USTR Proposes 12.5% Section 301 Tariff on Vietnam: TCM, ADS in Focus

Overview

The Office of the United States Trade Representative (USTR) has proposed a 12.5% additional tariff on Vietnamese goods under Section 301 of the Trade Act of 1974, citing labor rights concerns. The measure targets key export sectors including textiles, footwear, furniture, and seafood, directly affecting listed firms such as TCM (Thanh Cong Textile) and ADS (Damsan). Analyst views are mixed, with some expecting limited impact due to exclusions for high-tech items, while others flag competitive disadvantages versus peers like Bangladesh.

Key Facts

• USTR proposes a 12.5% additional tariff on Vietnamese goods under Section 301, with no cap on rate or duration.
• The tariff applies to 60 economies; Vietnam’s rate is 12.5%, compared to 10% for Bangladesh and the EU.
• Key affected sectors: textiles, footwear, furniture, and seafood, representing a large share of Vietnam’s exports to the US.
• High-tech items (HS codes 8517, 8541, 8471, 8473) are excluded, covering a significant portion of Vietnam’s export value.
• Vietnam is the largest supplier of cotton to the US in 2024/2025, importing 45-50% of total industry cotton, which may support quota negotiations.
• Textile firms TCM and ADS are among those with high US cotton import exposure.
• The US is the largest market for Vietnam’s textiles (40% of export value) and footwear (41% of export value).
• Vietnam’s market share in US apparel reached 20.6% in H1 2025, surpassing China.

What Happened

The USTR announced the conclusion of an investigation and proposed additional tariffs of 10%-12.5% on goods from 60 economies under Section 301, related to the enforcement of regulations on goods produced with forced labor. Vietnam faces the higher end at 12.5%. This tariff is seen as a replacement for previous reciprocal and global tariffs that were rejected by US courts.

Analysts at ABS Securities view the tariff as not overly pessimistic, expecting Vietnam and the US to soon sign a reciprocal trade agreement currently under negotiation. KBSV also sees limited negative impact, noting that high-tech items are excluded and that the 12.5% rate is lower than the previous 19% under IEEPA. However, Mirae Asset warns that the 2.5 percentage point gap versus Bangladesh could shift order allocation, as Bangladesh faces only 10%.

Market Context

TCM closed flat at VND 20,450 on June 9, 2026, with volume of 673,400 shares on HOSE. ADS closed at VND 9,010 (+0.56%) with thin volume of 184,600 shares on HNX. Both stocks have been under pressure from ongoing trade policy uncertainty. The broader textile sector faces headwinds from US anti-dumping investigations and now the Section 301 proposal, though Vietnam’s strong cotton import relationship with the US may provide some negotiating leverage.

Strategic Significance

For long-term investors, the Section 301 tariff introduces a structural cost disadvantage for Vietnamese exporters versus Bangladesh and the EU. However, Vietnam’s deep integration into US supply chains—particularly as the largest cotton importer—could lead to quota-based exemptions or a bilateral trade deal that mitigates the impact. Firms like TCM and ADS that source US cotton may be better positioned to negotiate preferential treatment. The exclusion of high-tech items also limits the overall drag on Vietnam’s export growth. The key risk is a prolonged tariff regime that erodes Vietnam’s market share in labor-intensive sectors.

What to Watch

• Progress on US-Vietnam bilateral trade agreement negotiations, which could replace or modify the Section 301 tariff.
• Q2 2026 earnings reports from TCM and ADS for margin impact and order commentary.
• USTR final rule publication and effective date, expected within 60-90 days.
• Response from US industry groups like FDRA (footwear) and AAFA (apparel) lobbying against the tariff.
• Competitor pricing and order shifts to Bangladesh and other lower-tariff countries.