Majority of Comments Oppose Tariffs for Alleged Vietnamese Currency Manipulation

The majority of comments from U.S. interests submitted on whether the U.S. should do anything to pressure Vietnam to stop manipulating its currency favor not putting tariffs on Vietnamese imports. Many comments filed in the docket express disagreement with the very premise of the investigation. HanesBrands, which manufacturers apparel in Vietnam that is exported to the U.S., Australia, Canada, the European Union and China, requested a public hearing on the investigation, and quoted the statute that requires such a hearing if requested by any interested person.

The company's letter, written by Jerry Cook, vice president-government and trade relations, said that curiously, the Office of the U.S. Trade Representative did not mention as it launched the investigation that the Treasury Department listed Vietnam on a currency monitoring list. He said that the most recent report noted that Vietnam intervened to both appreciate and depreciate its currency so that it would closely track the dollar. Treasury says the dong has been stable on a nominal basis for eight years.

He said the rising trade deficit with Vietnam has more to do with Section 301 tariffs on China than on currency moves. “USTR should see this shift as a good indicator that its policy to push production out of China is working,” he said. He also said that if there are tariffs or quota restrictions on apparel exported from Vietnam, it would affect the U.S. cotton growers and spinners that Hanes buys from. They export a million pounds a week of cotton yarn to Vietnam, he said.

Kuhl USA President Kevin Boyle said the sportswear manufacturer and retailer laid off nearly half of its 100-person workforce due to COVID-19 pandemic disruption, and that although they've been able to gradually bring back 80% of those let go, any new tariffs “would significantly hamper our already precarious recovery from the pandemic.” Boyle said the company has paid more than $500,000 in Section 301 tariffs on Chinese imports, and the company moved as much production as possible out of China, “but now we see that only a short time later our supply chain could be disrupted again.” The company can't increase the prices of its goods to cover the tariffs, because the products would no longer be cost-competitive if it did, he said.

Three shoe manufacturers -- Dansko; Caleres, the parent company for Naturalizer, Famous Footwear and others; and Aldo -- all oppose tariffs on Vietnamese shoe imports. Vietnam is the No. 2 source of imported shoes, they noted, and Section 301 tariffs on Chinese imports accelerated moves from China to Vietnam.

Footwear Distributors and Retailers of America noted that Vietnam provides 20% of U.S. footwear, and when you exclude China and Vietnam, all other countries only provide 13% of footwear. American Apparel and Footwear Association’s Beth Hughes, vice president for trade and customs policy, asked for a virtual public hearing and said AAFA strongly opposes tariffs on Vietnamese imports. About 17% of apparel imports through August came from Vietnam, and 18% of travel goods were from Vietnam in the first eight months of 2020, up from 16% in 2019, she noted. Tariffs in general are higher on apparel, shoes and bags, “even though many of these products are no longer made in commercial quantities in the United States. In 2019, our industry represented approximately 6 percent of all U.S. imports (by value) yet generated more than 29 percent of the duties collected by Customs,” she wrote.

The U.S. Fashion Industry Association said that the fact that apparel imports from Vietnam increased by 11.5% from 2018 to 2019, at the same time the dong appreciated significantly, shows undervaluation is not driving the trade deficit. “Now, from a policy perspective, U.S. Government officials may or may not like the fact that apparel imports from Vietnam are increasing, but, when those imports have increased during a period in which the exporting country’s currency is appreciating, it seems clear that a 'managed,' 'undervalued' currency is not the reason for the increase in imports,” USFIA President Julia Hughes wrote.

The Retail Industry Leaders Association also said Treasury, not USTR, should investigate currency manipulation, but if USTR goes forward, it should use diplomacy, not tariffs. “The retail industry has been battered by the pandemic and ensuing recession,” RILA Vice President Blake Harden wrote. Another trade war is counterproductive to the U.S. goal of diversifying out of China, he said.

Magna, an auto supplier with 24,000 U.S. employees, also opposes the investigation. Misti Rice, executive director of government affairs, said the auto industry's recovery from the COVID-19 recession would be hurt by this action. “Ultimately, Magna sources most of its components in U.S. dollars, so current movements have little impact on sourcing decisions,” she said.

Trade groups that represent motorcycles, recreational off-road vehicles and specialty vehicles asked USTR not to impose tariffs or quotas on Vietnamese imports. “The U.S. powersports industry relies upon an integrated, global supply chain to efficiently manufacture and assemble world-class vehicles in America, and Vietnam is an important supplier for the industry,” said Scott Schloegel, senior vice president of government relations for the trade groups.

People for Bikes, the trade group for bicycle manufacturers and distributors, said Vietnam has been a destination for some bicycle production that was done in China before Section 301 tariffs hit. “There is a significant risk that placing higher tariffs on bicycle products from Vietnam would simply encourage production to move back to China since it is likely the only other location able to quickly build capacity,” Alex Logemann, policy counsel for the coalition, wrote.

The U.S. Chamber of Commerce, the National Taxpayers Union, the U.S. Council for International Business and the Heritage Foundation all opposed the action. The National Foreign Trade Council wrote, “Vietnam and the United States have made significant progress on addressing many of the discrete trade and regulatory issues that the United States has raised for years in its bilateral discussions with Vietnam,” so punishing Vietnam doesn't make sense.

AmCham Vietnam Executive Director Adam Sitkoff said the bilateral trade deficit has not had a material impact on U.S. employment, and is a direct result of Section 301 tariffs on China. “Currency manipulation has not been an issue for our membership. There are, however, many areas that our members view as unfair or discriminatory policies and practices in Vietnam. Examples include digital trade and broadcast, pharmaceutical imports, intellectual property rights, customs and tax procedures, and more. To effectively address the trade imbalance, we would prefer the Administration continue to work closely with the US business community in Vietnam on the principal challenges and opportunities that matter most,” he said.

USA Poultry & Egg Export Council Trade Consultant Kevin Brosch said poultry exports to Vietnam have increased strongly across the years that a depreciated dong supposedly hurt U.S. producers, and said, “Vietnam has become the U.S. poultry export industry’s 4th most important market in terms of volume sales, and its 5th most important market in terms of dollar value.” If the U.S. imposes tariffs on Vietnam, poultry is a likely target for retaliation, he said.

Similarly, the U.S. Dairy Export Council argued that Vietnam doesn't deserve punishment, and that dairy exports could be hurt if USTR chooses to start a trade war. “Earlier this year, in response to a U.S. request, Vietnam unilaterally reduced its tariffs on dairy products and ingredients by 50 percent or more, ensuring that U.S. products would not be placed at a severe competitive disadvantage to those of our trading partners having preferential trade agreements with Vietnam, including Australia/New Zealand and the European Union,” Shawna Morris, vice president of trade policy, wrote.

But USTR also received comments in favor of tariffs on Vietnamese goods as a punishment for currency manipulation, from unions, the Magnesia Carbon Bricks Fair Trade Committee, the Committee for Pipe and Tube Imports, the Polyethylene Retail Carrier Bag Committee, Steel Dynamics, Magnum Magnetics and the American Furniture Manufacturers Committee for Legal Trade. The last group was the petitioner for an antidumping order on wooden bedroom furniture from China. One exporter also favored the action. Blue Diamond Growers, an almond growing cooperative, said a too-low dong hurts almond exporters, but also complained that the tariffs that were to be eliminated on U.S. almonds under the Trans-Pacific Partnership are a barrier.

Alliance for American Manufacturing President Scott Paul wrote, “The USTR will undoubtedly receive comments from those who have an interest in producing goods abroad and shipping them back here or who are universally opposed to using U.S. trade enforcement tools under any circumstances. For instance, some will argue that the United States should lodge complaints at the WTO or IMF,” he said. Several did. He said those organizations have been unable to get countries to abandon currency manipulation.

“Some will argue that the United States should negotiate directly with Vietnam. We do not disagree. Government-to-government consultations are useful, but only if they are backed with the threat of real consequences,” he said. “Do not allow these red herring arguments to stand in the way of taking meaningful action. Action is long overdue.”