China's Tariff Trick: How They Used Vietnam

The U.S.-China trade war has reshaped global commerce in unprecedented ways. Caught in the middle is Vietnam, a small but strategic player in the global supply chain. While tensions between the United States and China intensified, Vietnam emerged as a pivotal link in the trade game. For China, Vietnam wasn't just a neighbor—it became a critical escape route for bypassing U.S. tariffs.

Background: The Rise of Tariffs and Trade Wars

In an era of increasing economic rivalries, the trade war between the U.S. and China began as a dispute but quickly spiraled into something much larger. Both sides imposed escalating tariffs on each other's goods, with ripple effects disrupting global markets.

U.S.-China Trade War Overview

Trade tensions began escalating in 2018 when the United States slapped tariffs on Chinese imports, citing unfair trade practices, intellectual property theft, and a massive trade imbalance. The trade war saw tariffs rise to as much as 25% on hundreds of billions of dollars worth of goods. As diplomatic talks faltered, new tariff rounds became the norm.

These measures damaged businesses that relied on stable supply chains, but it was China that felt the most pressure. Manufacturing hubs faced closures, and export revenue took a hit. The conflict also set the stage for countries like Vietnam to step into prominent roles in trade networks.

Vietnam's Emergence as a Key Player

Vietnam’s geographic proximity to China and its growing reputation as a manufacturing alternative turned it into a significant beneficiary during the trade war. According to trade data, Vietnam's exports to the U.S. surged, with a trade surplus reaching $123.5 billion in 2024. But this rapid growth also raised suspicions—was Vietnam serving as a genuine supplier or merely a proxy for Chinese goods?

The U.S. levied additional tariffs on goods from Vietnam, concerned that Chinese products were being rerouted through Vietnamese ports. Emerging as both a winner and a target, Vietnam found itself navigating a delicate balance between its largest trading partners.

China's Strategy: Leveraging Vietnam for Tariff Evasion

While tariffs were designed to curb Chinese exports to the United States, manufacturers in China came up with a workaround: Vietnam. By routing products through its southern neighbor, relabeling goods, or conducting minimal value-added processing, Chinese exporters minimized their tariff liabilities.

The Mechanics of Tariff Evasion

Transshipment was the primary mechanism behind this tariff strategy. Raw materials or semi-finished goods produced in China were exported to Vietnam, only to be labeled as "Made in Vietnam" before being shipped to the United States. In some cases, production lines were set up in Vietnam solely to reassemble Chinese components.

U.S. customs officials uncovered several instances where goods, such as aluminum and electronics, were blatantly rebranded to evade tariffs. According to a report from CNBC, even textiles and furniture sectors were implicated in transshipment investigations.

Vietnam's Role in China's Trade Operations

Vietnam inadvertently became a linchpin in this strategy. Sectors like electronics, furniture, and textiles accounted for significant portions of exports linked to tariff evasion. U.S. authorities responded by imposing additional inspections and penalties on Vietnamese goods. The ripple effects of these policies went beyond trade, straining trust between Washington and Hanoi.

Economic and Political Impacts

China's use of Vietnam as a workaround for tariffs has not only affected bilateral U.S.-China trade but also placed enormous strain on Vietnam's economy, its trade partners, and regional diplomacy.

Vietnam’s Economic Challenges and Responses

Vietnam initially benefited from its increased role in global supply chains but soon faced backlash. Accusations of harboring transshipment hubs led to U.S.-imposed tariffs on Vietnamese goods in 2025. According to a Fox Business report, Vietnam implemented stricter measures to regulate imports from China, aiming to curb illegal practices.

Facing economic pressures, Vietnam began diversifying its trade relations, engaging with Europe and Japan to reduce dependence on both China and the U.S. Emergency meetings between Vietnamese government officials and trade advisors were aimed at addressing Washington's concerns while safeguarding its own economic trajectory.

Shifts in U.S. Trade Policies

The United States responded to China's tariff evasion tactics with increased scrutiny of Vietnamese trade patterns. Talks between the U.S. and Vietnam led to agreements focused on stricter supply chain controls and enhanced transparency in manufacturing. As noted by The Guardian, the U.S. also revised its tariff strategies to discourage secondary players like Vietnam from acting as intermediaries for Chinese goods.

Future Outlook: What Lies Ahead for Global Trade

The U.S.-China-Vietnam trade triangle exemplifies the shifting dynamics of global commerce. As trade policies evolve, businesses and governments alike must reassess their strategies in this complex landscape.

Predicted Policy Changes

Experts anticipate stricter enforcement from U.S. customs to prevent transshipment. Tariff rates may also be revised based on economic conditions and geopolitical developments. Vietnam, facing mounting pressure, is likely to strengthen its anti-fraud measures, as highlighted by Reuters.

Simultaneously, regional trade pacts like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could gain prominence, offering Vietnam and other countries alternatives to reliance on superpower trade routes.

The Long-term Impact on Supply Chains

The trade war has accelerated a trend away from single-country manufacturing dominance. Multinational companies are adopting "China Plus One" strategies, investing in diversified production setups across Southeast Asia. For Vietnam, the challenge lies in maintaining its growth while avoiding the pitfalls associated with being a proxy for Chinese exports.

Conclusion

China’s strategic use of Vietnam to sidestep U.S. tariffs reveals much about the adaptability of global trade actors. While Vietnam thrived as a manufacturing hub, its entanglement in tariff evasion brought significant economic and diplomatic challenges. For the U.S., combating trade fraud has reshaped its trade relationships in Southeast Asia, while forcing a global rethinking of production chains.

Understanding these dynamics isn’t just about tariffs—it’s about the future of globalization. As policies adapt and new players enter the global stage, businesses and governments must stay vigilant, redefining their roles in an increasingly interconnected economy.