In the final days of its time in the White House, the Trump administration has announced the results of a so-called Section 301 investigation into possible currency manipulation by Vietnam’s government.
On January 15, the office of the U.S. Trade Representative (USTR) announced its conclusion that Vietnam had taken actions to push down the value of its currency, but shied away from imposing punitive tariffs. “Vietnam’s acts, policies, and practices including excessive foreign exchange market interventions and other related actions, taken in their totality, are unreasonable and burden or restrict U.S. commerce,” the USTR said in a statement.
The investigation was opened in October, along with a separate probe into Vietnam’s import and use of illegally harvested timber. It marked the first time that the U.S. cited currency manipulation as a reason to investigate a trading partner under Section 301 of the 1974 Trade Act – the very same tool that the Trump administration used to erect its wall of tariffs against Chinese imports.
The USTR added this week’s conclusion was based on consultation with the Department of the Treasury, which in December officially labeled Vietnam a currency manipulator, accusing it of improperly intervening in foreign exchange markets to advantage its own exports.
“Unfair acts, policies and practices that contribute to currency undervaluation harm U.S. workers and businesses, and need to be addressed,” U.S. Trade Representative Robert Lighthizer said in the statement. His office added that the USTR “is not taking any specific actions in connection with the findings at this time but will continue to evaluate all available options.”
Since its inception, the investigation has faced opposition from American businesses in Vietnam, and has created frictions with a nation that is an increasingly close partner of Washington as it seeks to push back against Chinese ambitions in East and Southeast Asia.
The investigation seems to have stemmed from the administration’s – or President Trump’s – intense allergy to any country enjoying a trade deficit with the U.S.: that is, any nation that exports more to the U.S. than it imports. Trump had previously lashed out at Vietnam’s currency practices, saying on one occasion that the country “takes advantage of us even worse than China” and that it was “almost the single worst abuser of everybody.”
The Vietnamese government said that it welcomed the USTR’s decision, describing it as “a positive result” of the efforts of the government and businesses from both Vietnam and the U.S. “Vietnam will continue its efforts to open its market and enhance policy dialogues and strictly adhere to agreements between the two sides… to maintain a stable trade relation with a target for a balanced, sustainable and mutually-beneficial trade,” the government said in a statement.
By concluding its investigation, but taking no punitive actions, the USTR has effectively kicked the can down the road to President-elect Joe Biden, who is set to be sworn into office on January 20. Given the minor frictions this has created with an important partner, don’t be surprised to see the Biden administration quietly extract itself from the dispute during its first months in office.