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Trump’s eleventh-hour broadside
takes aim at Vietnam

In a parting blow by the outgoing Donald Trump administration, the US Treasury labeled Vietnam a currency manipulator this week, accusing it of intervening in currency markets to win trade advantages. The move has thrown a spanner in the works of US foreign policy, which regards Hanoi as an increasingly important ally owing to its stance as the loudest of China’s rival claimants to disputes in the South China Sea.

Trump won office in 2016 partly on promises to reduce US deficits with trading partners, but in Hanoi, there is confusion over why US officials won’t accept that one of the main reasons why Vietnam’s trade surplus with the US has risen in recent years is because of Washington’s trade war with China, which has resulted in international firms shifting their operations from China to alternative manufacturing hubs like Vietnam.

The designation puts the incoming Joe Biden administration in a bind, though it is unlikely to share the current administration’s hard-line stance on the issue of currency manipulation. Asia Times’ correspondent David Hutt reports that Vietnam’s leaders will in any case think twice about how much they can trust Washington, both as an economic and strategic partner. He shared his thoughts on what these developments mean for US-Vietnam ties.

Why in your estimation did the US single out Vietnam as a currency manipulator?

The US Treasury has long suspected Vietnam of currency manipulation, but its announcement this week also leveled the same charge against Switzerland, while India, Taiwan, Thailand were added to the US Treasury's watch-list. Vietnam has the fourth-highest trade surplus with the US, though the US has had a trade deficit with Vietnam since 1996, which began ballooning in the early 2010s.

Before Trump, US administrations generally ignored this publicly because, first, it suits US geopolitical objectives in Asia not to weaken the friendship with Vietnam as Hanoi opposes Chinese expansionism in the South China Sea and, second, it’s a rather natural development of the two countries' bilateral trade.

Sure, Vietnam could import more goods from the US rather than China, but Vietnam is still developing and its people relatively poor– Vietnam’s gross domestic product (GDP) per capita is far less impressive than its nominal GDP – so there’s less interest in more costly US goods than cheaper Chinese ones.

Also, Vietnam seems to have been a particular bugbear of Donald Trump’s. Last year he called Vietnam “the single worst abuser of everybody” over trade, just months after lavishing praise on it when in Hanoi.

How will the decision likely impact US-Vietnam ties?

Those relations are now on hold until Joe Biden’s inauguration in mid-January. In fact, Vietnam was one of the last large Asian states to actually congratulate Biden on his victory (it only did so on December 1). No doubt, Hanoi wanted to avoid infuriating Trump in his last few months in office and presumably prevent issues like this one from happening.

This isn’t a major dispute between the two nations and in the long run it is unlikely to cause any profound changes to their relations, though it will leave a bitter taste in Hanoi’s mouth and could cause Vietnamese officials to question how much they can trust Washington.

If the US government cannot turn a blind eye for a rather important geopolitical friend on an issue like trade, can the US be trusted to actually come to Hanoi’s defense if a conflict between Vietnam and China arises? I don’t think this changes how the US views defense issues relating to Vietnam, but it could lead to a little less trust between the pair in the future.

Do you think Biden will uphold the decision considering the impact it could have on the wider bilateral relationship?

That’s the question. Most analysts reckon Biden’s administration won’t follow through with this decision to actually impose punitive trade countermeasures; the Treasury has to go through several more rounds before that could even happen, and Biden’s current nominee for treasury secretary, Janet Yellen, appears to take a far more lenient view on these matters than outgoing Treasury Secretary Steven Mnuchin.

America’s trade surpluses have been an issue in Washington but Biden, like previous administrations, will most likely try to rectify these issues through more subtle means. It’s most probable that Biden will also seek to drop these issues in order to maintain good relations with Hanoi, and he certainly won’t want to lose a key friend in Asia like Vietnam. That said, it won’t be easy: he’ll face domestic pressure to put American jobs first and it could be one populist measure that’s hard to turn around.

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