As the United States deepens its bilateral trade ties with Indonesia and Vietnam, a lion’s share of European exports to these Southeast Asian economies faces a potential risk of trade dislodgment. According to a recent media analysis, around 10 per cent of the European Union’s total exports to these two nations are now under competitive threat due to newly signed preferential trade agreements between Washington and the two southeastern nations.
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Scale of the potential disruption
In 2023, the EU exported EUR 11.4 billion of goods to Vietnam (and imported EUR 47.7 billion), while trade with Indonesia stood at EUR 11.3 billion of export goods (and import of EUR 18.4 billion), as per Eurostat data. Based on a modelling assumption, if 10-12 per cent of that is at risk, European exporters could be facing a revenue exposure between EUR 6.18 billion and EUR 7.41 billion over the next 12-18 months, particularly in sectors where tariff advantages now tilt toward the US.
The US and Vietnam have recently agreed on a new trade deal that involves reciprocal tariff adjustments. Trump had originally imposed a 46 per cent tariff on Vietnamese exports to the US. Under the agreement, Vietnam will face a 20 per cent tariff on most of its exports to the US, and a higher 40 per cent tariff on goods transhipped through Vietnam from third countries, notably China. In return, Vietnam has agreed to eliminate tariffs on US products entering Vietnam.
The EU’s Directorate-General for Trade noted in its March 2024 country report that the segments being targeted, i.e. electrical machinery, pharmaceuticals, automotive parts, and processed food products, form the backbone of EU export flows to these markets.
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