HANOI, July 24 (Reuters) – Vietnam faces higher U.S. tariffs than peers and risks a further erosion of competitiveness in the clothing sector, as the largest exporter of apparel to the U.S. is excluded from a mechanism that could cut U.S. duties on some textile imports.
The decision, included in a Federal Register notice published on Thursday, could impact the supply chains of major apparel brands with large manufacturing bases in Vietnam.
Among top investors in Vietnam are Nike, Gap, Ralph Lauren and Under Armour. The companies did not respond immediately to requests for comment.
The new tariffs of 10% and 12.5%, which take effect on Friday, target 60 trading partners over allegations of lax enforcement of forced labour bans.
Vietnam, which is still negotiating a trade deal with the U.S. under the Trump administration, faces a 12.5% tariff rate, as does China. Competitors Bangladesh, Cambodia, Indonesia and Malaysia, which have done trade deals, are subject to 10% duties.
The measures are intended to replace temporary 10% tariffs expiring on Friday that the Trump administration imposed after the U.S. Supreme Court in February struck down its “reciprocal” duties of 10% to 50% that had been introduced under emergency powers.
Vietnam overtook China last year as the largest exporter of apparel to the U.S., and it is also one of the countries with the largest trade surpluses with Washington, according to U.S. trade data.
Vietnam’s large garment trade is now exposed to a double disadvantage.
Bangladesh, Cambodia, Indonesia and Malaysia are also the only beneficiaries named in the notice of a new “textile mechanism” that could exempt part of their apparel exports to the U.S. from the new tariffs.
The mechanism, to be established “when feasible” and initially set to last three years, is designed to encourage imports of U.S. cotton and textile goods.
A portion of eligible apparel exports from these countries would qualify for reduced or zero additional tariffs under a quota system linked to their purchases of U.S. cotton and textile inputs, according to the notice.
Vietnam’s foreign and trade ministries did not immediately respond to requests for comment.
(Reporting by Francesco Guarascio and Khanh Vu; Editing by Jamie Freed)
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