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Why 1 clause in the US-Vietnam trade deal is sparking concern across Asia

The inclusion of a 40 per cent tariff on transshipped goods could ‘open up a can of worms’ for the whole region, analysts said

The United States announced it had reached a trade deal with Vietnam on Wednesday, which will see Washington impose a 20 per cent tariff on Vietnamese goods.

Businesses in Vietnam’s vast export sector initially reacted with relief to the news, as the 20 per cent rate is substantially lower than the 46 per cent so-called “reciprocal” tariff that the US threatened to impose on Vietnam in April.

However, the agreement has a sting in the tail. US President Donald Trump also said in a social post announcing the deal that goods deemed to be transshipped via Vietnam would face a far higher levy of 40 per cent.

It remains unclear exactly how the transshipment clause will work in practice, but analysts said the provision could have far-reaching implications – not only for Vietnam, but also for the wider region.

What is transshipment, and why is the US so concerned about it?

In its purest form, transshipment refers to exporters evading tariffs by diverting goods via a third country.

The US has grown increasingly concerned about a rise in transshipment since it began targeting China with sky-high tariffs earlier this year.

Trump administration officials allege that large volumes of goods are being exported from China to third countries – often in Southeast Asia – where their certificate of origin is altered, allowing them to be exported to America at a lower tariff rate.

It is unclear how much transshipment is occurring in reality. Some analysts have pointed to a sharp rise in both Chinese exports to Southeast Asia and Southeast Asian exports to the US in recent months to suggest that transshipment is indeed a significant issue.

But others have claimed the issue is overblown. A report by MUFG Bank said the impact of the transshipment tariff may be limited if enforcement only targets the most blatant cases of trade diversion.

Why has the new transshipment tariff attracted so much attention?

The special 40 per cent levy in the US-Vietnam deal is sparking discussion partly because it sends a signal about how seriously Washington is taking the issue of transshipment, and partly due to the uncertainty surrounding the policy.

The key question for businesses and policymakers is how the agreement will define transshipment. Will the higher tariff only apply to goods that have simply been diverted via Vietnam, or will it apply more widely?

It is a crucial issue because the supply chains of Vietnam (and other Southeast Asian nations) are closely intertwined with China’s. It is common for a product’s raw materials and components to mostly come from China, but for part of the production and assembly process to take place in Southeast Asia.

If those kinds of goods are also deemed to be transshipped under the new deal, then the higher tariff will “open up a can of worms” for the whole region, analysts at the financial services firm Nomura said in a research note on Thursday.

Many firms would struggle to avoid the higher levy under that scenario, as Asia “is heavily dependent on imports of intermediate products from China, and does not have a local ecosystem in place yet”, the note added.

What are the wider implications of this deal for Asia?

On the most basic level, the tariffs imposed under the US-Vietnam deal will have a direct impact on economies across Asia, as many regional economies rely heavily on exporting goods to America.

According to Nomura, if current tariff levels remain constant, they will put 1.7 per cent of Vietnam’s gross domestic product (GDP) at risk, as well as 0.8 per cent of China’s, 0.7 per cent of Thailand’s and 0.6 per cent of South Korea’s and Malaysia’s.

But some analysts said the transshipment tariff carried even greater significance, as it signalled the US was determined to reduce China’s role in the region’s supply chain.

“While the exact criteria for defining transshipment remain unclear, it is evident that Vietnam’s role as a potential connector for Chinese exports to the US will diminish,” said Su Yue, principal economist for China at the Economist Intelligence Unit.

Some analysts said they also felt it was more likely that other Asian economies would face higher US tariffs after seeing the details of the US-Vietnam deal. Most nations currently face a 10 per cent “baseline” tariff rate.

Euben Paracuelles, a senior economist at Nomura, estimated that if the US’ goal was to clamp down on goods being diverted via Southeast Asian markets, then the average tariff rate for the region would need to be raised from 10 per cent to 15.5 per cent.

It is also possible that the US may try to impose higher transshipment tariffs on other Asian economies, though any measures will hinge on airtight origin certification, as “rules can be porous and firms are nimble”, Nomura noted.

Bloomberg has reported, per Nomura, that the US wants to impose a rule on India stating that a product must have at least 60 per cent local value added to be certified as “made in India”, while India is pushing for a lower 35 per cent threshold.

What are the other details of the US-Vietnam deal?

The US and Vietnamese sides have yet to release the full text of the agreement, but Politico reported that it had seen a draft joint statement indicating that the US may eventually lower its tariffs on some Vietnamese goods after further negotiations.

Technology products, footwear, agricultural goods and consumer items such as toys are among the goods that may be included, Politico said.

According to Bloomberg, the US may apply lower tariff rates to products from Vietnam with high local value added, with 100 per cent locally-made goods facing only a 10 per cent tariff.

Meanwhile, Vietnam has agreed to slash its tariffs on US goods to zero, as well as address non-tariff barriers including intellectual property violations. It will also provide preferential market access for US agricultural products – such as poultry, pork and beef – and unspecified industrial goods.

The draft statement also confirms that Vietnam will finalise a long-anticipated US$8 billion purchase of 50 Boeing aircraft and sign memorandums of understanding for US$2.9 billion of US agricultural imports, according to Politico.

ASNR has authorised EDF to enhance safety standards at its 1.3GW reactors, allowing them to function beyond their original 40-year design.

French electric utility EDF is reportedly planning to invest €6bn in extending the operational life of 20 nuclear reactors after receiving approval from France’s nuclear regulator.

The French Authority for Nuclear Safety and Radiation Protection (ASNR) has authorised EDF to enhance safety standards at its 1.3GW reactors, allowing them to function beyond their original 40-year design.

EDF stated that aligning safety measures with those of newer European Pressurised Reactor models will require significant investment, and initial preparatory work on the first reactor commenced last year.

Reuters reported that President Emmanuel Macron has prioritised boosting France’s nuclear energy capacity, aiming to extend the lifespan of existing facilities and construct at least six new reactors in the coming decades. This initiative presents challenges for EDF, which is dealing with financial strains, project delays, and reactor defects. The French government, facing budgetary constraints, recently nationalised EDF with a €10bn investment.

EDF’s CEO, Bernard Fontana, appointed earlier this year, is focused on revitalising the nuclear expansion strategy. He is exploring financing options for the upgrades and new reactor constructions, which may include asset sales.

ASNR will establish specific safety requirements for each reactor during its 40-year inspection, and EDF must submit annual progress reports to demonstrate compliance. This decision affects 20 reactors within EDF’s 56-reactor fleet, with their approved lifespan concluding between 2026 and 2040.

Previously, ASNR extended the operational life of EDF’s 32 smaller 900MW reactors, said the publication.

Transition away from fossil fuels will incorporate ‘some years’ using oil, Corrêa do Lago says

Brazil’s UN climate summit chief has defended oil and gas production as being compatible with international efforts to limit global warming, ahead of the South American country hosting the world’s most important climate talks.

President Luiz Inácio Lula da Silva’s government wants Brazil to become the world’s fourth-largest oil producer. The country last month hosted an auction of oil blocks, including some in the sea close to the mouth of the Amazon river.

Almost 200 countries agreed to transition away from fossil fuels by 2050 at the UN COP28 climate summit in Dubai in 2023. Progress on national climate goals will be assessed at the upcoming UN COP30 in November, as the world remains off track on the need to cut greenhouse gases by half by 2030 from 1990 levels to limit global warming to 1.5C since pre-industrial times.

André Corrêa do Lago, president-designate of the UN COP30 climate summit taking place in the Amazonian city of Belém, played down concerns that Brazil’s stance on oil expansion was in conflict with global efforts to reach net zero emissions. 

“We are thinking of a ‘net zero’ that incorporates some years continuing to use oil. The transitioning away [from fossil fuels] allows considerable flexibility,” the senior diplomat told the Financial Times. 

“I believe that all countries are analysing how they can reach net zero in a way that is economically viable, technologically viable, and that logically should go in the direction of the transition away [from fossil fuels].”

By 2030, Petrobras, Brazil’s state-backed fossil fuel company, will increase oil production by among the most of the world’s top producers in percentage terms, according to new analysis from campaign group Global Witness based on March data from independent consultancy Rystad Energy.

The oil and gas major, controlled by the Brazilian government, is on track to produce a billion barrels of oil in 2030, or a third more than it did in 2024, the research found.

Petrobras declined to comment. Its public data shows production of both oil and gas was the equivalent of 2.7mn barrels per day in 2024 and would rise to 3.2mn bpd by 2029, although this 19 per cent increase versus the 33 per cent in the study is not directly comparable as the figures cover both oil and gas.

Global Witness investigator Patrick Galey said its research had focused solely on oil because the resulting carbon dioxide emissions from its use were more polluting over a longer period, lasting for hundreds of years in the atmosphere.

Rystad analyst Flávio Menten said Petrobras was not taking a wildly different strategy to its multinational peers, and after 2031 the research group forecast a steady production decline for Brazil.

Just over half of Brazil’s oil is exported, while the country’s electricity network is largely fuelled by hydropower and wind.

Brazil’s government argues that some of the proceeds from hydrocarbon export revenues can go towards investing in greener energy sources. Its mines and energy ministry said its transition was compatible with its economic and social needs.

The transition process was not “something radical”, the ministry said, and it was important to balance the strengthening of renewable energy sources with oil and gas exploration and production “which will still be necessary for national matrices in the coming decades.”

Corrêa do Lago said many countries, including the US and Norway, were also expanding oil production. The COP28 agreement to transition away from fossil fuels “allows countries and companies to choose different paths”, he noted.

He argued that if Brazil increased its oil production but used the proceeds to protect the Amazon from deforestation, that was “completely different” from a scenario in which the country boosted fossil fuel production and reduced renewables. 

Some countries, he said, had little choice presently but to use their fossil fuel reserves to help pay for their economic development.

But there were already signs of the shift away from fossil fuels by major economies, such as the rise of electrification in China, he added.

This year’s summit would focus on efforts to implement the agreements already made at past UN climate summits, he noted, including phasing out fossil fuels.

Campaigners such as Galey accuse Brazil of a “conflict of interest”, however, in attempting to balance its role as host of the UN climate summit at the same time as expanding oil production. 

The oil industry had shown a “mastery over the entire COP process”, Galey said, in thwarting efforts to tackle climate change at the most recent UN summits held in the petrostates of United Arab Emirates and Azerbaijan.

At the Global Tipping Points Conference and Exeter Climate Forum in the UK this week, involving hundreds of delegates from leading European scientific organisations and academia, almost 200 participants endorsed a statement calling for action from policymakers “especially [the] leaders meeting at the COP30 climate summit in Brazil later this year”.

Scarves, umbrellas and the classic trench are key to CEO Joshua Schulman’s revival of the luxury brand

New Burberry CEO Joshua Schulman is refocusing on classic British style to revive the brand’s cachet.

Burberry aims to recapture its universal luxury appeal after a period of pursuing a niche aesthetic.

Schulman is re-emphasizing classic items like trench coats and scarves, while recalibrating pricing.

LONDON—Soon after taking over as Burberry’s BRBY -0.24%decrease; red down pointing triangle chief executive last summer, Joshua Schulman popped into the company’s Fifth Avenue store in Manhattan. The shop floor was cavernous, minimalist and showcased select $3,000 handbags.

What he didn’t see were any $500 umbrellas—the type of higher-volume accessory that, along with trench coats, made Burberry an icon of functional, aspirational luxury for well over a century. As an American who had long admired the British brand, Schulman was puzzled.

“I’m like, why don’t we have hats or umbrellas on the floor?” he recalled. A store employee told him that went against the company’s visual guidelines, which called for sparse setups and no mannequins, another thing that struck Schulman as odd given that Burberry sells a full wardrobe. “I said, ‘Well, why don’t we try?’”

Employees quickly retrieved some from the stockroom and propped them up prominently. As luck would have it, a rainstorm soon blew through, and several shoppers bought umbrellas with Burberry’s signature check pattern within the hour.

One year in as Burberry CEO, Schulman is taking a back-to-basics approach to reviving the cachet of a company that once helped define British culture around the world. He is unwinding some of the brand’s overly ambitious detours and refocusing on what built Burberry’s name: classic British style and clothing designed to withstand the elements. A new ad campaign proclaims “It’s Always Burberry Weather” and features Olivia Colman, who played Queen Elizabeth II on “The Crown,” in a quilted jacket and Liam Gallagher of Oasis in a parka ahead of the ’90s British rock band’s reunion tour.

“Some of this is about slicing and dicing the numbers and looking at deep analysis,” says the 53-year-old in an interview in his office at Burberry’s London headquarters near the Thames. “And some of it is just leaning into the assets that we have already and celebrating who we are.”

Since its founding in 1856 and Thomas Burberry’s invention of weatherproofed gabardine fabric designed to withstand the British climate, Burberry has outfitted polar explorers, soldiers and royalty. A young Princess Diana was frequently photographed in her Burberry trench, establishing the coat as a symbol of understated aristocratic style. By the late 1980s, it was becoming the uniform of London’s club kids and fashion outsiders. The shift diluted its luxury image; it was too everywhere. In the 2000s, the brand mounted a comeback, running ads with the likes of Kate Moss and aristocratic model Stella Tennant that blended heritage with edge.

In recent years, a series of CEOs and designers tried to catapult Burberry into the top tier of the fashion world with avant-garde runway looks and bags at prices that rivaled Louis Vuitton.

The timing couldn’t have been worse. As Burberry tried to push upmarket, the luxury industry turned. Consumers cut back amid economic uncertainty and balked at prices that had soared during the pandemic boom in demand. Sales were hit especially hard in China, the world’s largest luxury market.

Burberry was caught in an identity crisis.

The brand, Schulman believes, had lost focus, pursuing a niche aesthetic at the expense of its more universal luxury appeal.

And because Burberry is the U.K.’s only global luxury brand—as well as the marquee name at London Fashion Week—its missteps have wider implications for British fashion as a whole.

“When it falters, it exposes how heavily the system depends on a single brand to lead,” said Andrew Groves, a professor of fashion design at the University of Westminster.

Other fashion rivals are privately owned (Chanel) or part of sprawling conglomerates (Gucci or Dior), but Burberry is on its own as a company and publicly traded. That puts more pressure on Schulman to turn things around, despite the weaker luxury market, and fast.

In May, Burberry announced a second annual decline in sales and a net loss for the fiscal year ended in March. Burberry’s share price is down more than 50% since early 2023. Schulman moved quickly to overhaul the executive team and announced plans to cut roughly 1,700 jobs by 2027—nearly 20% of its global head count.

The oldest of six children, Schulman grew up in Los Angeles. As a boy, he had his nose in Women’s Wear Daily, known in the industry as the “fashion bible,” and corporate annual reports. He would memorize the layouts and square footage of major department stores from company filings.

“I was a very strange child,” he admits with a laugh.

When Nordstrom announced it would open a store nearby in West Los Angeles, Schulman, then around 13 years old, wrote to one of the company’s leaders to say he was “ecstatic.” The executive wrote back, and he’s kept the letter ever since.

Around the same time, Schulman got his first job at a children’s clothing boutique in Beverly Hills. Kris Kardashian came in to shop for her young children. So did Kathy Hilton, for her daughter Paris. Schulman knew the regulars by name and paid close attention to their tastes. He joined the owner on buying trips, bringing back Versace and Moschino for kids.

“A lot of what I learned was in those four walls,” he says. He was convinced he’d rocket straight to being CEO of Bloomingdale’s.

After college at New York University and then Parsons School of Design, Schulman landed his first job in fashion at Perry Ellis, an American menswear brand known for its dress shirts and slacks. The company was in turmoil. It had just parted ways with Tom Ford—who would soon reinvent Gucci—and brought in Marc Jacobs, whose now-legendary Grunge collection also got him fired.

Schulman quickly learned the risks of misalignment between creative vision and corporate leadership.

A few years later, in 1997, he joined Gucci. There, Schulman was responsible for the commercial side of the ready-to-wear business, working closely with Christopher Bailey, who was head of women’s design. Bailey later jumped to Burberry.

Schulman kept a close eye on Burberry as Bailey led a revival of the brand, and Schulman’s interest deepened when he relocated to London to run Jimmy Choo from 2007 to 2012.

“Burberry was like the shining city on a hill,” he said.

A succession of CEOs—five since the turn of the century—have tried to push Burberry higher up the luxury ladder, with some experimenting with less traditional styles like an urban, sports-luxe aesthetic.

Burberry built out a network of global flagships and tightened control over its image. It gave up profits from high-volume licensing deals in Spain and Japan, pulled back from discount-friendly department stores in the U.S., and stripped out promotions from full-price boutiques.

The push accelerated during the pandemic. In late 2022, the company hired designer Daniel Lee and leaned hard into expensive handbags. Burberry increased prices on leather goods by 60%.

“It’s been a mistake for them to raise prices like they did and to try to carve out a whole new lane for themselves,” says Pete Nordstrom, president of the Seattle-based Nordstrom department store, one of Burberry’s most important wholesale partners in the U.S. “That’s going to have a negative impact with customers—and it has.”

Meanwhile, Schulman was on a fast track through some of America’s biggest fashion names, including Coach and Michael Kors.

Schulman was in talks to bring more fashion know-how to Burberry as a potential board member in spring 2024, just as Burberry’s strategy was unraveling. The company had issued a profit warning and seen its share price tumble. Shareholders were losing patience.

Instead of a board seat, Schulman was named CEO.

On his first day, he stood before staff at Burberry’s London headquarters and delivered a blunt diagnosis: The brand had drifted too far into niche fashion. It needed to capitalize more on its roots—trench coats, scarves, the classic red, white, black and tan checks.

Within weeks, Schulman convened a 200-person session of designers, merchandisers, product developers and marketers. Burberry had narrowed its appeal too drastically, he told them, focusing on the “opinionated customer” while neglecting others who he called investors, aspirers, hedonists and conservatives.

“We had left behind the broader universe of luxury customers,” he says.

One symbolic casualty of that shift was the classic Burberry polo, historically with an embroidered equestrian knight or checked trims.

“We had replaced that with a more anonymous polo shirt…at a much higher price point,” Schulman said. “Our customer didn’t respond to that.”

Pricing has been recalibrated: Schulman is charging a premium where the brand has authority—particularly outerwear and trench coats, which can run upward of $3,400—while pulling back in categories like handbags, where Burberry’s credentials are weaker.

He is also highlighting globally recognizable symbols of Britishness—but with a sharper eye on how they would resonate internationally with, say, an American like himself. Internal data revealed a recurring problem under the previous leadership: Campaigns aimed at showcasing Burberry’s “modern British luxury” aesthetic struck a chord in the U.K., but often failed to resonate as strongly abroad.

In the fall, Schulman unveiled an ad campaign tied to the reopening of Burberry’s New York flagship that featured British model and actress Cara Delevingne in front of London’s iconic Big Ben. “It may not be the most subtle reference, but it’s globally recognizable,” Schulman said. “You can see the Eiffel Tower in ads for three or four of our French competitors all the time.”

Nowhere is Schulman’s shift more visible than in how Burberry displays scarves, once tucked away in drawers. New “scarf bars” prominently showcase cashmere scarves in an array of patterns and colors that can be monogrammed on the spot.

Investors are optimistic. Same-store sales fell 5% in the six months to March 29—an improvement from the 20% drop in the previous half. Burberry’s share price is up about 30% this year.

At a showroom in Paris shortly after Schulman joined Burberry, Nordstrom says his buyers and merchandisers were ready to lay out everything that wasn’t working. Before they could start, Schulman cut in: “You don’t need to tell me. I know. We’ll fix it.”

Schulman and his team are eager to work collaboratively, says Nordstrom. “Their time to shine is really the second half of the year, especially fall and winter. I think we’ll know a lot more then.”

With its recent focus on more accessibly priced products, some warn the brand risks drifting into “affordable luxury” territory—a profitable but less rarefied space, closer to Coach. Two former Burberry executives contend that the shift to the higher end would have worked if given enough time, or if the broader environment hadn’t changed so dramatically.

“It takes years to elevate a brand,” said one. “Burberry started that process, but it’s very hard to achieve when you’re a publicly listed company. Shareholders want results.”

Schulman insists he has no intention of turning Burberry into a “British Coach,” emphasizing that the ambition remains firmly rooted in full luxury positioning. First, however, he needs to lure more customers with the kind of classic coats and scarves that made Burberry famous.

“We could be among those top five luxury brands in the far future,” he says. “That is the North Star for this business.”