Yesterday (19 July), the US Treasury said it had “reached agreement to address Treasury’s concerns about Vietnam’s currency practices”, which indicated a potential delay to the possible imposition of tariffs

A statement following the meeting outlined Vietnam’s confirmation that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong.

The State Bank of Vietnam (SBV) is also making ongoing efforts to further modernise and make more transparent its monetary policy and exchange rate framework. In support of these efforts, the SBV has said it will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals, while maintaining macroeconomic and financial market stability.

“I welcome the constructive dialogue between the Department of the Treasury and the State Bank of Vietnam on currency policy, and the mutual understanding we have reached,” said US Secretary of the Treasury Janet Yellen. “I believe the State Bank of Vietnam’s attention to these issues over time not only will address Treasury’s concerns, but also will support the further development of Vietnam’s financial markets and enhance its macroeconomic and financial resilience.”

State Bank of Vietnam Governor Nguyen Thi Hong, added: “I highly appreciate the work done by the technical levels of our institutions towards a shared understanding on currency matters based on the principles of partnership and mutual respect. The State Bank of Vietnam will continue to manage exchange rate policy within its general monetary policy framework to safeguard the proper functioning of the monetary and foreign exchange markets, to promote macroeconomic stability and to control inflation, not to create an unfair competitive advantage in international trade.”

The US Trade Representative launched a Section 301 investigation in October 2020 into Vietnam’s acts, policies and practices related to the import and use of timber that is illegally harvested or traded, and Vietnam’s acts, policies, and practices that may contribute to the undervaluation of its currency and the resultant harm caused to US commerce.

Trade bodies, including the National Retail Federation (NRF) urged the USTR to avoid placing tariffs on imports of Vietnamese goods and rely on other remedies to address trade complaints as it has released a report revealing the price of goods from the country could increase by up to 23%, triggering a hunt for new sources of supply.