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CPA Urges Action on Vietnam’s Deliberate Currency Manipulation

November 12, 2020

Sends letter to U.S. Trade Representative in support of Section 301 Trade Case

Washington. The Coalition for a Prosperous America (CPA) has submitted comments to the Office of the U.S. Trade Representative (USTR) in support of an investigation into Vietnam’s deliberate currency undervaluation. In October, U.S. Trade Representative Robert Lighthizer announced a Section 301 trade case to determine whether Vietnam’s currency, the dong, is deliberately undervalued, and if it is adversely impacting U.S. manufacturers and agricultural producers. CPA believes the dong is undervalued by roughly 15 percent and that tariffs are needed in response.

“Vietnam is deliberately undervaluing its currency to undercut U.S. producers,” said CPA Chair Dan DiMicco. “We’ve already seen this playbook with China. Vietnam recognizes that currency manipulation works, and they want to keep gaming the system to take advantage of America’s large consumer market. We strongly encourage Ambassador Lighthizer and his team to thoroughly investigate Vietnam’s practices and then take appropriate action.”

In a letter to USTR, CPA noted that Vietnam now accounts for roughly 10 percent of America’s global trade deficit. From 2009 to 2019, America’s annual goods trade deficit with Vietnam soared from $9.2 billion to $55.8 billion. In fact, the 2019 U.S. goods deficit with Vietnam rose by a staggering 44 percent over 2018. It’s now on track to finish 2020 by reaching at least $65 billion.

Much of the U.S.-Vietnam trade imbalance has been driven by the State Bank of Vietnam (SBV) pegging the dong to the U.S. dollar at a preferential rate in order to promote Vietnamese exports. The SBV achieves such manipulation through capital controls as well as the central government’s tight hold over Vietnamese banks and industry. Additionally, the government of Vietnam operates a centrally planned communist system, with wage levels restrained by pervasive government control of the economy. 

In 2019, the International Monetary Fund (IMF) estimated the dong to be roughly 15 percent undervalued. Using this figure, CPA estimates that a 2020 goods deficit with Vietnam of $70 billion goods would cost the U.S. up to 420,000 jobs.

“We commend the USTR for initiating a Section 301 trade case with Vietnam,” said Michael Stumo, CEO of the CPA. “We believe that USTR should recommend tariffs on Vietnamese imports into the U.S. and that they be in an amount equal to the IMF’s estimate of a 15 percent undervaluation of the dong. America’s growing trade deficit with Vietnam poses a significant challenge for the U.S. economy and places an unfair burden on the nation’s manufacturers and agricultural producers—particularly at a time of hardship during the coronavirus pandemic. Action is urgently needed on this growing problem."

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