Just one week before the July 9 deadline in the ongoing trade standoff with the EU, the United States and Vietnam have reached a sweeping agreement. President Donald Trump’s tough stance appears to be paying off. For European negotiators, a difficult round now lies ahead.
Vietnam, long seen as part of China’s economic orbit, has served as a key transshipment hub -- an alternative base for Chinese exporters to bypass existing U.S. tariffs. That loophole is now closing. The U.S. has directly targeted these rerouting practices.
Washington Dictates the Terms
On Wednesday, President Trump announced the outcome of trade talks with Vietnam. From the American point of view, the results are striking: going forward, Vietnamese companies will face a 20% tariff on goods entering the U.S. domestic market. An additional 20% penalty will be applied to so-called transshipments -- exports disguised as Vietnamese but actually originating from third countries like China, especially in the textile sector.
The message is clear: those who play by Washington’s rules can secure a tough but workable deal -- and gain access to the largest consumer market on Earth.
In other words, access to the dollar-based financial system is no longer treated as a global public good. It now comes at a price -- one set by the provider. That’s the underlying message of this trade confrontation.
On his media platform Truth Social, Trump expressed satisfaction. Vietnam, he declared, will fully open its markets to U.S. companies. All Vietnamese tariffs will be dropped. This amounts to a political double victory. Not only do American firms gain greater access, but a powerful signal is sent to other Asian nations within China’s sphere of influence: to trade with America, they must break away from Beijing and accept U.S. terms.
Bad Omen for Europe
The clearly one-sided outcome with Vietnam bodes ill for the EU. Brussels has already threatened retaliatory tariffs worth €95 billion if talks with Trump’s team fail to produce results.
In detail, the EU’s planned countermeasures include punitive tariffs on a wide range of U.S. products: steel, aluminum, motorcycles, jeans, agricultural goods, and other industrial exports. Export restrictions are also being considered for steel scrap and chemical products worth €4.4 billion.
Whether Washington takes these threats seriously remains to be seen. But one thing is clear: the Americans currently hold the stronger hand. This is especially evident in the case of Germany’s auto industry -- a pillar of the European economy. If U.S. tariffs on cars double to 50%, it could effectively wipe out EU auto exports to the United States. That would be a crippling blow to a sector already struggling for survival.
One element largely absent from public discussion is the EU’s web of non-tariff trade barriers. Brussels will find it hard to defend its endless catalog of regulatory harmonization and climate compliance rules against Washington’s hardball tactics. And yet, this is the secret of the EU’s stealth protectionism: it hides behind moral grandstanding -- especially climate policy -- and thus shields itself from criticism. In this regard, Trump is up against Brussels’ last and strongest line of defense.
A Weak Dollar Adds to Europe’s Woes
Until the July 9 deadline, U.S. tariffs on European exports remain at 10%, except for vehicles (25%) and steel (50%). If the talks collapse, Europe faces a global flat rate of 50%. That would effectively kill off exports of luxury goods and high-end industrial products from the EU.
In addition to the tariffs, a second hurdle arises: the U.S. dollar has depreciated by over 10% against the euro in recent months. For European exporters, the weak dollar acts as an additional trade barrier.
From Washington’s perspective, the need for action is hard to dispute, given the enormous trade deficit. Last year alone, the U.S. ran a €200 billion trade gap with the EU.
For decades, America’s status as the issuer of the world’s reserve currency created an overwhelming demand for the dollar and dollar-denominated assets -- especially U.S. Treasury bonds. This, in turn, strengthened the dollar, making offshoring more attractive and accelerating U.S. deindustrialization.
Trump’s trade policy clearly aims to reverse this trend. His goal: eliminate the trade deficit, reindustrialize America, and mend the social fabric in communities devastated by manufacturing decline. To that end, he intends to use all available leverage to compel U.S. trading partners to do their part in rebuilding the nation’s industrial base.
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