Vietnam’s 20% US Tariff Shock: What It Means for India’s Trade Strategy

By Shan | Jul 07, 2025

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In a move thats rattled Asian export markets, the United States has slapped a flat 20% tariff on all Vietnamese goods, replacing a decades-old trade agreement that had once helped Vietnam become a global export powerhouse.

While the headlines focus on Vietnam, the ripple effects go much further and India is right in the splash zone. A recent report from the Global Trade Research Initiative (GTRI) is urging Indian policymakers to take this shift seriously as they finalize their own trade talks with Washington.

Heres whats changed, why it matters, and how India can respond




What Happened Between the US and Vietnam?

Until now, Vietnam enjoyed preferential access to the US market under a 2000 Bilateral Trade Agreement (BTA). This allowed key exports textiles, footwear, seafood, and furniture to enter at reduced tariff rates (210%).

But under a new deal announced by former US President Donald Trump, those benefits are gone. Instead:

Key stat: Vietnams exports to the US grew from $800 million in 2001 to over $135 billion in 2023. That growth is now at risk.

Why the Deal Matters Beyond Vietnam

This isnt just about two countries changing trade terms. Its a clear sign that the US is rewriting trade rules in Asia, and tariffs are back in the toolkit.

More importantly, it shows how quickly a reliable trade partner like Vietnam can face a harsh reversal. For India, this is a reality check.

GTRIs Warning to India: Dont Rush Into a Deal

India is currently negotiating its own trade arrangement with the US. And while better access to American markets is tempting, the Vietnam case shows that deals can be re-written fast and unilaterally.

According to GTRI, India should be especially cautious about:

What India Should Watch Closely

Heres a quick comparison to understand the shift:

Aspect

Vietnam (Old Deal)

Vietnam (New Deal)

India Ongoing Talks

Tariff Rate

210% (sector-specific)

Flat 20%

Under negotiation

Rules of Origin

Standard WTO norms

Stricter, targets transshipment

Likely to be a key negotiation area

Duration

In force since 2000

Announced 2025

Talks ongoing

Export Growth (20012023)

$800M $135B

Potential slowdown expected

India exports to US: ~$78B in 2023


How This Affects Indian Exporters

This shift can open up some opportunities but also introduces new risks.

Opportunities for India

Risks for India

Real-Life Example: Indias Textile Sector

Vietnam's textile industry thrived on low tariffs. Now, a 20% levy can hurt margins and order volumes.

Indias textile exporters, especially those in Tiruppur, Ludhiana, and Surat, could benefit if theyre prepared to scale up and meet compliance.

Action Point: Government must invest in export readiness programs and quick infrastructure support to help Indian firms capture lost Vietnam share.

Legal Concerns: WTO in the Picture

Trade experts say the new US-Vietnam deal especially the 40% penalty for routing Chinese goods could violate WTO rules.

Why? Because routing doesnt always change the products origin, and penalizing it may breach global norms. If challenged, it could lead to disputes that reshape how rules of origin are interpreted across Asia.

Indias Takeaway: Dont sign any trade deal without solid WTO-compatible clauses or risk being dragged into future disputes.

Bigger Picture: The New US Trade Playbook

Trumps strategy (and possibly the next administrations too) shows a shift:

What India Should Do Now

Heres a checklist Indian policymakers and exporters can use:

For Policymakers

For Exporters

Final Thought

Deals like the US-Vietnam one are no longer just about trade theyre about power, strategy, and supply chain control. For India, this is not just a warning shot its a moment to shape a resilient, forward-looking export strategy that doesnt get caught off guard.


Read also: Nothing Phone (3) with Snapdragon 8s Gen 4 & All-50MP Cameras: India Launch Highlights

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