U.S.: Vietnam May Be Caught Up in the Shifting Definition of Currency Manipulation

3 MINS READMay 10, 2019 | 18:44 GMT
The Big Picture

As a part of its trade strategy, the White House under Donald Trump has long wanted to prevent other countries from engaging in perceived currency manipulation. The issue is not new to Trump, and the United States has a review process to evaluate exchange-rate policies of other countries. The open question has been whether or not the White House would press to change the criteria to be labeled a currency manipulator, and now, it appears it has.

What Happened

A change in the criteria, outlined in an as-yet unreleased U.S. Treasury Department report, will likely lead to up to eight countries being added to the U.S. watchlist for currency manipulation, Bloomberg reported May 9, citing officials familiar with the report's contents. One of those countries, Vietnam, could be automatically slapped with the currency manipulator label, as it now would meet all three defining conditions, including a current account surplus exceeding 2 percent of GDP (a reduction from the previous threshold of 3 percent). The Treasury Department is withholding public release of the report, which originally had been due out in mid-April, until it receives more information from the government in Hanoi. Other countries added to the watchlist, which already includes the 12 largest U.S. trading partners and Switzerland, could include Russia, Thailand, Indonesia, Ireland and Malaysia, Bloomberg added.

Why It Matters

For all practical purposes, the only immediate consequence for the currency manipulation label for Vietnam, which would be the first country added to the U.S. list since 1994, would be a negotiation with the United States over altering its currency practices. But the label could give Washington ammunition to push Hanoi for trade concessions or changes to its currency policy. The White House could also use the determination to add tariffs to Vietnamese imports, justifying them with the argument that keeping the value of its currency low amounts to an export subsidy. 

The U.S. Treasury Department sets the specific thresholds when it comes to the broad conditions under which currency manipulation is defined by Congress.

The U.S. trade deficit with Vietnam is $37.3 billion on a total trade of $58.9 billion, according to figures from the Office of the U.S. Trade Representative. The U.S. administration could also initiate tariffs under an investigation under Section 301 of the Trade Act of 1974. But it is not clear whether the United States even wants to officially label Vietnam a currency manipulator outright, hence its decision to delay the report altogether.


During his campaign for office, U.S. President Donald Trump pushed the idea that currency manipulation is giving goods exporters an unfair trade advantage over the United States. One of the biggest targets of his ire on that point, China, does not meet criteria defining currency manipulation. If the Treasury department were to adjust the criteria to include China, it would likely automatically grab other countries as well. Currency clauses, though largely symbolic, have been part of the trade deals negotiated under the Trump administration. The Treasury Department sets the specific thresholds of the broad conditions under which currency manipulation is defined by Congress — unilateral currency intervention, trade surpluses with the United States and a current account surplus.

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