U.S. trade agency drops tariff threat against Vietnam over currency practices

[July 24, 2021]  By David Lawder

WASHINGTON (Reuters) - The U.S. Trade Representative's office on Friday said it had determined that no tariff action against Vietnam was warranted after its central bank agreed with the U.S. Treasury not to manipulate its currency for an export advantage.

In a statement, USTR said it found that the U.S. Treasury-State Bank of Vietnam agreement earlier this week "provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this time."

The State Bank of Vietnam on Monday pledged in an agreement with Treasury Secretary Janet Yellen to refrain from "competitive devaluation" of its dong currency and make its monetary and exchange rate policies more transparent.

The deal follows months of U.S. pressure on Vietnam over its currency practices and ballooning U.S. trade surplus. The Trump administration in its final weeks had declared Vietnam a currency manipulator and had threatened to impose punitive tariffs on imports from Vietnam over its currency practices.

The USTR determination, outlined in a federal register  notice, only pertains to its Section 301 investigation into Vietnam's currency practices. It does not affect a separate Section 301 investigation into Vietnam's use of illegally harvested or traded timber that could lead to tariffs on furniture and other wood products imported from Vietnam.

A Vietnam Dong note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration

"American workers and businesses are stronger when our partners value their currency fairly and compete on a level playing field," U.S. Trade Representative Katherine Tai said in a statement.

"Going forward, in coordination with Treasury, we will work together with Vietnam to ensure implementation, and we will continue to examine the currency practices of other major trading partners," Tai added.

Vietnam welcomed the USTR's decision to take no action, its foreign minister, Bui Thanh Son, said.

"Constructive efforts and goodwill help resolve outstanding issues and contribute to the building of a better and stronger partnership," Son said on Twitter on Saturday.

The Vietnamese dong closed at 23,005 to the dollar on Friday, compared with 23,191 on Oct. 2, 2020, the day that USTR launched its currency probe.

(Reporting by David Lawder; Editing by Leslie Adler and Diane Craft)

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