Treasury Sec. Bessent on Vietnam trade deal framework

Key Concepts:

• Trade Framework with Vietnam
• Tariffs (20% on Vietnamese goods)
• Transshipment from China
• Inflationary impact of tariffs
• Margin pressure on US corporations (retailers)
• Negotiating with suppliers in Vietnam

Trade Framework with Vietnam and Tariffs:

The discussion centers on a new trade framework announced by President Trump, specifically focusing on trade with Vietnam. The core element is a proposed 20% tariff on goods imported from Vietnam into the United States. This tariff is not stacked on top of any existing tariffs; it's a reciprocal rate. The deal is understood to be finalized "in principle," although direct confirmation from the team leader, Jameson Greer, is pending.

Concerns and Responses:

The potential impact of the 20% tariff is a key concern. Retailers and the Footwear Association, who manufacture significantly in Vietnam (a shift encouraged by the previous Trump administration to move production out of China), are likely to face higher costs for importing goods into the US.

Transshipment and Inflation:

A significant portion of trade from Vietnam is characterized as "transshipment" from China. The speaker suggests that the impact of the new tariff remains to be seen, especially considering businesses have already adjusted to a 10% tariff. The speaker argues that tariffs are not inherently inflationary, potentially causing a one-time price increase but not generalized economic inflation.

Margin Pressure and Supplier Negotiations:

The question arises as to where the cost of the tariff will be absorbed. The speaker questions whether the tariff will lead to margin pressure on US corporations, particularly retailers who import goods from Vietnam. An alternative possibility is that producers in Vietnam will absorb the cost to maintain market share. The speaker believes that US companies are actively negotiating with their suppliers in Vietnam. It's also noted that many apparel companies experienced abnormally high margins during the COVID-19 pandemic.