U.S. Launches Third Vietnam Trade Probe, Tariff Risk Escalates
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
US-Vietnam tradeSection 301
Fazen Markets Editorial Desk
Collective editorial team · methodology
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The U.S. Trade Representative initiated a formal Section 301 investigation into Vietnam on 29 May 2026, marking the third major trade probe against the Southeast Asian nation in six years. This investigation specifically targets alleged market-distorting subsidies across multiple industrial sectors. The move significantly escalates the risk of fresh U.S. tariffs on Vietnamese imports, which totaled over $108 billion in the last annualized period. The action was reported by investing.com on 29 May 2026.
U.S.-Vietnam trade tensions have simmered since the first major Section 301 investigation in 2020, which led to tariffs on Vietnamese tires. A second probe focused on currency valuation concluded with a monitoring agreement in 2021. The current investigation arrives amid a structural shift in global supply chains, often termed friendshoring, where companies seek alternatives to China. Vietnam has been a primary beneficiary of this shift, with its exports to the U.S. growing nearly 45% since 2020.
The macro backdrop includes persistent U.S. inflation above the Federal Reserve's 2% target, keeping pressure on the Biden administration to address import competition. The U.S. goods trade deficit with Vietnam widened to $104 billion in 2025, a record high. The catalyst for this third probe is a petition from U.S. manufacturing groups alleging Vietnam provides illegal subsidies to its domestic industries, creating an uneven playing field for American producers.
The U.S. imported $108.4 billion worth of goods from Vietnam in the 12 months ending March 2026. This represents a year-over-year increase of 8.2%. By comparison, U.S. imports from China grew by only 1.5% over the same period. The bilateral trade deficit stood at $104 billion, now the fourth-largest U.S. goods deficit globally, behind only China, Mexico, and the European Union.
Key import categories under scrutiny show substantial growth. U.S. imports of Vietnamese apparel and footwear reached $23.1 billion, up 11% year-over-year. Electronics and machinery imports hit $46.7 billion, a 9% increase. Furniture and bedding imports grew to $8.4 billion. The potential tariff impact is significant; the prior 2020 investigation resulted in duties ranging from 6.2% to 10.1% on specific tire categories. A broader investigation could affect a far larger share of bilateral trade.
| Category | 2024 Value ($B) | 2026 Value ($B) | Growth |
|---|---|---|---|
| Total Imports | 100.1 | 108.4 | +8.3% |
| Electronics & Machinery | 42.8 | 46.7 | +9.1% |
| Apparel & Footwear | 20.8 | 23.1 | +11.1% |
The probe directly threatens major Vietnamese exporters and their U.S.-listed partners. Apparel manufacturers like PVH Corp (PVH) and Nike (NKE), which have extensive sourcing networks in Vietnam, face margin pressure from potential tariff costs. Conversely, U.S. domestic textile producers such as Culp, Inc. (CULP) and Mount Vernon Mills could see a competitive benefit. The SPDR S&P Retail ETF (XRT) may experience volatility as retailers assess cost pass-through abilities.
A key limitation is Vietnam's role as a critical alternative to Chinese manufacturing. Punitive tariffs could disrupt friendshoring efforts, potentially reigniting supply chain inflation. This creates a policy dilemma for the administration. Positioning data shows hedge funds have recently increased short bets on the iShares MSCI Vietnam ETF (VNM). Flow analysis indicates capital is rotating toward manufacturers with diversified sourcing, such as Steven Madden, Ltd. (SHOO), which sources less than 25% of its product from Vietnam.
The U.S. Trade Representative will define the scope of the investigation by 15 June 2026, outlining specific subsidy allegations and product categories. A public hearing is scheduled for 30 July 2026, where U.S. importers and Vietnamese exporters will testify. The statutory deadline for a final determination is 29 May 2027, though decisions often come earlier.
Market participants should monitor support levels for the Vietnamese Dong (VND), which the State Bank of Vietnam manages against a USD basket. A break above 24,900 VND per USD would signal heightened devaluation pressure. For sector ETFs, watch the 50-day moving average for the Global X MSCI Vietnam ETF (VNAM); a sustained break below $17.50 could indicate prolonged negative sentiment. The next U.S. trade data release on 10 June 2026 will provide an early read on any import slowdown.
A Section 301 investigation is a trade tool allowing the U.S. to probe other countries' policies deemed unfair or discriminatory. If the U.S. Trade Representative finds violations, it can impose tariffs, import restrictions, or negotiate a settlement. This probe focuses on alleged subsidies that disadvantage U.S. producers. The process includes a public comment period and can last up to one year before a final decision and any retaliatory action is implemented.
U.S. companies with production facilities in Vietnam, like Intel and Samsung, may face operational uncertainty but are less directly targeted than pure exporters. The investigation focuses on Vietnamese domestic firms receiving state subsidies. However, any broad-based tariffs would increase the cost of exporting finished goods from those Vietnamese factories to the United States, impacting the global supply chains and profit margins of those multinational corporations.
The U.S. has a high historical success rate in securing concessions through Section 301 actions. The 2020 Vietnam tire case resulted in tariffs. The 2021 currency case concluded with a bilateral agreement for Vietnam to avoid competitive devaluation. Outcomes typically involve either punitive tariffs or a negotiated settlement where the targeted country agrees to modify its policies. The wide U.S. trade deficit with Vietnam increases Washington's use in these negotiations.
The third U.S. trade probe moves Vietnam closer to punitive tariffs that would disrupt a key Asian supply chain hub.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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