US escalates Vietnam on IP threat scale, as EU joins China on watchlist

The US Trade Representative’s (USTR) office has designated Vietnam as a “Priority Foreign Country” for intellectual property violations.

This is the first time any nation has received that label in 13 years, and it opens the door to a Section 301 trade investigation against the country, which has been one of the biggest beneficiaries of the US tariff campaign against China.

For years, China had been the primary target of American IP enforcement, with the US accusing Chinese AI companies of copying frontier models built by US companies like OpenAI and Anthropic.

However, Vietnam now occupies the most severe category on Washington’s watchlist, a tier above the “priority watch list” where China, India, Russia, and three other nations sit, as seen in the USTR’s 2026 Special 301 Report.

Why is Vietnam designated a priority IP threat country?

Since 2025, the US has been pointing out what it calls a trade surplus between it and Vietnam. Exports from the Southeast Asian country to the United States hit $153 billion in 2025, producing a trade surplus of nearly $134 billion, according to Reuters.

Its economy grew 8% last year, and this was largely fueled by foreign manufacturers like Samsung, Apple, and Nike assembling goods in Vietnamese factories, often from Chinese-sourced components.

Last year, the Trump administration accused Vietnam of serving as a transshipment hub for Chinese goods headed to American consumers. Le Monde reported in April that Vietnamese garment and footwear factories have been exporting more than ever to both the US and Europe, one year after new tariffs reshaped global supply chains.

The “Priority Foreign Country” tag carries statutory weight as it is reserved for countries whose IP practices have “the most egregious” adverse impact on US products and that have not entered good-faith negotiations to fix them. 

The agency will decide within 30 days whether to open a formal Section 301 investigation, the same legal mechanism used to impose tariffs on China starting in 2018.

Why was the European Union (EU) added to the USTR watchlist?

A surprise entry to the watch list was the EU, which was placed in the lower-tier “watch list” for the first time.

This comes at a period when there is growing friction between Washington and Brussels on IP enforcement. The transatlantic relationship is already strained by disagreements over tariffs, tech regulation, and defense spending.

However, some countries like Argentina and Mexico saw their status on the watchlist upgraded from the “priority watchlist” red zones to the standard watchlist. Mexico is a member of the three North American trade pacts, with the US and Canada.

China stays on the priority watch list

China remains on the “priority watch list,” one tier below Vietnam’s new designation. The placement comes after months of escalating accusations over AI intellectual property. OpenAI told Congress in February that Chinese startup DeepSeek had used “increasingly sophisticated tactics” to extract results from American models.

Google, OpenAI, and Anthropic began sharing information through the Frontier Model Forum to detect unauthorized distillation attempts, according to the same report.

Chile, China, India, Indonesia, Russia, and Venezuela are the six countries on the priority list. Another 19 trading partners, including the EU, occupy the standard watch list, while Bulgaria was removed entirely.

The 30-day clock on a potential Section 301 investigation into Vietnam starts now. If the USTR moves forward, it will request consultations with Hanoi aimed at resolving the IP concerns that triggered the designation. 

For Vietnam, which has built its economic growth strategy around export-driven manufacturing and foreign investment, the outcome could determine its trade relationship with its largest customer and also have lasting impact on its growing economy.

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