Trump’s final trade jab may be tariffs on Vietnamese goods
President Donald Trump is likely to unveil proposed tariffs on Vietnamese goods before he leaves office in January, currency and trade experts say, after the U.S. Treasury branded the growing U.S. trade partner a “currency manipulator” last week.
U.S. companies that import goods from Vietnam should brace for significant tariffs from the U.S. Trade Representative’s (USTR) “Section 301” investigation into currency valuation practices, experts say.
Results of the probe, running in parallel with the Treasury review announced last week, could be public as soon as Jan. 7.
“It is wise to be planning now for the conclusion of the Section 301 process because, especially with the Treasury designation, it is extremely likely that the United States will impose some kind of retaliation against Vietnam,” said Deborah Elms, executive director of the Singapore-based Asian Trade Centre.
U.S. companies imported about $65 billion worth of goods from Vietnam in the first 10 months of 2020, compared with $66.6 billion for all of 2019. Tariffs could hit the $400 billion-plus sales U.S. apparel and footwear sector, along with furniture, electronics and household goods.
“There will be economic consequences,” Elms told a Friday web event hosted by the American Chamber of Commerce in Vietnam.
Deadly foes during the Vietnam War in the 1960s and early 1970s, Vietnam and the United States have enjoyed significantly warmer relations in recent years. Washington had considered Hanoi a strategic security and economic partner in Southeast Asia to help counter China’s growing influence, including during the Trump administration, but tariffs would deal the relationship a setback.
Vietnam’s commerce ministry said on Monday that tariffs would cause firms in the country to “lose their confidence in doing businesses with U.S. partners” and reduce imports from the United States. It said officials from the two countries will hold “extremely important” talks in late December.
Taxing Vietnamese imports would present yet another trade complication for President-elect Joe Biden as he takes over, and could prompt retaliatory tariffs on U.S. exports to Vietnam.
Trump has thrown up new economic restrictions on China in recent weeks, including adding the top Chinese chipmaker SMIC and drone maker SZ DJI Technology to a technology blacklist on Friday.
A spokesman for Biden’s transition team did not respond to questions about the Vietnam investigation or Treasury’s findings. A USTR spokesman also did not respond.
The Treasury’s long-delayed currency report, published Dec. 16, concluded that Vietnam, along with Switzerland, had exceeded all three of its thresholds for currency manipulation during the year ending June 30.
Both countries had foreign exchange market interventions and global current account surpluses exceeding 2% of gross domestic product (GDP), and a $20 billion-plus trade surplus with the United States.
The designation adds fuel to the USTR’s Section 301 investigation into Vietnam’s “acts, policies, and practices that may contribute to the undervaluation of its currency,” hurting U.S. commerce. The USTR has Dec. 28-29 public hearings here on the investigation and a second one into whether Vietnamese manufacturers use illegally harvested timber.
Three sources familiar with the matter said the USTR would not cut short a public comment period that ends Jan. 7, giving Trump about two weeks to act on any Vietnam tariff recommendations before he leaves office on Jan. 20. Tariff collections could start in Biden’s first weeks in the White House.
KNOCKBACK FOR VIETNAM
“This administration clearly has a beef here and wants to send a signal that Vietnam needs to be brushed back for its currency policies,” said Matthew Goodman, a former Treasury official and an Asian economics expert at the Center for Strategic and International Studies.
The message is that the United States will not tolerate Vietnam using an artificially low currency to aid its development in the same the way that China undervalued its currency for decades, Goodman said, adding that he views Vietnam’s high current account surplus as a temporary phenomenon.
USTR used a similar Section 301 investigation to justify tariffs of up to 25% on $370 billion worth of Chinese imports in Trump’s 2.5-year trade war with Beijing.
It is unclear whether tariffs on Vietnamese goods would reach that level or be closer to the 6.2% to 10% duties that Commerce Department applied to Vietnamese tires in November under a new currency rule.
Analysts say that Vietnam’s violation of the Treasury current account surplus threshold was partly a product of the Trump administration’s trade war with China, causing a rush of inward investment by companies seeking to avoid Chinese tariffs and a large increase in exports to the United States.
Concerned U.S. executives are already reaching out to Congress. “Just the rumor of another massive tax on American companies has created such a panic that congressional offices are already getting panicked calls from their hometown businesses,” one congressional aide told Reuters.
In comments submitted for the USTR currency investigation, the American Apparel and Footwear Association said Vietnam “has become even more important as U.S. companies have implemented diversification strategies away from China. Imposing new punitive tariffs on imports from Vietnam would cause extreme disruption.”