The US Department of Finance and the State Bank of Vietnam (SBV) on July 19 reached an agreement to address Washington’s concerns about Hanoi’s monetary behavior amid reports of the Biden’s administration considering levying tariffs on goods from the Southeast Asian country because of trade disputes.
A statement from the US Treasury Department released on July 19 said the head of the department, Ms. Janet Yellen, met online with SBV’s Governor Nguyen Thi Hong during the day and reached the above agreement after a “constructive” discussion between the two sides.
The Treasury Department, under the Trump administration, last year put Vietnam on a list of currency manipulators, a “label” that the Biden administration removed in April this year when it said there were not enough evidence to conclude that Vietnam is a currency manipulator even though it has “crossed the threshold” which is considered to be able to undervalue the dong. The department said at the time that further analysis on the issue was needed in subsequent bilateral talks with Vietnam.
In a joint statement issued on July 19, Secretary Yellen and Governor Hong said that SBV reaffirmed the focus of Hanoi’s monetary policy framework on “promoting macro-economic stability and control inflation.”
The US Treasury Department and the State Bank of Vietnam in recent months have had “constructive discussions through the process of increasing engagement,” the two women leaders said in a joint statement, adding that they had “agreement addressing the US Treasury Department’s concerns about Vietnam’s monetary behavior as described in the Treasury Department Report to Congress (USA) on Macroeconomic Policy and foreign exchange of major U.S. Trading Partners.”
The report of the US Department of Finance issued in December 2020, under President Trump, for the first time put Vietnam, along with Switzerland, on the list of “currency manipulators.”
In a joint statement with the US Department of Finance on July 19, SBV confirmed that Hanoi is obliged to abide by the Terms of Agreement of the International Monetary Fund (IMF) in avoiding exchange rate manipulation to prevent balance of payments adjustment or to gain an unfair competitive advantage and to prevent any competitive devaluation of the Vietnamese dong. According to this statement, the SBV is also making constant efforts to further modernize and be more transparent in its monetary policy and exchange rate framework.
SBV commits to continue to provide necessary information for the US Department of Finance to conduct a thorough analysis and report on the SBV’s activities in the foreign exchange market in its biannual report to the US Congress, according to a joint statement.
The meeting between the heads of the US Treasury and the SBV took place amid concerns that the US Trade Representative (USTR) may be about to issue a list of imported goods from Vietnam that the Biden Administration will propose to tax under Section 301 follows the Trump Administration’s investigations into Hanoi’s “currency manipulation” and use of “contraband timber.” The Biden administration has until October to decide whether to impose tariffs, which marks a year since the USTR initiated investigations at the request of President Donald Trump in early October last year.
“I welcome the constructive dialogue between the Department of Finance and the State Bank of Vietnam on monetary policy and the mutual understanding we have reached,” Secretary Yellen said in a joint statement. “I believe that the interest of the State Bank of Vietnam on these issues over time will not only address the concerns of the Department of Finance but also support the further development of Vietnam’s financial market and enhance its financial and macroeconomic resilience.”
“The State Bank of Vietnam will continue to adjust the exchange rate policy within the framework of the common monetary policy in order to ensure the good functioning of the currency and foreign exchange markets, and promote macroeconomic stability as well as control inflation, do not create unfair competitive advantages in international trade,” Governor Hong said in the joint statement.
Secretary Yellen and Governor Hong pledged to maintain close cooperation between the US Department of Finance and the State Bank of Vietnam, and expressed their desire to address other common challenges, such as supporting recovery from the COVID-19 pandemic.