On May 29th, 2019, the U.S. Department of the Treasury (U.S. Treasury) issued a report on "Macroeconomic and foreign exchange policies of major trading partners of the United States" (hereinafter referred to as the Report). In this Report, the U.S. Treasury has put nine nations — China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore and Vietnam —on the monitoring list.
In the previous reports, the U.S. Treasury reviewed 12 largest trading partners. However, in the latest report, the U.S. Treasury has expanded the list of reviewed nations to 21 by lowering the threshold for review in such areas as the size of the country’s trade surplus with the United States, etc. to include all nations with bilateral trade turnovers with the United States of over 40 billion USD, including Vietnam.
In accordance with the U.S. Trade Facilitation and Trade Enforcement Act of 2015 (the “2015 Act”), U.S. Treasury needs to conduct an advanced analysis of the exchange rate and foreign economic policies of major trading partners that meet the criteria for bilateral trade surpluses, current account surpluses and foreign currency interventions. These criteria have been specifically quantified in the May 2019 Report as follows: (i) Significant Bilateral Trade Surplus with the US of at least $20 billion; (ii) Material Current Account Surplus of at least 2% of the GDP; (iii) Persistent, One-Sided Intervention in Foreign Exchange Markets, which is expressed in net foreign currency purchases for at least 6 months over a 12-month period with a total amount of foreign currency net buying equivalent to at least 2% of the GDP in a 12-month period.
The May 2019 Report concludes that no trading partner is manipulating the currency. In this Report, the U.S. Treasury established a Monitoring List consisting of China (satisfying only one criterion but having a very big bilateral trade surplus with the US) and eight other major trading partners that meet two of the three criteria. Vietnam is included in the Monitoring List in the May 2019 Report for satisfying two criteria of bilateral trade surplus with the US and current account surplus. The Report also states that a country on the Monitoring List will continue to be monitored in the next two reports.
Concerning the inclusion of Vietnam on the Monitoring List, in the coming time, the U.S. Treasury will monitor information, trade data, current account balance, macroeconomic and monetary policies of Vietnam and may continue to exchange and work with the relevant Vietnamese agencies if necessary.
The State Bank of Vietnam will continue to coordinate with the related ministries and agencies to exchange and work on the issues that the U.S. Treasury is concerned about in the spirit of cooperation, while continuing to administer the monetary policy in order to control inflation, stabilize the macro economy, support a reasonable economic growth, manage the exchange rates in a flexible manner in line with the domestic and international market developments as well as in compatibility with the characteristics of Vietnam's economy, not to create a competitive advantage for unfair international trade.