AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Summary
- The US department of treasury has reported large-scale interventions by Vietnam in the currency markets to prevent the appreciation of Dong.
- This is for the first time the US government has officially labelled a country of being a currency manipulator.
- A similar investigation was initiated by the Trump administration against China leading to sanctions and the 2019 trade war between the two countries.
The US treasury department has accused Vietnam of manipulating the foreign exchange markets to gain an advantage to its exports. In its semi-annual currency manipulation report, the department has said that it suspects Vietnam of taking measures to devalue its currency against the dollar. An investigation on the same had been initiated by the Donald Trump administration in October to look into policies and practices of Vietnam, which had been hurting American business interests.
Vietnam has become a favourite sourcing destination for companies who were avoiding China because of its trade tussle with the US. Vietnam had exported goods worth $14.9 billion to the US in 2010 and worth $66.6 billion in 2019.
Vietnam had been denying the allegations, but now after the US treasury department has said that Vietnam has met all three criteria for being a currency manipulator, this would trigger special negotiations over the next year and the US can impose economic sanctions on Vietnam.
Besides Vietnam, other countries on the monitoring list are China, Japan, South Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand and India.
Probe into Vietnam’s trade practice
The US trade representative office had initiated an investigation in October on “acts, policies, and practices” of Vietnam that may be contributing to the undervaluation of its currency, Dong, and the resultant harm to the US Commerce. The investigation was conducted under Section 301 of the Trade Act of 1974, which was previously used to investigate China’s actions and impose sanctions.
In the last few years, the trade surplus of Vietnam with the US has been growing. As of 2020, it has the fourth largest surplus against the country. Earlier in August this year, the treasury department had revealed that Vietnam had manipulated currency in a tyre exports case, on which US tariffs were levied later in November.
China-US trade war
The US and China had been involved in a full-fledged trade war in 2019 after which a truce was agreed upon between China and the US that eased out the tension between the two countries. The US had put sanctions on annual imports worth $370 billion from China during the period.
The trade war continued for a period of about two years and had a serious recessionary impact on the entire global commerce.
Looking ahead
In 2021, the situation may be different as Joe Biden will take over as the US presidency in January and takes a relook at the policies being followed by the Trump administration. However, the policy of protectionism may continue with the new government as well because of the tough economic conditions in the US induced due to the pandemic.
