On 2 October 2020, the Office of the United States Trade Representative (“USTR”), under Trump’s administration, initiated an investigation regarding Vietnam’s acts, policies, and practices related to the valuation of its currency (the dong) pursuant to Section 301 of the Trade Act of 1974. The USTR asserted that the Government of Vietnam, through the State Bank of Vietnam (“SBV”), tightly manages the value of its currency and that the SBV’s management of Vietnam’s currency is closely tied to the U.S. dollar.
On 16 December 2020, the US Department of the Treasury Office of International Affairs delivered to the US Congress the semiannual Report on Macroeconomic and Foreign Exchange Polices of Major Trading Partners of the United States. In this Report, the US Treasury, in determining Vietnam as a currency manipulator, stated that Vietnam gained unfair competitive advantage in international trade by manipulating its currency. Based on this determination, the US Treasury concluded that:
1. The US Tresury will press for the adoption of policies that will permit effective balance of payments adjustments and eliminate the unfair advantages created by Vietnam’s actions.
2. Vietnam should move expeditiously to strengthen its monetary policy framework to facilitate greater movement in the exchange rate to reflect economic fundamentals, while reducing intervention and allowing for the appreciation of the real effective exchange rate. Vietnam should also increase the transparency of foreign exchange intervention and reserve holdings.
3. Vietnam should work to durably reduce its external imbalances and strengthen domestic demand by leveling the playing field for the domestic private sector through measures such as improving its access to land and credit, reducing the role of state-owned enterprises in the economy, and improving financial supervision to help facilitate more productive lending and spur private domestic investment.
4. Vietnam needs to dismantle barriers to U.S. companies and U.S. exports in Vietnam to reduce the bilateral trade imbalance.
Vietnam denied the charges of currency manipulation, with the former Prime Minister Nguyen Xuan Phuc arguing in October 2020 that the nation’s exchange rate policy was not aimed at boosting Vietnam’s exports and asking that Trump come to “a more objective assessment of the reality in Vietnam”.
The new elected president Joe Biden and his administration seem have a less hostile approach. After many constructive discussions between the Treasury and the SBV, in April of 2021, the Treasury removed the “currency manipulator” label from Vietnam.
On 19 July 2021, U.S. Secretary of the Treasury Janet L. Yellen and State Bank of Vietnam Governor Nguyen Thi Hong met virtually and issued a joint statement regarding Vietnam’s currency manipulation with the following key points:
(i) The SBV underscores that the focus of its monetary policy framework is to promote macroeconomic stability and to control inflation. Vietnam confirms that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong. The SBV is also making ongoing efforts to further modernize and make more transparent its monetary policy and exchange rate framework. In support of these efforts, the SBV will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with the stage of development of the financial and foreign exchange markets and with economic fundamentals, while maintaining macroeconomic and financial market stability.
(ii) The SBV will continue to provide necessary information for Treasury to conduct thorough analysis and reporting on the SBV’s activities in the foreign exchange market in Treasury’s semiannual Report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.
(iii) Treasury will inform other U.S. government agencies that it has reached agreement with the SBV to address Treasury’s concerns about Vietnam’s currency practices.
U.S. Trade Representative Katherine Tai said that her office will monitor Vietnam’s implementation of the agreement and would work with Vietnam “to ensure that it addresses the acts, policies and practices related to the valuation of its currency that were found actionable in the Section 301 investigation”.
Following the agreement, USTR on 23 July 2021 issued a formal determination in the Vietnam Currency Section 301 investigation, under which the agency will not take any tariff action against Vietnam. The determination finds that the Treasury-SBV agreement provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this time. USTR, in coordination with Treasury, will monitor Vietnam’s implementation going forward.


Go to
  • Expertise
  • People
  • Cases
  • Courses