Asia Business Channel

Is U.S. versus Vietnam the next trade war?

The brewing trade-fight with Vietnam is the same as the U.S. has started with China- leaving importers aghast, textile interests applauding and U.S. consumers paying more for products.

 

Last week, while U.S. President Donald Trump was sick from the COVID-19 virus, and in the closing month of the 2020 election, his administration sought to change the narrative from the presidents illness and hospitalization, and moved ahead with an investigation into Vietnam and whether or not the Asian nation undervalues its currency, thereby giving domestic producers an advantage.

Robert Lighthizer, United States Trade Representative discussed the investigation into Vietnam and said, “President Trump is firmly committed to combating unfair trade practices that harm America’s workers, businesses, farmers, and ranchers.”

For the American fashion industry the stakes are high, since Vietnam accounts for 16% of the U.S.’s apparel imports, the second-largest producer behind China, which has a 37% share of the market.

Vietnam has considered a “middle-ground” for apparel producers who have had to contend with Trump’s long-running trade war with China, which has sent stiff tariffs added to imports. Although the industry has been calmed by Trump’s lack of attacks on apparel imports over the last several months, anxiety about what the Trump administration can do, and when it will do it, has kept everyone in the apparel industry anxious.

Steve Lamar, President and Chief Executive Officer of the American Apparel & Footwear Association (AAFA) said, “Vietnam is an important trading partner for the U.S. apparel, footwear, and travel goods industry, and has become even more important as U.S. companies have implemented diversification strategies away from China.”

He adds, “As brands did their best to restructure their sourcing models to protect American consumers and American global value chain workers from increased costs caused by the administration’s tariffs, and follow the administration’s edict to diversify from China, many turned to their trusted partners in Vietnam.”

On the other side of the Trump narrative against Vietnam is the National Council of Textile Organizations (NCTO), which welcomed the Trump administrations move to investigate Vietnam.

Kim Glas, President and CEO of the NCTO said, “ The NCTO strongly opposes foreign governments undervaluing their currencies. The U.S.-Vietnam trading relationship suffers from many of the same problems that we have experienced with China. There are strong indications of a purposefully undervalued currency that warrants a full investigation. “

A report from ING in late 2019 said that, “If we assume that Vietnam will be labelled a currency manipulator, regulation suggests the U.S. government must engage in negotiations before taking action. In other words, it doesn't automatically trigger retaliatory actions such as tariffs.“

The report adds, “However, President Trump has often found a different basis (for instance, national security) to impose tariffs on a country. Vietnam seems particularly at risk of being hit by US tariffs and the Trump Administration may consider using the FX manipulator label to threaten tariffs.”

In the last 25 days of the 2020 election cycle, and with Trump and his administration being hit by scandal after scandal during the last several weeks, Trump is keen to shore up support among his base and wants to be see as “tough” on countries “taking advantage” of the U.S. Analysts believe that if the administration wants to go further than simple investigations that it will take action by the end of this month, so people involved in Vietnam’s exports to the U.S. are waiting to see what the outcome of Trump’s threats will be.

 

 

 

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