The Trump administration formally accused Vietnam of currency manipulation. The U.S. Treasury made that disclosure on Wednesday (12/16) in a semi-annual currency manipulation report. It said that the Asian nation allegedly took actions through June to devalue their currencies against the U.S. dollar.
With rising labor costs and the trade war with the U.S., Vietnam became an attractive manufacturing alternative to China. In the last several years, many apparel and footwear brands have moved their supply chains to Vietnam. For brands with factories in Vietnam, this accusation could affect their bottom line. Rumors of a 25% tariff on Vietnamese products have floated around the news.
Trump has been vocal about closing the U.S. trade gap, and Vietnam has been a focus of his administration during 2020. However, even if tariffs are imposed, it would take time before new duties would go into effect, and time is running out for the Trump administration.
The currency report is the final one by the Trump administration. It will be up to the next Treasury secretary to determine whether to keep or remove the currency manipulator label on Vietnam. The Biden administration has not clarified whether it would continue the Trump administration’s pressure campaign on Vietnam. But many labor unions and progressive Democrats have supported adopting tougher trade measures on countries that artificially weaken their currency, saying they undercut the United States’ ability to manufacture and export by making American goods comparatively more expensive.
Blacksmith will continue to monitor the situation closely and keep our clients operating in Vietnam updated. If you have any questions, please contact us.