Is Vietnam Still Winning?
Yes — But Only If You Can Prove It.

The "Vietnam 20% tariff" lost its legal basis in a February 2026 Supreme Court ruling. What's running now is a 12.5% Section 301 duty. So why can't Vietnam relax? Because the contest moved from location to proof.

The "Vietnam 20% Tariff" No Longer Exists

You'll still see "Vietnam's 20% tariff" in articles and internal memos. That number lost its legal footing on February 20, 2026.

The US Supreme Court ruled, 6–3, that tariffs imposed under IEEPA (the International Emergency Economic Powers Act) exceeded presidential authority. Customs and Border Protection stopped collecting IEEPA tariffs on February 24. Both the 2025 "reciprocal tariff" and the 40% transshipment surcharge lost their legal foundation along with it.

A different regime is running now. A 10% Section 122 tariff filled the gap starting February 24, and 150 days later, on July 24, Section 301 tariffs (tied to forced labor) took effect. Rates are either 10% or 12.5% depending on the country; Vietnam sits at 12.5%. Smartphones, laptops, and semiconductors are exempt.

The framework was announced in October 2025. As of late September 2026 — nearly a year later — the US-Vietnam successor agreement still isn't signed. That gap, on its own, is a warning against declaring victory too early.

Look only at the headline rate and Vietnam seems to have caught a break. But the real contest moved somewhere else.

The Numbers Say Vietnam Is Still Winning

"Vietnam is done" doesn't match the data.

• US Census figures put 2025 imports from Vietnam at roughly $193.8B — a record, up 42.2% year over year.
• Vietnam's share of US imports rose from about 1.8% in 2018 to about 5.6% in 2025 — roughly tripling (our own calculation; differing statistical bases mean the decimal precision isn't guaranteed).
• Through the first eight months of 2026, Vietnam's own export statistics show US-bound exports up 23.2% year over year (about $122B). That's down from 21.9% growth in H1 — a slowdown in rate, not in absolute volume.
• In Nike's FY2026 (ended May), Vietnam made 52% of Nike-brand footwear, up from 51% the year before. China, once above 60%, is down to 16%.
• Samsung announced up to $4B for a chip-packaging plant in Thai Nguyen province in April 2026.
• On September 21, FTSE upgraded Vietnam from Frontier to Emerging Market status.

A statistical note: US Census and Vietnam's own GSO figures use different bases. 2025 US-bound exports read about $193.9B on the US side versus $153.2B on the Vietnamese side.

The momentum is real. So the question isn't "Vietnam or not."

The Game Changed: From Location to Proof

Why Washington is suspicious

The suspicion has numbers behind it. Vietnam's trade deficit with China grew 40% year over year in 2025, to roughly $115B (Thailand's grew 50%, Malaysia's 62%). The more Vietnam exports to the US, the more Chinese components and goods flow in. That pattern reads either as genuine value-add growth or as transshipment — and Washington is watching for the latter.

It's also why Vietnam's rate landed at 12.5% — higher than Malaysia's or Indonesia's 10%. Trade media (WWD/Sourcing Journal) reports USTR's reasoning: Vietnam's own ban on forced-labor imports hasn't taken effect yet, leaving a real risk that Xinjiang cotton, polysilicon, and similar goods enter the US mislabeled as Vietnamese-origin.

What Washington has done

• June 3 — Executive Order 14411. Tightens Importer of Record rules: US asset and bond requirements, ownership disclosure, and a ban on simplified entry for foreign importers. Forced labor, misclassification, underreporting, and illegal transshipment are named enforcement priorities.
• August 13 — the White House report "The Great Transshipment Scam." Sorts roughly 40 countries into three tiers by economic integration with China. Vietnam lands in Tier 2, alongside Malaysia, Indonesia, Thailand, Brazil, and Turkey. Estimated damage: a range of $40B–$303B annually, pooled from five independent estimates.
• Three simultaneous Section 301 investigations. Forced labor and structural overcapacity (started in March, covering roughly 60 countries and territories), plus a third probe launched May 29 — targeting Vietnam alone, on intellectual property.

What's actually happening

• In one reported case, Chinese steel that had only been pickled and oiled — minimal processing — was exported as Vietnamese-origin; CBP assessed over $25M in duties and penalties and referred the case for criminal investigation.
• CBP overall flagged more than $400M in unpaid duties between January 20 and August 8, 2025 (89 cases — not Vietnam-specific).
• CBP reportedly raided Chinese-owned factories inside Vietnam on July 29, 2026 (details unconfirmed).
• Vietnam became the top US furniture supplier, and CBP inspection rates on Vietnamese furniture have reportedly risen sharply since 2022.

What happened to the 40% transshipment penalty?

The July 2025 announcement — a 40% surcharge on goods deemed transshipped through Vietnam from China — was built on the same IEEPA executive order as the 20% rate, and its definition was never formally codified. It appears to have been struck down alongside the 20% rate, though we couldn't confirm that explicitly in primary sources. Routine customs enforcement against false origin declarations continues regardless. Whether the penalty returns in a new agreement isn't knowable from public information.

The case for less alarm

It's worth not overcorrecting toward pessimism. A pre-print paper ("The China-Plus-One Paradox") estimates that transshipment-linked activity accounts for at most about 16% of Vietnamese exports at the product level — leaving roughly 84% as genuine value-added production.

In other words, what's under suspicion isn't "Vietnam" — it's processes that can't be documented. The question is whether you can show you're in the 84%.

Companies Are Already Splitting Decisions by Process, Not Country

The Foxconn timeline makes the point: a shift decision has to hold up under rules that don't exist yet. Weigh proof resilience over today's rate.

Move Countries, and the Proof Burden Follows You. The Quiet Winner Is Mexico.

"So just move to India or Mexico" is the obvious next question.

India and Indonesia: lower rates, same proof burden

Both India and Indonesia currently sit at 10% (Section 301) — lower than Vietnam's 12.5%. The rate gap alone is a weaker argument for choosing Vietnam. But the proof burden doesn't go away. In June 2026, CBP found that India's Waaree Energies had mislabeled Chinese-made solar cells as Indian-origin to dodge anti-dumping duties on China (up to 271.28%). Indonesia's deal includes anti-transshipment clauses; Malaysia's includes coordination on third-country tariffs and export controls.

Mexico: the biggest winner in dollar terms is the quiet one

While Vietnam's growth gets the attention, Mexico is the largest winner in absolute dollar terms of US import growth.

Three things stand out here.

1. Mexico's and Vietnam's combined gains exceed China's roughly $230B loss (an approximation that includes overall US import growth).
2. Mexico edges out Vietnam in dollar terms. Vietnam edges out Mexico in share-point growth (+3.8pt vs. +1.4pt) — Vietnam roughly tripled from a low base, while Mexico added on top of an already-large base. Vietnam stands out in growth rate; Mexico wins on dollars. That's the "quiet" part.
3. At roughly $534.3B, Mexico was the single largest source of US imports in 2025.

Mexico's edge isn't just geography. We think a pre-existing proof system matters more.

• A shared proof language already exists. USMCA-qualifying goods enter duty-free; non-qualifying goods pay 10%. About 80.2% of US imports from Canada and Mexico qualified under USMCA as of July 2026. The rules, forms, and practice around origin qualification are established — likely a lighter documentation burden than each company proving its case individually, as in Vietnam.
• Geography helps. Trucking from northern Mexico to a US distribution center takes 4–8 days; ocean freight from Vietnam or India takes 25–35.
• The scrutiny tier is different. In the White House report's tier system, Mexico sits in Tier 1 alongside Canada, the EU, Japan, South Korea, Taiwan, and India; Vietnam sits in Tier 2. We can't say for certain what the ranking implies — but they're not grouped together.
• Companies are already acting on it. A March 2026 survey found 51% of companies actively using USMCA-based nearshoring.

It isn't frictionless, though.

• Steel and aluminum carry roughly 40.5% average tariffs; autos around 13% — a heavy load in some sectors.
• The 2026 USMCA review is expected to tighten origin-qualification screening for Mexican-processed goods. Assembly built on Chinese components will face the same proof question Vietnam does.
• Mexico itself imposes tariffs of up to 35–50% on Chinese and other Asian goods (reportedly extended through April 2026; status beyond that needs checking), which also raises the cost of sourcing Chinese components.

Mexico isn't really Vietnam's rival — it's a complement. Products where proximity to the US matters go to Mexico; products where clustering and process completeness matter stay in Vietnam. Either way, the common thread is the same: no proof, no tariff benefit.

The Practical Answer: How Far Should You Shift?

We won't offer a percentage — it varies by product and sector, and there's no public data to anchor one. Instead, three questions set the ceiling.

1. Does the Vietnam process actually change the product's character? Simple assembly, relabeling, or surface treatment alone likely won't meet the "substantial transformation" test (the US origin-determination standard, 19 C.F.R. § 134.1(b)) — risking Chinese-origin classification regardless of where it shipped from.
2. Can you document where your components come from? The share of Chinese content, and traceability for high-risk materials like Xinjiang cotton or polysilicon.
3. What matters most for your US business? Clustering and process completeness favor Vietnam. US proximity and a shared measuring stick (USMCA) favor Mexico.

US importers of record now face tighter rules under Executive Order 14411. We expect supplier documentation requirements to keep expanding — and whoever prepares first gets the advantage.

Three things worth doing this week:

• Map component origin and process-level value-add for each core product line.
• Document, in substantial-transformation terms, exactly what changes in your Vietnam process.
• Verify supplier-to-raw-material traceability for any high-risk, forced-labor-linked inputs.

What to Watch Before Year-End

• Signature on the US-Vietnam successor agreement. "Very close to a final deal," per September 21 comments — still unsigned. Simply carrying over the old framework (20% + zero-rated Annex III items) may be legally difficult now.
• The IP Section 301 remedy decision. Under Trade Act Section 304, USTR must decide within roughly six months of the May 29 start — around November 29 (extendable three months under certain conditions).
• Final results of the overcapacity investigation. Preliminary results landed in August; final results are expected by year-end.
• Phased rollout of Executive Order 14411 (45/90/180 days). Counting from the June 3 signing date, day 180 lands near late November (the exact start date needs confirming).
• Whether a transshipment penalty returns in the new agreement.

Bottom line. Vietnam is still winning. But only companies that can prove what they made there — not companies merely located there — keep winning. Tariffs came down. Scrutiny and proof requirements went up. The answer to "how far to shift" isn't a ratio — it's the range of process you can document. Even Mexico, the largest dollar winner, seems to owe its edge to having a proof system already in place.