The trump administration raises the trade stick again! This time it was Vietnam

 The trump administration raises the trade stick again! This time it was Vietnam

Who is manipulating the exchange rate

The above-mentioned decision was made at the U.S. trade representatives office on the evening of the 2nd. The so-called 301 investigation originates from section 301 of the United States trade act of 1974, which empowers the U.S. trade representative to initiate an investigation into the unreasonable or unfair trade practices of other countries, and may, after the investigation, recommend unilateral sanctions to the president of the United States.

According to the statement, under the direction of US President trump, the US trade representative will investigate Vietnams practices, policies and practices related to the import or use of illegal logging or illegal trade timber, as well as behaviors, policies and practices that may lead to the devaluation of Vietnams currency and damage to U.S. commerce.

In fact, in the exchange rate assessment submitted by the US Treasury Department to the US Department of commerce at the end of August this year, it was determined that the exchange rate of the Vietnamese Dong against the US dollar was undervalued by about 4.7% in 2019 due to the intervention of the Vietnamese government. The U.S. Treasury said Vietnam made $22 billion of national foreign exchange purchases in 2019, pushing down the effective exchange rate of the Dong.

Once the U.S. Treasury believes that the Dong is undervalued, it may increase the possibility of the Treasury Department identifying Vietnam as a currency manipulator in its semi annual currency report.

In a statement, U.S. trade representative lethizer said the unfair exchange rate would hurt U.S. workers and enterprises competing with Vietnamese products, because Vietnamese products may be artificially priced down because of the undervalued exchange rate. He said the United States would carefully review the relevant findings before deciding whether to take appropriate measures.

Since 2016, the Central Bank of Vietnam has further moved towards the market benchmark structure in setting the exchange rate, adjusting the reference exchange rate of the Dong every day, and allowing the market to trade between the upper and lower 3% of the reference exchange rate.

Vietnam has never used monetary policy to gain an unfair competitive advantage, and said monetary policy will continue to aim at maintaining economic stability and lasting growth, and implement measures to support recovery, said Li Mingxing, governor of the Central Bank of Vietnam.

Expert: there may be diffusion effect

The Central Bank of Vietnam announced on September 30 that it would cut key policy interest rates from October 1 to promote the accelerating economic growth. This is Vietnams third rate cut this year.

According to the latest report of the Asian Development Bank in September, Vietnams economic growth rate is estimated to be 1.8% this year. Vietnam is one of the few Asian economies expected to achieve positive economic growth this year due to the successful anti epidemic policy and the transfer of global industrial chain.

After the announcement of the U.S. investigation on the 2nd, Vietnams state news agency, Vietnam News Agency, published a comment entitled economic and trade cooperation - highlights in the development of Vietnam US relations on the 3rd.

The article states that since the normalization of Vietnam US relations on July 12, 1995, Vietnam and the United States have become partners and established a comprehensive partnership. The bilateral trade volume has also increased by nearly 120 times in 25 years. At the end of the article, the trade and investment cooperation between the two countries is growing. The two sides have formulated an action plan in which a number of specific measures have been put forward to realize the harmonious and sustainable development of bilateral trade relations.

Linda Liu, an economist at the research department of King Ying securities of Maybank, said that the investigation into Vietnam is a warning from the trump government to Vietnam. Meanwhile, Thailand and Malaysia also need to be vigilant, because the investigation on Vietnam is likely to target other ASEAN economies.