Vietnam Macro Flash - USTR's determination of Section 301 investigation of Vietnam's currency: No trade action against Vietnam

USTR determined no action is warranted under Section 301 investigation

On July 24, 2021, the Office of the United States Trade Representation (USTR) issued a formal determination for the Vietnam Currency Section 301 investigation after nearly 10 months since the launch of the investigation on October 2, 2020. According to the notice, the USTR has determined that no action under Section 301 investigation is warranted at this time based on the agreement reached between the Department of the Treasury (US Treasury) and the State Bank of Vietnam (SBV), the advice of the interagency Section 301 Committee and public comments during the investigation. 

- The launch of the USTR’s Section 301 investigation in October 2020 and the US Treasury determination of labelling Vietnam as a currency manipulator in December 2020 raised concerns that the USTR could implement punitive actions against Vietnam, particularly tariffs on imported goods from Vietnam. Related Ministries, Departments and Agencies as well as business communities from the US and Vietnam have made significant efforts to solve this issue. 

- The public hearing held in December 2020 included a majority of witnesses who showed their opposition to the USTR’s investigation on Vietnam’s currency valuation and/or potential punitive actions on Vietnam. 

- On April 16, 2021, the US Treasury removed Vietnam from the currency manipulator list even though Vietnam continued to meet all three criteria under the Trade Facilitation and Trade Enforcement Act of 2015 in the US Treasury’s Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. 

- On July 19, 2021, the US Treasury and SBV reached an agreement on Vietnam’s currency practices, providing a satisfactory resolution of this issue. Some key points are as follows:

* Vietnam confirms that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate and will refrain from any competitive devaluation of the Vietnamese dong. 

* The SBV will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals while maintaining macroeconomic and financial market stability. 

* The SBV will continue to provide necessary information for the US Treasury to conduct thorough analysis for its semi-annual report on Macroeconomic and FX policies of Major Trading Partners.