7, 2025. The Vietnamese government is emphasizing a strategy of "harmonized benefits, shared risks" to ensure that both countries can find mutually beneficial solutions. This diplomatic engagement is crucial for maintaining a constructive dialogue and preventing further escalation of trade tensions.
Economic and Policy Adjustments
To balance trade and address the concerns of the U.S., Vietnam has pledged to increase its purchases of American goods, including liquefied natural gas (LNG) and aircraft. This move is designed to reduce the trade surplus and demonstrate Vietnam's commitment to a fair trading relationship. Additionally, Vietnam is taking stringent measures to crack down on transshipment fraud, particularly the rerouting of Chinese goods through Vietnam to avoid U.S. tariffs. This effort aims to enhance the integrity of Vietnamese exports and comply with international trade regulations.
Strategic Requests to the U.S.
Vietnam is seeking early recognition as a market economy, which would provide significant advantages in trade relations and reduce the likelihood of anti-dumping measures. Furthermore, Vietnam is requesting the removal of restrictions on high-tech U.S. exports to Vietnam. These strategic requests are aimed at fostering a more balanced and equitable trade environment, benefiting both countries.
Domestic Measures
On the domestic front, the Vietnamese government is streamlining its administrative structure to improve efficiency and reduce bureaucratic hurdles. This includes promoting high-tech industries such as semiconductors and microchips, which are critical for the country's economic modernization and competitiveness. By focusing on these high-value sectors, Vietnam aims to diversify its export base and reduce its vulnerability to external trade shocks.
Question 2. “Tariffs as expected after June 2025 as imposed to Vietnam and Cambodia by US government?”
Anticipated Tariffs and Their Implications
As of early May 2025, the United States announced a 46%, and 49% reciprocal tariffs on Vietnamese import, and Cambodian imports respectively. However, the implementation of this tariff has been delayed until July 2025 to allow for ongoing negotiations. If these negotiations fail, the tariff will take effect, significantly impacting Vietnamese/ Cambodian exports to the U.S., particularly in sectors such as apparel, footwear, electronics, and furniture.
What to Expect After June 2025
If no agreement is reached, the reciprocal tariffs will be implemented in July, leading to higher landed costs for Vietnamese/ Cambodian goods in the U.S. market. This will likely result in supply chain disruptions and force companies to re-evaluate their sourcing strategies. Businesses should prepare for potential impacts by considering repricing and margin adjustments, conducting customs compliance reviews, and exploring alternative markets or production bases.
Implications for Businesses
Businesses need to be proactive in preparing for the potential impacts of the tariffs. Key strategies include:
- Repricing and Margin Adjustments: Companies may need to adjust their pricing strategies to maintain competitiveness in the U.S. market.
- Customs Compliance Reviews: Ensuring compliance with customs regulations is crucial to avoid penalties and delays.
Exploring Alternate Markets or Production Bases: Diversifying markets and considering alternative production locations can help mitigate the risks associated with the tariffs.
Part 2 | Sectoral Impacts
Question 3. Please can you explain the tariff stacking?
Tariff stacking refers to the simultaneous application of multiple tariffs on a single commodity. This methodology can result in cumulative tariffs, significantly increasing the overall cost of imported goods.
| Key Points of Tariff Stacking |
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| 1. Multiple Tariffs: Different types of tariffs, such as antidumping duties, countervailing duties, and Section 232 tariffs, can be applied together. |
| 2. Hierarchy of Application: Tariffs are applied in a specific order, often starting with the most general tariffs and then adding more specific one. |
| 3. Impact on Importers: Importers must carefully review classifications to ensure proper application of tariffs and avoid excessive duties. |
Example:
For instance, if a commodity is subject to Section 232 tariffs on steel, it might also face additional tariffs under antidumping measures if imported from a country suspected of selling below market value.
Non-Stacking Principle:
Recent executive orders have aimed to prevent the cumulative application of tariffs under the same provisions, ensuring that an article subject to one type of tariff isn't subjected to additional tariffs from the same order.
Why It Matters:
Understanding tariff stacking is crucial for businesses to navigate international trade efficiently and mitigate potential financial burdens:
? Accurately assess landed costs.
? Avoid supply chain inefficiencies.
? Evaluate competitiveness and the real impact of trade policies.
Question 4. How does the U.S reciprocal tariffs impact on Vietnamese exporters in Footwears & Apparel to US? How to minimize the potential impacts?
Impact of U.S. Reciprocal Tariffs on Vietnamese Footwear and Apparel Exporters
The imposition of a 46% reciprocal tariff by the United States on Vietnamese exports, including footwear and apparel, has created significant challenges for Vietnamese exporters. This sharp increase in tariffs, effective from April 2025, raises the total effective duty on textiles and garments. The substantial hike in tariffs has severely impacted the price competitiveness of Vietnamese products in the U.S. market, leading to concerns about order cancellations, profit margin erosion, and supply chain disruptions.
| Impact on Vietnamese Exporters |
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 Price Competitiveness: The increased tariffs have drastically reduced price competitiveness in the U.S. market.
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Order Cancellations: Rising cancellations from U.S. buyers unwilling to absorb costs.
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Profit Margin Erosion: Exporters face reduced profitability amid higher costs.
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Supply Chain Disruptions: Tariffs have disrupted sourcing and logistics strategies.
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| Minimizing Potential Impacts |
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 Market Diversification: Explore alternative export markets under FTAs.
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Product Value Enhancement: Invest in branding and quality to justify higher prices.
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Supply Chain Restructuring: Localize or regionalize to reduce tariff exposure.
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Compliance & Transparency: Improve traceability to meet U.S. standards.
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Cost Optimization: Streamline operations, automate, and reduce overheads.
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Strategic Partnerships: Collaborate with U.S. firms to bypass tariffs.
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Question 5. What is the impact of the Trump tax in Cambodia? What is the forecast for the Cambodian market, especially for Moto and Auto? Are there risks of anti-dumping, countervailing duties, or quotas on steel imports from Cambodia?
Impact of the Trump Tariff on Cambodian Exporters
The U.S. has imposed reciprocal tariffs of up to 49% on Cambodian exports as of April 2025. This move was driven by Cambodia's large trade surplus with the U.S. and its heavy reliance on the U.S. market, which accounts for a significant portion of Cambodia's total exports. Key affected sectors include garments and footwear, leather goods, furniture, and automotive components and accessories.
Forecast for Cambodia’s Motorcycle and Automobile Market
? Domestic Demand: Domestic demand for motorcycles and small vehicles remains resilient, driven by urbanization, rising middle-class income, and infrastructure development.
? Export-Oriented Auto Parts: Export-oriented auto parts and accessories face significant headwinds due to tariff-induced price hikes and potential order cancellations from U.S. buyers. Market volatility is expected through late 2025 and early 2026, with growth possible if Cambodia can diversify export markets and upgrade local production capabilities.
? Risks of Anti-Dumping, Countervailing Duties, or Quotas on Steel
While no formal U.S. trade remedy actions have been announced against Cambodian steel as of May 2025, the risk is rising due to increased scrutiny of transshipment practices, Cambodia's growing steel re-export volumes, and U.S. emphasis on origin verification and enforcement. If evidence of unfair pricing or subsidies emerges, Cambodia could face anti-dumping duties (ADD), countervailing duties (CVD), import quotas, or licensing requirements.
| Strategic Recommendations for Cambodian Exporters |
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Strengthen Origin Documentation: To avoid transshipment allegations, exporters should ensure robust documentation and traceability systems.
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Diversify Export Markets: Exploring markets beyond the U.S., such as the EU, ASEAN, and the Middle East, can reduce reliance on the U.S. market.
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Engage in Trade Diplomacy: Negotiating tariff relief or exemptions through diplomatic channels can provide some respite.
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Invest in Compliance and Traceability Systems: Meeting U.S. customs standards is crucial for smooth trade operations.
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Monitor U.S. Trade Remedy Investigations: Preparing legal defenses and staying informed about ongoing investigations can help mitigate risks.
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Part 3 | Value Chain Considerations
Question 6. Should companies now shift all remaining production out of China to Vietnam on the consideration that the China punitive rate will be higher for longer, and how they are dealing with the country of origin issue?
Challenges
With the U.S. imposing historically high tariffs on Chinese goods, many companies are contemplating shifting their production from China to Vietnam. This strategic move is driven by several factors, including tariff pressure, rising costs in China, and geopolitical risks. However, this transition also brings significant compliance challenges, particularly regarding country of origin rules.
Reasons why companies are seeking alternatives to China
Tariff Pressure
U.S. tariffs on Chinese goods have reached unprecedented levels, making exports to the U.S. from China significantly more expensive. This has prompted companies to seek alternative production locations to maintain their competitiveness.
Rising Costs
Labor costs in China have surged, coupled with additional social insurance burdens. These rising costs are eroding profit margins and making China less attractive as a manufacturing hub.
Geopolitical Risk
Ongoing U.S.-China tensions and policy unpredictability are driving companies to seek more stable environments. The geopolitical landscape has become a critical factor in strategic decision-making for global businesses.
Why Vietnam Is a Top Alternative
Lower Tariffs
While Vietnam faces a 46% U.S. tariff, it is still far lower than China’s 104%. This significant difference makes Vietnam a more cost-effective option for exporting to the U.S.
Labor Advantage
Factory wages in Vietnam are significantly lower than in China. This labor cost advantage is a key factor in the decision to relocate production.
Trade Agreements
Vietnam is part of several free trade agreements, including the CPTPP and EVFTA. These agreements provide broader market access and reduce tariff barriers.
Improved Infrastructure
Vietnam has made substantial investments in upgrading its ports, roads, and industrial zones. This improved infrastructure supports efficient manufacturing and logistics operations.
Country of Origin Compliance: The Critical Challenge
As companies shift production to Vietnam, compliance with country of origin rules becomes a critical issue. Ensuring that products meet the substantial transformation criteria is essential to qualify for Vietnamese origin and avoid penalties.
What’s Required
- Substantial Transformation: The product must undergo a fundamental change in Vietnam, not just assembly or packaging.
- Documented Value Addition: A significant portion of the product’s value must be added in Vietnam.
- Clear Audit Trail: Companies must maintain detailed records of sourcing, processing, and labor inputs to prove compliance.
What to Avoid
- Transshipment Risks: Simply routing Chinese goods through Vietnam without substantial transformation can trigger U.S. Customs enforcement.
- Mislabeling: Incorrect country-of-origin declarations can lead to severe penalties, including seizures and criminal charges.
| Strategic Recommendations |
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| 1. Conduct Origin Audits: Ensure that your Vietnam operations meet U.S. Customs’ substantial transformation criteria. |
| 2. Invest in Local Capabilities: Move upstream processes, such as cutting, molding, and finishing, to Vietnam to add significant value locally. |
| 3. Use Trade Compliance Experts: Engage legal and customs advisors to validate your origin claims and ensure compliance. |
| 4. Diversify Beyond Vietnam: Consider a “Vietnam +1” strategy to spread risk across multiple low-tariff jurisdictions. |
乐鱼（Leyu）体育官网’s Emphasis
Substantial Transformation
Companies must ensure that their products undergo substantial transformation in Vietnam to qualify for Vietnamese origin.
Avoid Transshipment Risks
Transparent documentation and compliance with U.S. Customs standards are crucial to avoid penalties.
Question 7. Remedies to Trade Surplus and Setting Up New Supply Chains?
Remedies to Trade Surplus:
Increase Imports from the Surplus Partner
Import more high-value goods, such as U.S. agricultural products, aircraft, and LNG. Encourage joint ventures with U.S. firms to balance trade flows.
Promote Outbound Investment
Invest in manufacturing or R&D facilities in the U.S. and support M&A activities that create U.S. jobs or infrastructure.
Adjust Export Composition
Shift from low-cost, high-volume exports to value-added or co-branded products. Reduce reliance on sensitive sectors that attract scrutiny.
Strengthen Trade Diplomacy
Engage in bilateral negotiations to address trade imbalances and offer market access or regulatory alignment in exchange for tariff relief.
Setting Up New Business or Supply Chains:
Location Strategy
Use a “China +1” or “Vietnam +1” model to diversify risk.
Compliance-First Design
Ensure country of origin rules are met, including substantial transformation and value addition. Implement traceability systems, such as blockchain and ERP integration.
Supplier Development
Invest in local supplier training and quality assurance. Encourage vertical integration to control key inputs.
ESG and Sustainability
Align with environmental and labor standards to meet global buyer expectations. Pursue green certifications to access premium markets.
Conclusion
The imposition of reciprocal tariffs by the U.S. has created significant challenges for Vietnamese and Cambodian exporters. By adopting strategic measures such as market diversification, product value enhancement, supply chain restructuring, compliance improvement, and cost optimization, exporters can mitigate the impacts and navigate the complex trade environment. Proactive engagement in trade diplomacy and investment in compliance systems are essential for long-term success in the face of evolving tariff policies.
Shifting production from China to Vietnam/ Cambodia presents both opportunities and challenges. While Vietnam offers lower tariffs, labor costs, and improved infrastructure, compliance with country of origin rules is critical. By adopting strategic measures and ensuring robust compliance, companies can successfully navigate the complexities of relocating production and maintain their competitiveness in the global market.
Hoang Thuy Duong
Partner, Head of Tax
乐鱼（Leyu）体育官网 in Vietnam and Cambodia
Mr. Hoang Thuy Duong
Partner, Head of Tax, 乐鱼（Leyu）体育官网 Vietnam and Cambodia
Duong is Head of Tax for 乐鱼（Leyu）体育官网 in Vietnam and Cambodia. With over 19 years at 乐鱼（Leyu）体育官网, including time in Australia, Duong has advised leading multinationals on tax, customs, transfer pricing, and business restructuring across a wide range of industries. He played a key role in Vietnam’s first Advance Pricing Agreement and actively consults with the General Department of Taxation and Ministry of Finance in Vietnam on key regulations, including Decree 20.
Nhan Huynh
Partner, Head of Trade & Customs and Value Chain Management
乐鱼（Leyu）体育官网 in Vietnam
Nhan Huynh
Partner, Head of Trade & Customs and Value Chain Management, 乐鱼（Leyu）体育官网 in Vietnam
Nhan Huynh is National Leader of 乐鱼（Leyu）体育官网’s International Tax and Value Chain Management practices in Vietnam and Cambodia. Nhan will focus on how businesses can mitigate trade risks through material traceability and country of origin determination—a crucial area for companies navigating U.S. and Vietnam customs regulations. With over 17 years of experience, Nhan brings deep expertise in tax, customs, and supply chain structuring.
George Zaharatos
Principal, Tax, Trade & Customs
乐鱼（Leyu）体育官网 US
George Zaharatos
Principal, Tax, Trade & Customs, 乐鱼（Leyu）体育官网 US
George is 乐鱼（Leyu）体育官网’s Southeast Regional Leader based in Atlanta. With over 20 years of experience advising Fortune 500 companies on trade and customs strategy, George will walk us through the current U.S. tariff environment, including key developments like Section 301 and Section 232 tariffs, and what they mean for cross-border operations. George also co-leads 乐鱼（Leyu）体育官网’s ESG pillar for trade, covering human rights, forced labor, and green incentives, and serves clients across mobility, EV, semiconductors, aviation, and biotech sectors.
Leigh Burton
Senior Manager, Trade & Customs
乐鱼（Leyu）体育官网 US
Leigh Burton
Senior Manager, Trade & Customs, 乐鱼（Leyu）体育官网 US
Leigh is our Trade & Customs experts from 乐鱼（Leyu）体育官网 US. Leigh focuses on how traceability can be a powerful tool in managing trade risks, particularly in the context of anti-dumping and countervailing duties, and the growing importance of sustainability and ESG compliance in global supply chains.