An investigation by the U.S. government had concluded that the available evidence indicated that Vietnam’s currency had been undervalued for the past three years, and that the State Bank of Vietnam’s interventions in foreign exchange (FX) markets in the form of net purchases of FX contributed to undervaluation of its currency during 2019.

“Vietnam’s acts, policies, and practices that contribute to currency undervaluation through excessive foreign exchange market interventions and other related actions burden or restrict U.S. commerce within the meaning of section 301 of the Trade Act”, says the report. “First, currency undervaluation effectively lowers the price of exported products from Vietnam into the United States. This makes Vietnamese imports into the U.S. less expensive than they would otherwise be, which undermines the competitive position of firms in the U.S. that are competing with lower-priced Vietnamese imports. Second, currency undervaluation raises the local currency price of U.S. exports to Vietnam. This undermines the competitive position of U.S. firms in the Vietnamese market. Third, excessive FX market intervention undertaken while a country has a significant current account surplus also undermines U.S. export opportunities.”

The U.S. Trade Representative’s (USTR) office said it would continue to evaluate all available options to correct the situation, but that it will not respond with punitive tariffs at this time. According to media outlet Reuters, the Vietnamese government said its Trade Ministry and related agencies are willing to talk with the USTR to address the outstanding issues in the trade relations between the two countries to officially close the investigation.

Matt Priest, President and CEO, Footwear Distributors and Retailers of America (FDRA), said he testified before the Administration in December and strongly opposed any tariff action on Vietnamese-made footwear. “At the end of a tumultuous and uncertain time for those of us who value global trade and the ability of American footwear companies to sell products far and wide, my hope is that this advocacy win will turn into a more stable and predictable environment for our members in the months and years to come”, said Priest. “FDRA companies stepped up big time over the past four years—signing letters, providing testimony, making calls—ensuring our collective industry’s voice was heard loud and clear”, he added.