The U.S. Shouldn’t Let Vietnam Off the Hook for Currency Cheating

It’s already been determined that Vietnam’s actions on currency are “unreasonable and burden or restrict U.S. commerce.” Now it’s time to act.

Back in January, then-U.S. Trade Representative (USTR) Robert Lighthizer issued the findings of his agency’s Section 301 investigation into Vietnam’s “acts, policies and practices related to currency valuation,” concluding that Vietnam’s government had undertaken “excessive foreign exchange market interventions and other related actions” that “are unreasonable and burden or restrict U.S. commerce.”

The USTR report did not get a ton of attention outside trade policy circles, but it was a pretty big deal. The USTR had determined that Vietnam’s currency interventions were significant enough that punitive tariffs could be issued in response.

But Lighthizer didn’t impose them, instead leaving it up to the incoming Biden administration, including current U.S. Trade Representative Katherine Tai, to determine what to do with the findings. The administration has until October to decide.

With the countdown on, companies that import products from Vietnam are lobbying to stop the administration from imposing tariffs. On Wednesday, business groups sent a letter to Tai asking her to avoid tariffs and pursue “engagement” instead.

But here’s the thing: Diplomacy and engagement only work when there’s leverage. By not using the tools at its disposal to address Vietnam’s unfair trade practices, the U.S. will give up some pretty powerful leverage.

AAM President Scott Paul wrote to the USTR back in November 2020, before the final report was issued, urging the office to act to address Vietnam’s currency cheating. As he noted at the time:

“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…. 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. Do not allow these red herring arguments to stand in the way of taking meaningful action. Action is long overdue.”

Vietnam’s trade cheating hurts U.S. manufacturers and workers.

“When a foreign government manipulates or devalues its currency, their own companies benefit from an artificial price subsidy on products exported to the United States,” Paul wrote. “At the same time, the exported goods of U.S. companies are effectively hit with an artificial tax making our goods more expensive when they are sold abroad. This combined impact erodes U.S. competitiveness, undermines manufacturers and farmers seeking to grow their export markets, and hurts those forced to compete against subsidized imports into our home market.”

This isn’t just some wonky policy debate, mind you. Currency manipulation has cost the United States millions of jobs; the Economic Policy Institute found that stopping it could create between 2.3 million and 5.8 million new jobs, many in manufacturing.

And while the importers who wrote USTR argue that Vietnam has become a “trustworthy alternative to China” in recent years, there is evidence that China has shipped its products through Vietnam to avoid U.S. duties.

Plus, there are a number of ongoing additional trade issues with Vietnam. The Commerce Department determined last year that tires made in Vietnam were unfairly traded, for example, and the USTR is currently investigating imports of timber from Vietnam.

As our Scott Paul predicted back in November, importers do not want to see tariffs issued on the products they import from Vietnam. But without taking action, the U.S. will let Vietnam off the hook, giving up the leverage it needs to finally get Vietnam to stop its unfair trade practices and resolve many of these issues, once and for all.

It’s time to act.