On Wednesday, Trump announced on Truth Social, his social media platform, that the U.S. will impose a 20% tariff on Vietnamese exports to the U.S. Goods deemed to have been transshipped through Vietnam will get a 40% levy. 

In return, Trump claimed Vietnam will drop all tariffs on U.S. goods and “open their market to the United States,” pointing to U.S.-made SUVs as a “wonderful addition” to Vietnam’s roads. 

Vietnam’s benchmark VN-Index climbed by 0.5%, as of 1 a.m. Eastern Time. Shares of U.S. companies with a major manufacturing presence in Vietnam rose: hotlink]Nike[/hotlink] rose 4%, while Apple jumped by 2.2%. 

Vietnamese state media reported that To Lam, general secretary of the Communist Party of Vietnam and the country’s leader, spoke with Trump on Wednesday to discuss the tariff negotiations. According to the report, the U.S. will “significantly reduce reciprocal tariffs on many Vietnamese imports”; it noted as well that Trump “highly valued” Vietnam’s pledge to grant preferential market access to U.S. goods, including large-engine vehicles. To Lam also reportedly urged Washington to lift export restrictions on certain high-tech goods. 

The deal makes Vietnam one of the few governments that have reached an accord with Washington since April 2, or “Liberation Day.” Trump struck a deal with the U.K. in early May, and reached a trade truce with Beijing last week.

Still, details of the U.S.-Vietnam trade agreement are murky. “The interpretation of transshipment is unclear,” DBS Bank wrote in a research note. 

Transshipment refers to a practice where goods are moved from one vessel to another before being shipped off to their final destination. Yet the Trump administration also accuses Vietnam of being a backdoor for Chinese goods to evade U.S. tariffs. 

Illegal transshipment typically involves changing the certificate of origin to a new country, without adding significant value. 

Vietnam has turned into a key manufacturing hub for global supply chains. Apple, Nintendo, and other electronics manufacturers moved final assembly of their products to Vietnam, both to avoid U.S. tariffs on China and to diversify their supply chains.

These components often come from Chinese suppliers, but Vietnam-based manufacturers are also adding value through final assembly, before the goods are shipped to the U.S.

“I suspect the terms are still being developed. This is likely to be more of a framework,” says Deborah Elms, head of trade policy at the Hinrich Foundation.

The details of the agreement can also shift between Trump’s announcement and when the deal is formalized through an executive order. That process could take weeks: The U.S. and U.K. announced their deal in early May, but it wasn’t formalized until mid-June.

“The details will be extremely important,” Elms cautions. “Depending on the product and the manufacturing process, the rate could be lower or much higher, up to 40%. The uncertainty is set to continue for some time.”

A significant increase in purchases of American SUVs might also be a tall order for Vietnamese consumers. The average monthly income of a Vietnamese worker is about $320, significantly less than that of an average American worker. 

Vietnam’s biggest purchases from the U.S. were computers, electronic products, machinery, and instruments, according to Vietnam government data. The country likely imported these goods to support its electronics manufacturing. 

A 20% tariff is less severe than the 46% rate first proposed in early April. Yet it still signifies a ramp-up in trade frictions between the U.S. and Vietnam. It’s also double the baseline 10% tariff rate imposed on all imports.

Vietnam is highly exposed to the U.S., with 30% of its exports headed there, according to DBS.

DBS predicts a possible short-term rally in Vietnam’s stock markets ahead of the release of second-quarter GDP, which the country’s deputy prime minister suggests will be a strong 7.6% year over year. “However, brace for signs of an economic slowdown should export front-loading dissipate,” the bank warns.