US secures trade deal with Vietnam as negotiations continue with S Korea
South Korean President Lee Jae-myung, who came to power last month on a platform of pursuing pragmatic diplomacy with both the US and China, indicated on Thursday that it remained unclear whether tariff negotiations between Washington and Seoul would be concluded by next week's deadline.
Vietnam has the third-biggest trade surplus with the US of any country after China and Mexico, and was targeted with a 46 percent rate, one of the highest in Trump's 'Liberation Day' tariff blitz on April 2.
Analysts say the US-Vietnam trade deal may give a glimpse of the template Washington will use with other Asian countries still scrambling for accords, including South Korea, Japan and Thailand.
Speaking at his first news conference on Thursday since taking office on June 4, Lee said the tariff negotiations with the US have been 'clearly not easy' and stressed that the countries must reach mutually beneficial outcomes.
'It's difficult to say with certainty whether we will be able to reach a conclusion by July 8. We are now doing our best,' Lee said. 'What we need is a truly reciprocal outcome that benefits both sides and works for everyone, but so far, both sides are still trying to define exactly what they want.'
Lee, a liberal, came to power after winning a snap presidential election caused by the removal of conservative President Yoon Suk-yeol over his ill-fated imposition of martial law in December.
Trump's 90-day pause in global reciprocal tariffs is set to expire on July 9, potentially exposing South Korean products to 25% tax rates.
The US has separately been seeking higher duties on specific products such as automobiles and semiconductors, which are key exports for South Korea's trade-dependent economy.
There are growing concerns in Seoul that Trump may also demand a broader deal, requiring South Korea to pay significantly more for the 28,000 US soldiers stationed in the country to deter threats from North Korea. Lee has consistently urged patience on tariffs, arguing that rushing to secure an early deal would not serve the national interest.
Provoking China?
South Korea's struggle to reach a trade deal with the US comes as the US-Vietnam trade deal was secured late on Wednesday, meaning that the 46 percent rate due to take effect next week has been averted. Vietnam is now set to face a minimum 20 percent tariff in return for opening its market to US products, including cars.
But a 40 percent tariff will hit goods passing through the country to circumvent steeper trade barriers – a practice called 'transhipping' – and has raised concerns about how Beijing will react.
Washington has accused Hanoi of relabelling Chinese goods to skirt its tariffs, but raw materials from the world's number-two economy are the lifeblood of Vietnam's manufacturing industries.
'From a global perspective, perhaps the most interesting point is that this deal again seems in large part to be about China,' said Capital Economics. The terms on transhipment 'will be seen as a provocation in Beijing, particularly if similar conditions are included in any other deals agreed over coming days', it added.
Shares in clothing companies and sport equipment manufacturers – which have a large footprint in Vietnam – rose on news of the deal in New York. But they later declined sharply as details were released.
Vietnam's government said in a statement late on Wednesday that under the deal, the country had promised 'preferential market access for US goods, including large-engine cars'.
But the statement gave scant detail about the transhipment arrangements in the deal, which Trump announced on his Truth Social platform.
Uncertainty over how transshipping will be 'defined or enforced' is likely to have diplomatic repercussions, said Bloomberg Economics expert Rana Sajedi.
'The looming question now is how China will respond,' she said. 'Beijing has made clear that it would respond to deals that came at the expense of Chinese interests.'
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