Why does the United States buy more from Vietnam than from China?
The tariff sequence of 2026, the origin question, and what a manufacturer now has to be able to prove
In the first half of 2026 Vietnam ran a goods trade surplus with the United States of about US$114 billion — the largest of any American trading partner, ahead of both China and Mexico. The explanation usually offered is the tariff gap, and the gap is real: since 24 July 2026 Vietnamese goods enter the United States under a 12.5 % Section 301 duty while Chinese goods carry roughly 37.5 %. But that gap is four months old, it rests on an authority the Supreme Court has already curtailed once this year, and it explains the direction of the movement rather than its size. Two things explain the size: forty years of industrial preparation, and the arrival in Vietnam of the Chinese manufacturers themselves. The second is what now decides a client’s exposure, because it turns a commercial question into a question of origin.
What the flows show
The turn is recent and it is abrupt. Through 2025 Vietnam was already a large surplus country; in 2026 it became the largest, while Chinese shipments fell away.
| Measure | Figure |
|---|---|
| Surplus with the US, 2025 | US$178 billion for the full year. |
| January 2026 alone | Surplus of US$19 billion, the highest of any US partner that month. US imports from Vietnam exceeded US$20 billion, up 53 % year on year, while imports from China fell 46 %. |
| First half of 2026 | Surplus of about US$114 billion — ahead of China and of Mexico. |
| The other side of the ledger | Vietnam’s surplus is with the United States, not with the world. In July 2026 the country ran an overall goods deficit of US$3.59 billion. It buys its inputs, and it buys many of them from China. |
American import statistics and Vietnamese export statistics do not agree, and the difference is not small. They are compiled on different bases — valuation, timing, the treatment of goods that change hands in transit — and a figure quoted without its source can be off by tens of billions. The trade balances above are on the American basis; the export composition further below is on the Vietnamese customs basis. We do not mix the two in a single sentence, and neither should anything built on this note.
The sequence of 2026
Any statement about what a Vietnamese shipment pays has a date attached to it. The rate has changed three times this year, and once by judicial decision rather than by policy.
| Date | What happened |
|---|---|
| 7 August 2025 | Reciprocal tariff of 20 % on Vietnamese goods under the executive order of 31 July 2025 — down from a threatened 46 %, up from the 10 % of 21 April. A 40 % rate applied to goods found to have been transshipped to evade duty, backed by the customs fraud penalties of 19 U.S.C. § 1592. |
| October 2025 | The two governments announce a Framework for an Agreement on Reciprocal, Fair, and Balanced Trade. Vietnam undertakes to open its market to United States goods on a zero-tariff basis. A framework, not a treaty: it binds no rate. |
| 20 February 2026 | The Supreme Court holds, six votes to three, that the International Emergency Economic Powers Act does not authorise the President to impose tariffs. The reciprocal tariffs fall, and with them the country-specific tariffs on China, Canada and Mexico. Duties already collected are not addressed by the judgment. |
| 24 February 2026 | Replacement under Section 122 of the Trade Act of 1974: a flat 15 % on all countries, announced at 10 % and raised within a day. Section 122 is a balance-of-payments authority and it is time-limited: 150 days, with exemptions for goods already under Section 232, critical minerals, pharmaceuticals and certain electronics. |
| 24 July 2026 | The 150 days expire. On the same morning a Section 301 action takes effect against sixty economies, at rates of 10 % to 12.5 %. Vietnam: 12.5 %. China: 12.5 % stacked on the existing 25 %, for 37.5 %. |
The Section 301 action of 24 July is not framed as retaliation for unfair trade in the ordinary sense. The determination is that the governments concerned have failed to enforce — or in some cases failed to enact — prohibitions on the importation of goods produced with forced labour. That is a different legal object, and it has a practical consequence: the exposure it creates is not a rate to be budgeted but a documentary burden on the supply chain, which no amount of tariff engineering removes.
Two further consequences follow. First, duties paid under the invalidated IEEPA tariffs are not automatically refunded: recovery runs through post-summary corrections and protests at Customs and Border Protection, or through the Court of International Trade, and the administration has signalled it will resist. A client who imported into the United States between April 2025 and February 2026 should establish now whether it has a claim and whether the time limits are running. Second, Section 232 and Section 338 remain unused and available, and further Section 301 investigations are running on an accelerated timetable. The 12.5 % is a reading of September 2026, not a plan assumption for 2027.
Why tariffs alone do not build factories
A duty differential redirects orders within weeks. It does not create a port, a customs regime, an industrial estate or twenty thousand trained operators. Vietnam could absorb the movement because it had spent four decades building the capacity to absorb it.
The Đổi Mới reforms — literally « renovation » — opened the economy to markets and to foreign investment from 1986, while leaving political direction and long-horizon planning intact. What followed was unglamorous and cumulative: export-processing and industrial zones with their own one-stop administration, deep-water port and road capacity, an electricity network built ahead of demand, and one of the densest free-trade agreement networks in South-East Asia. Trade now stands at 165 % of GDP (World Bank, 2023) — a figure that measures both the achievement and the exposure.
The composition of what Vietnam sells tells the same story. These are not goods that pass through a warehouse.
| Exports to the United States, first ten months of 2025 | US$ bn |
|---|---|
| Computers, electronics and components | 34.1 |
| Machinery, equipment and parts | 19.6 |
| Textiles and garments | 14.8 |
| Wood and wood products | 7.8 |
| Footwear | 7.4 |
| Vietnamese customs basis; telephones and parts are counted separately and are not in this table. Electronics and machinery together are the two largest lines by a wide margin, which is why Vietnam’s exposure is concentrated in exactly the categories the 2025 reciprocal tariff did not exempt. | |
Where do the goods actually come from?
This is the part of the story that a headline omits, and it is the part that decides a client’s risk. In a note published on 17 July 2026, researchers at the Federal Reserve Board examined Vietnam’s export boom firm by firm, combining the Vietnam Enterprise Survey with transaction-level trade records and greenfield investment data.
| Finding | Figure |
|---|---|
| Chinese-owned firms’ share of Vietnam’s exports to the US | Rose from 11 % in 2018–19 to 25 % in 2020–23 — more than a doubling. |
| Chinese-owned firms established in Vietnam | 1,287 in 2018 to 2,864 in 2023, a rise of 122.5 %. By 2023 they were 15 % of all foreign-owned firms in the country. |
| Where those firms buy their inputs | Substantially more from China than other exporters do. The share of Vietnam’s imports from China accounted for by Chinese-owned firms doubled over the same period. |
The authors are explicit, and they excluded from their data the shipments flagged as possible rerouting: the quantitative importance of transshipment is limited. What the figures capture is Chinese firms moving production to Vietnam — buildings, machines, payroll, and a supplier network that still reaches north.
For a client the difference is everything. Transshipment is fraud and is punished as fraud. Relocation is lawful, ordinary and encouraged — but it produces goods with a high proportion of Chinese inputs, made in factories under Chinese ownership, in a country whose surplus with the United States is now the largest in the world. That combination attracts scrutiny even when every rule has been followed. The risk to manage is not illegality; it is the burden of demonstrating legality.
What does origin have to prove?
Under United States rules, origin turns on substantial transformation: whether the processing carried out in Vietnam produced a new and different article of commerce, with a name, character and use distinct from the imported inputs. Assembly from a kit does not; a manufacturing operation that changes the article does. The test is applied to the facts of a particular production line, not to a company’s general profile, and the burden of establishing it falls on the importer.
The forced-labour framing of the July 2026 action adds a second file to the first. A client should be able to produce, on request and without a scramble:
| What is asked | What answers it |
|---|---|
| The origin file | Bills of materials with the origin and value of each input; the production process described operation by operation; the cost build-up showing value added in Vietnam; and the reasoning by which substantial transformation is claimed — written before the question is put, not after. |
| The supply-chain file | Identification of suppliers beyond the first tier for the inputs that matter; evidence of the recruitment and employment conditions in those facilities; and a record of the checks actually performed. A supplier code of conduct signed and filed is not evidence of anything. |
| Consistency | The origin declared to customs, the origin stated in the sales contract and the origin shown on the marking must be the same. Most enquiries begin with a discrepancy among the three, not with a suspicion about the goods. |
| Retention | Records kept for five years from entry, retrievable by shipment. An importer who cannot produce the file loses the point regardless of the merits. |
A note on the rare earths
Vietnam’s mineral endowment is frequently offered as a further strategic argument, on the strength of a reserve estimate of 22 million tonnes that placed the country second in the world. That figure no longer stands. In the Mineral Commodity Summaries of March 2025 the United States Geological Survey revised Vietnam’s rare-earth reserves down to 3.5 million tonnes, on the basis of company and government reports, which places the country sixth — behind China (44 Mt), Brazil (21 Mt), India (6.9 Mt), Australia (5.7 Mt) and Russia (3.8 Mt). Extraction and separation capacity, in any case, is a different question from reserves. We mention it because the superseded figure is still in wide circulation, and a business case should not rest on it.
How we help
We start from the shipment rather than from the narrative. We establish which duty actually applies to a client’s goods today, under which authority and with what expiry, and we say plainly where the answer is provisional. Where a client imported into the United States under the tariffs the Supreme Court set aside, we establish whether a refund claim exists and whether its time limits are running. We build the origin file before it is asked for — bills of materials, process description, value added, and the substantial-transformation reasoning written down — and we map the supply chain past the first tier, which is where the forced-labour question is actually answered. And we set up the Vietnamese company so that the file is a by-product of how it operates rather than an exercise repeated at every enquiry.