No Vietnam Tariffs ‘Warranted at This Time,’ Says USTR

The agreement the U.S. Treasury reached last week with the State Bank of Vietnam to address U.S. allegations that Hanoi was devaluing the dong against the dollar to the detriment of American trade interests (see 2107190035) was a "satisfactory resolution” of the Section 301 investigation launched in October into Vietnamese currency manipulation, said an Office of the U.S. Trade Representative notice Friday. USTR “has determined that no action under the Section 301 investigation is warranted at this time,” said the agency.

The Information Technology Industry Council hailed the reprieve for U.S. importers from the threat of Section 301 tariffs on goods from Vietnam. “ITI welcomes the U.S. government’s bilateral engagement -- rather than consideration of tariffs that harm U.S. competitiveness and jobs -- to address concerns with Vietnam’s currency valuation practices,” emailed Senior Policy Director Sam Rizzo Monday. CTA didn't comment.

USTR, working with Treasury, will use its Trade Act Section 306 authority to “monitor Vietnam’s implementation of its commitments under the agreement and associated measures,” it said. If it “subsequently” finds that Vietnam is not “satisfactorily” living up to its commitments, USTR “will consider further action under Section 301,” it said.

A joint statement by the governments said Vietnam agreed to be "bound" by International Monetary Fund rules against currency manipulation to the detriment of one's trading partners. Vietnam also agrees to continue giving Treasury access to data on Vietnamese foreign exchange activities, it said. USTR, in the waning days of the Trump administration, found Hanoi’s currency practices “actionable” under Section 301 but punted to Biden administration trade officials any decisions on possible sanctions to impose. Treasury found in April that Vietnam was one of several U.S. trading partners that “intervened in the foreign exchange market in a sustained, asymmetric manner with the effect of weakening their currencies” to “impede U.S. growth or harm U.S. workers and firms.”

Vietnam plays a large and growing role in the consumer tech supply chain, and so it's increasingly important how the Section 301 currency situation ultimately plays out between Washington and Hanoi. Census Bureau numbers confirm U.S. tech importers turned increasingly to Vietnam in 2021's first five months in key product areas, especially in smaller-screen TVs that remain in historically high consumer demand during the COVID-19 pandemic.

Census data show Vietnam generated 24.5% of TV set imports to the U.S. in screen sizes between 35 and 45 inches in January-May. Vietnam's share was only 12% in that classification of goods in the same five-month 2020 period. U.S. importers sourced 4.41 million sets in those sizes from all countries in January-May this year, a 28.4% increase from a year earlier. But the enormous growth in Vietnamese sourcing of those TVs was unmistakable. Vietnam shipped 1.08 million TVs to the U.S in that size classification January-May -- a 161.5% increase from a year earlier.