Background

The Treasury Department announced July 19 an agreement with the State Bank of Vietnam “to address Treasury’s concerns about Vietnam’s currency practices.” The agreement appears to delay indefinitely the potential imposition of tariffs on imports from Vietnam in a related Section 301 investigation.

The Office of the U.S. Trade Representative had previously concluded in that investigation that Vietnam’s acts, policies, and practices related to currency valuation are unreasonable. These included the persistent undervaluation of Vietnam’s currency over several years; Vietnam’s more recent, rapid, and significant purchases of foreign exchange, which had contributed to undervaluation; and the conditions surrounding Vietnam’s foreign exchange market interventions, including current account and goods trade surpluses. USTR had also determined that Vietnam was burdening or restricting U.S. commerce by effectively lowering the price of goods it exported to the U.S. and raising the local currency price of U.S. exports to Vietnam.

However, former USTR Robert Lighthizer left it to his successor to determine how to address the issue, and Treasury said that after “constructive discussions … through the enhanced engagement process” in recent months the two sides reached an agreement. Vietnam committed to refraining from any competitive devaluation of its currency, improving exchange rate flexibility over time, and continuing efforts to further modernize and make more transparent its monetary policy and exchange rate framework.

Tai said USTR and Treasury will monitor Vietnam’s implementation of these commitments and work with Vietnam to ensure it addresses the currency valuation issues raised in the Section 301 investigation. This comment, and Tai’s omission of any mention of related tariffs, suggest that no such measures will be imposed as long as Vietnam is implementing the new agreement. However, the investigation appears to still be active, and USTR could take steps such as publishing a preliminary list of Vietnamese goods that could be targeted for Section 301 tariffs as a way to maintain pressure on Hanoi to keep its commitments.

For more information on these developments, please contact Nicole Bivens Collinson (at (202) 730-4956 or via email) or Kristen Smith (at (202) 730-4965 or via email).

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