3 minEconomy
Vietnam’s $140 billion surplus with US not driven mainly by illegal transshipment, ex-ambassador says
Former US ambassador to Vietnam Marc Knapper says illegal transshipment accounts for only a very small share of Vietnamese exports to the United States, which reached a $140 billion goods surplus in the first ten months of 2026.
Vietnam’s goods surplus with the United States has reached $140 billion in the first ten months of 2026, and a former US ambassador says illegal transshipment is not the main reason. Marc Knapper, who served as US ambassador to Vietnam from 2022 to 2026, said that illegal transshipment accounts for only a «very small percentage» of Vietnamese exports to the American market.
Illegal transshipment refers to falsifying the country of origin of goods to avoid tariffs, typically by routing products through a third country and misrepresenting where they were made. Knapper said Vietnam is reportedly cracking down on the practice in cooperation with US Customs and Border Protection and other customs agencies. The scale of actual illegal transshipment, however, remains disputed, and the surplus has continued to grow despite US tariffs on Vietnamese goods.
The Trump administration applies a broader definition of transshipment that includes normal supply-chain activity, such as assembling components from different countries before final export. A White House office has alleged that more than 40 economies are engaged in a «transshipment scam», and it has claimed that the practice causes federal revenue losses of $19 billion to $26 billion a year. Knapper’s comments suggest that the gap between the narrow and broad definitions is central to how the trade imbalance is being interpreted.
The tariff picture is complicated. Under a July 2025 agreement, regular Vietnamese exports faced a 20 percent tariff, while goods alleged to be transshipped faced 40 percent. The agreement did not specify how the transshipment calculation would be made. In February 2026, the Supreme Court ruled against most of the Trump administration’s tariffs, leaving the deal in limbo. Many Vietnamese goods currently face a 12.5 percent US tariff stemming from a Section 301 probe into forced labor.
Knapper’s remarks also point to a broader shift in global manufacturing. Companies have moved production into Southeast Asia under what is often called the «China plus one» strategy, driven by US protectionism, rising costs in China, and a desire for more resilient supply chains. Chinese firms are expanding into Vietnam both as a manufacturing base and as a consumer market. Trade between China and the Association of Southeast Asian Nations topped $1 trillion for the first time in 2025.
Vietnam’s economic ties with China are also deepening through infrastructure. In August 2026, Vietnam approved an additional $3.3 billion for a railway linking the two countries, with completion targeted for 2030. The project has faced delays related to land clearance. Whether the US will adopt a new tariff regime for Vietnam remains unresolved, and the future of the trade relationship will depend on how the transshipment question is settled.
Source: fortune.com
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