In a report released on January 15, the U.S. administration said Vietnam’s actions to undervalue its currency are “unreasonable” and restrict U.S. commerce, but it will not take immediate action to impose punitive tariffs.
An investigation by the U.S. government had concluded that the available evidence indicated that Vietnam’s currency had been undervalued for the past three years, and that the State Bank of Vietnam’s interventions in foreign exchange (FX) markets in the form of net purchases of FX contributed to undervaluation of its currency during 2019.
“Vietnam’s acts, policies, and practices that contribute to currency undervaluation through excessive foreign exchange market interventions and other related actions burden or restrict U.S. commerce within the meaning of section 301 of the Trade Act”, says the report. “First, currency undervaluation effectively lowers the price of exported products from Vietnam into the United States. This makes Vietnamese imports into the U.S. less expensive than they would otherwise be, which undermines the competitive position of firms in the U.S. that are competing with lower-priced Vietnamese imports. Second, currency undervaluation raises the local currency price of U.S. exports to Vietnam. This undermines the competitive position of U.S. firms in the Vietnamese market. Third, excessive FX market intervention is undertaken while a country has a significant current account surplus also undermines U.S. export opportunities.”
To read the rest of this article, click on ILM - Vietnam