WASHINGTON, D.C. – The U.S. Trade Representative has determined that Vietnam’s actions, policies and practices have unfairly contributed to the undervaluation of its currency and that those actions artificially enhance its exports, restrict imports, and burden or restrict U.S. commerce.

While USTR did not recommend specific steps to take, the report concluded that Vietnam’s currency valuation-related practices, “including excessive (foreign exchange) market interventions and other related actions”  . . .”are actionable under section 301 of the Trade Act.”

USTR’s findings, which emerged from its investigation begun in October, come after the U.S. Treasury labeled Vietnam a currency manipulator last month.

The USTR report said that the State Bank of Vietnam sets a tight band within which licensed credit institutions can trade Vietnamese dong and U.S. dollars in Vietnam and “engages in the accumulation or decumulation of (foreign exchange) reserves to maintain the VND/USD exchange rate within +/-3 percent of the central exchange rate that it sets,” and that the investigation found no basis for concluding that the exchange rate is set solely for the purpose of ensuring the maintenance of adequate foreign exchange reserves.

Second, citing the U.S. Treasury and International Monetary Fund, USTR determined the dong has been undervalued in recent years, and Vietnam has tightly managed the dong relative to the U.S. dollar at an undervalued rate “consistently in periods of both appreciation and depreciation pressure.”

Third, USTR said Vietnam has taken concrete steps in foreign exchange markets that have contributed to the undervaluation of the dong, “which in turn serves to perpetuate macroeconomic imbalances.”

Fourth, USTR determined Vietnam’s management of its exchange rate, and the resultant undervaluation of the dong has been recently accompanied by substantial current account and trade imbalances and that “Vietnam’s large-scale (foreign exchange) market interventions have taken place in the context of a sustained current account surplus, record goods trade surpluses (including with the United States), and rapid productivity growth in the tradable goods sector.”

The USTR said Vietnam’s actions “burden or restrict” U.S. Commerce by lowering the price of product exported to the United States and raise the price of United States exports to Vietnam.

Any further action such as potential tariffs would likely have to be determined under the incoming Biden administration.

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