Vietnam Tariffs Back on Biden Administration’s Radar

Vietnam Tariffs Back on Biden Administration’s Radar

Sourcing Journal



Sources familiar with the matter told Bloomberg that the Treasury Department, the U.S. Trade Representative’s (USTR) office, the Commerce Department and the National Security Council were planning to meet with President Joe Biden’s administration this week. Any potential action must be put into play before October, the sources said, marking one year from the start of the U.S. investigation into Vietnam’s actions. On Oct. 2, 2020, the USTR, under the direction of then-President Trump, launched a probe into whether the country engaged in acts, policies and practices that undervalued its currency, with the effect of damaging American commerce. It also looked into whether Vietnam had been importing illegally harvested or traded timber.

According to the USTR, currency undervaluation lowers the price of Vietnam’s exports to the U.S., making them less costly than they should be. That action undermines American companies’ competitiveness against the overseas producer, both stateside and as an exporter of goods, the office said. The investigation was conducted under Section 301 of the 1974 Trade Act, the same legislation used to impose duties on Chinese goods beginning in 2018. At the time, industry trade groups like the American Apparel and Footwear Association (AAFA) decried the prospect of trade actions against Vietnam, which they said had the potential to further derail supply chain diversification efforts for companies looking for alternative sourcing to China.

By January, former USTR Robert E. Lighthizer had concluded that while Vietnam’s actions were indeed unreasonable and had the effect of restricting or burdening U.S. commerce, the office would decline to take any specific actions while it continued to evaluate options. “Unfair acts, policies and practices that contribute to currency undervaluation harm U.S. workers and businesses, and need to be addressed,” USTR Lighthizer said at the time. “I hope that the United States and Vietnam can find a path for addressing our concerns.”

Now, the issue is being examined by the Biden administration and new USTR Katherine Tai. Sources told Bloomberg that if the U.S. plans to impose tariffs on Vietnam due to the findings of the earlier investigation, those actions would need to take place within the next two to three weeks, allowing time for public comments and hearings.

While the proceedings remain underway, an April report by the Treasury dropped the distinction of “currency manipulator” from Vietnam’s trade profile. The department contradicted its Trump-era predecessors, reporting that evidence showing that Vietnam’s actions prevented “effective balance of payments adjustments” or gave the country an “unfair competitive advantage in international trade” was lacking. The U.S. and Vietnam have also seen “enhanced bilateral engagement,” the Treasury’s spring report said, with the U.S. urging the country’s government to address its undervalued currency along with the external surpluses. The combined actions indicate that the Biden administration is interested in seeing a joint resolution, rather than slapping the country with an unfavorable label and moving with haste to impose tariffs.

Vietnam is currently the No. 2 apparel supplier to the U.S., and industry leaders believe the imposition of duties would prove catastrophic for brands already struggling under the weight of tariffs on China-made goods.

“American businesses and families have been assessed more than $72 billion in additional tariffs on products since the China 301 tariffs were put into place,” Blake Harden, vice president of international trade at the Retail Industry Leaders Association (RILA), told the USTR in December as a part of the office’s investigation into Vietnam’s dealings. Imposing punitive tariffs on Vietnam’s goods would further impact U.S. firms’ ability to compete globally, he said. “It is imperative that USTR conduct this investigation in a fair, thorough, and transparent manner that carefully considers the novel issue before it and all potential implications of any actions taken, including the collateral damage that could be caused to U.S. retailers,” he added.

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