Will Vietnam Face Unfair-Trade Tariff?
By Emerson Schwartzkopf
WASHINGTON – Imported goods from Vietnam, including hard-surfaces, could face new tariff challenges in 2021 as part of a United States Trade Representative (USTR) investigation.
The USTR will hold a virtual public hearing on Dec. 29 to hear comments regarding allegations of Vietnam’s government undervaluing its state currency – the dong – to give the country’s exports an unfair trade advantage in the U.S. market.
The hearing is a further step in possibly putting a Section 301 tariff on all goods from Vietnam entering U.S. ports-of-entry. Currently, there is no set schedule on a tariff decision or its possible level,
The upcoming hearing comes after the USTR invited comments this fall on its currency inquiry. Among the 70+ respondents is Cambria Company LLC, the largest U.S.-based manufacturer of quartz surfaces.
At issue is whether the State Bank of Vietnam used its management of the dong/U.S dollar exchange rate and actions in the foreign-exchange market to keep the dong’s value low. The result would lower the market value of Vietnamese goods in foreign markets.
In announcing the investigation in October, the USTR cited “available analysis” that Vietnam undervalued the dong against the U.S. dollar by approximately 7% in 2017 and 8% in 2018, along with an unspecified amount in 2019.
The USTR also noted evidence that the State Bank of Vietnam purchased a net $22 billion in foreign exchange last year, causing the nominal exchange rate of 23.224 dong/US$1 to be undervalued by approximately 1.09 dong-per-dollar.
This week, the U.S. Treasury Department bolstered the USTR’s preliminary findings in citing Vietnam as a currency manipulator. The Treasury Department’s semi-annual foreign-exchange report to the U.S. Congress noted Vietnam as one of two countries acting from June 2019-June 2020 of “preventing effective balance of payment adjustments.” (Switzerland is the other country named as a manipulator.)
The Treasury report also specifically named Vietnam as manipulating exchange rates “for gaining unfair competitive advantage in international trade as well.”
The comments received on the USTR investigation included pro and con statements from a variety of U.S. companies and trade groups, ranging from the United Steeworkers union to the Fruit of the Loom Co.
Among those favoring unfair-trade action against Vietnam is Cambria. The Eden Prairie, Minn.-based company noted financial actions taken by the Vietnamese government, along with corresponding changes in shipments in quartz-surfaces from Vietnam to the United States.
“In 2019, the U.S. imported 11.6 million square feet of quartz surface products from Vietnam, nearly three times the volume imported in 2018,” according to the Cambria statement. “At the same time, the average unit value of those imports has dropped sharply during the same period falling from $11.60/square foot in 2018 to just $10.24/square foot in 2019.
“In other words, Vietnamese imports of quartz surface products were able to rapidly penetrate the U.S. market because of their declining prices.”
An analysis of imports by Hard-Surface Report shows mixed results on the values of Vietnam’s hard surfaces. Quartz-surface shipments from Vietnam declined in 2017 and 2018 dur to the then-intense competition from China in U.S. markets, with 2019 being the first year where most Chinese imports faced large 300%-plus unfair-trade tariffs.
The per-square-foot value of Vietnam’s quartz-surface exports indeed dropped from $11.60 in 2018 to $10.24 last year. However, in 2016 – before the time noted by USTR for Vietnam’s currency manipulation – the country’s per-square-foot value with U.S. imports was only $10.46.
Quartz surfaces made up 92% of the value of all of Vietnam’s hard-surface shipments to the United States. In all natural-stone categories, the values per unit (metric ton) increased significantly from 2016-2019.
Porcelain’s value-per-square-foot dropped by half from 2017 to 2019. However, the 98¢/ft² from Vietnam in 2019 differs little from the 97¢/ft² recorded this October by Spain, the sector’s leading exporter in volume to the United States. Vietnam also shipped less than 18,000 ft² to the United States in 2017, growing to 2.6 million ft² last year.
USTR actions on a possible tariff following this month’s public hearing is unclear. Unlike actions by the United States International Trade Commission (USITC), which set previous tariffs on quartz surfaces and porcelain tile, the USTR doesn’t follow a tightly set schedule in determining any action.
Previous USTR actions during the Trump administration include the blanket U.S. tariffs on all Chinese goods of 25%, sparking the trade war between the two countries, and the open-ended “Airbus” tariff schedule on goods from the European Union.
The virtual public hearing is set for 9:30 a.m. Eastern Standard Time on Dec. 29. USTR guidelines for online attendance will be posted here on the USTR website sometime before the event.
