LIVE MARKETS-What the US-Vietnam deal means for inflation

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WHAT THE US VIETNAM DEAL MEANS FOR INFLATION

If the U.S. Vietnam trade deal, which has been finalised in principle, Treasury Secretary Scott Bessent said on Thursday, becomes a model for other such deals, it could actually send U.S. inflation higher.

Under the deal, according to a social media post from Donald Trump, Vietnamese goods would face a 20% tariff and trans-shipments from third countries through Vietnam will face a 40% levy.

Robin Brooks, a senior fellow at the Brookings Institute and former chief economist at the IIF says it's this transshipments point that is crucial.

He says first the transshipments clause shows the U.S. focus on stopping goods from China avoiding tariffs by going via third parties, and he anticipates that many more trade deals "will follow the Vietnam template."

Following on from this. He writes: "One of the big puzzles this year has been that inflation hasn't picked up despite tariffs. One reason why is that Chinese transshipments of goods slowed the inflationary impulse from tariffs."

"As the U.S. cracks down on transshipments, this ... will grow again."

He adds higher inflation would cause market pricing to reduce bets on Fed cuts, and support the dollar.

(Alun John)

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