American companies called on the Trump Administrations, US Trade Representative (USTR) to drop its investigation into Vietnam’s currency practices and turn the matter over to the Treasury Department to recommend actions. If the U.S. goes ahead with it’s proposed sanctions against Vietnam, it will lead to tariffs on a wide range of Vietnamese products.
Jerry Cook, Vice President for Government and Trade Relations at Hanes Brands Inc., said during a hearing into whether Vietnam deliberately undervalues its currency for an unfair trade advantage that, “Any actions by USTR at this point threatens to disrupt Treasury's leverage with Vietnam and the ability to restore market balance.”
Robert Lighthizer, the U.S. Trade Representative, launched its investigation into Vietnam in October under the 1974 Trade Act’s Section 301, which allows the USTR to unilaterally impose retaliatory tariffs if it determines that a country is engaging in unfair trade practices.
Currency investigations have traditionally been overseen by the Treasury Department and until Lighthizer’s investigation in October; the 1974 Trade Act has never been used to investigate another country’s currency practices. Many government and trade experts consider the Trump Administrations approval of Lighthizer’s action as an unprecedented intrusion by the USTR into the Treasury Department’s policy space.
Many industry leaders believe that outgoing President, Donald Trump, along with Lighthizer have already decided to impose tariffs on Vietnam before Trump leaves office on Jan. 20. Those that oppose Trump’s move against Vietnam used Tuesday’s hearing to emphasize the damage that action could do to their businesses, as well as to U.S. relations with one of the fastest-growing markets in Asia.
U.S. companies that import goods from Vietnam warned that tariffs on Vietnam could hit consumer goods, such as clothing and electronics while encouraging Hanoi to retaliate against American export products, which include aerospace, health and power equipment, as well as commodities such as pork.
Because of Trump’s ongoing trade war against China, the European Union and other countries, and China and Europe’s retaliatory measures, U.S. exporters have lost sales to export markets that they had taken years to develop.
In Tuesday’s hearings, Maria Zieba, Director of International Affairs at the National Pork Producers Council, testified that, “After three painful years, U.S. hog farmers simply cannot withstand more punitive tariffs whether imposed by Vietnam or other countries from around the world.”
This weeks hearings came about after the USTR’s investigation, and Trump’s order to the Treasury to support the USTR and formally labeled Vietnam a currency manipulator in its semi-annual report that details the foreign exchange practices of major trading partners.
Based upon the findings in the Treasury departments semi-annual report, Treasury is bound by law to begin engage with Vietnam to address U.S. concerns.
Sam Rizzo, Senior Director of Policy at the Information Technology Industry Council testified that, “Having labeled Vietnam a currency manipulator, the Secretary of the Treasury is in fact compelled to pursue enhanced bilateral engagement with Vietnam, and barring sufficient progress is afforded by law a range of policy options for addressing U.S. concerns.”
“We believe the application of Section 301 tariffs would undermine this bilateral engagement and would fail to address the underlying concerns identified both in USTR’s Federal Register notice and in Treasury's report,” Rizzo said.
Multiple witnesses, from organizations that included the U.S. Chamber of Commerce, the National Foreign Trade Council, the National Retail Federation urged USTR to drop its threat to impose tariffs and allow the Treasury Department to resume its traditional lead role on currency.
At Tuesday’s hearings, more than 20 people testified, but only three of the witnesses said they supported USTR’s currency probe. Those who support the USTR are the United Steelworkers union, a coalition of domestic wood furniture makers and a magnet manufacturer.
Roy Houseman, Legislative Director for the steelworkers, said Vietnam's undervalued currency has been well documented and that the USTR should impose tariffs that would increase if Vietnam takes further action to devalue its currency, known as the dong.
Houseman said that, "Relief should contain an adjustment mechanism to reflect shifts in the exchange rate, counteract further devaluation and encourage a market-based valuation of the dong. Too many American jobs are at stake not to aggressively pursue a more balanced trading regime that allows for U.S. workers to compete on a level playing field."
Critics of Houseman and his position said in their remarks that it impossible to create this level playing field when Vietnamese workers make $400 a month in salary and wages, while U.S. workers are being paid 10x more. They note that penalizing Vietnam for U.S. problems is both unfair and counter-productive to the goal of long-term U.S. and Vietnam relations.
Many people who are involved in the USTR’s investigation believe that the underlying goal of the Trump administration is to pick a fight with Vietnam so that Trump can look tough, and impose sanctions against Vietnam that will hobble the incoming administration of President-elect, Joseph Biden.
The deadline for interested parties to file final comments in the currency investigation is January 7th, which leaves only two weeks for the Trump administration to announce any tariff actions before leaving office. After January 20th, it will be up to the incoming Biden administration to decide whether it wants to endorse either the USTR or Treasury Departments actions against Vietnam, and what actions, if any, that it will take.