U.S. Tags Vietnam on Unfair Currency Practices But Delays Penalties

Key Summary

• USTR found Vietnam’s currency practices “unreasonable” and burdensome to U.S. commerce under Section 301
• Despite the findings, USTR chose not to impose tariffs or other penalties at this time
• The decision leaves room for the incoming Biden administration to shape its own response
• Future actions, including tariffs, remain possible depending on policy direction and industry input
• Electronics imports from Vietnam have surged as companies shifted production during U.S.–China trade tensions

Today, the United States Trade Representative (USTR) released a report on their Section 301 investigation into "Vietnam's Acts, Policies, and Practices Related to Currency Valuation." The Federal Register notice is here. The report draws three conclusions:

• Vietnam's acts, policies, and practices in regards to currency valuation are "unreasonable;"
• Vietnam's acts, policies, and practices "burden or restrict U.S. commerce"; and
• These acts, policies, and practices are actionable under Section 301 of the U.S. Trade Act.

Notably, however, USTR chose not to take any steps towards imposing tariffs or other measures to remedy these issues. There had been some suggestion that USTR was considering levying tariffs against all imported products from Vietnam.

That means the incoming Biden Administration will be able to craft their own response, rather than being forced to deal with hastily implemented tariffs at the end of an outgoing administration. There are numerous ways that the new USTR may choose to deal with the currency valuation issues, and tariffs may still be levied at a later date. However, the delay gives industry an opportunity to engage with the incoming USTR staff, including USTR-designate Katherine Tai. 

U.S. imports of electronics from Vietnam nearly doubled from 2018 to 2019, as the U.S. and China ramped up their tariff war.