Vietnam remains on US Treasury Department 'monitoring list'

Vietnam, as a major trading partner of the U.S., remains on the U.S. Treasury Department’s “monitoring list,” the department affirmed in its June 2024 report to Congress.

The monitoring list is a list of major trading partners with the U.S., whose currency practices and macroeconomic policies merit close attention, the Treasury Department clarified.

Seven economies, namely China, Japan, Taiwan, Malaysia, Singapore, Vietnam, and Germany, constitute the U.S. Treasury Department’s latest edition of its monitoring list.

Vietnam, which had met one criterion for monitoring in every report since June 2022 (significant bilateral trade surplus), “exceeded two of the three criteria over the four quarters through December 2023”, according to the report. They are a material current account surplus and a significant bilateral trade surplus with the United States.

Vietnam’s current account balance stood at 5.8% of GDP over the four quarters through December 2023. The current account has swung back into a substantial surplus, after registering deficits in 2021 and 2022 when Covid-related production constraints weighed on export earnings and elevated commodity prices drove import prices higher, according to the Treasury.

Vietnam’s bilateral trade surplus with the United States has expanded dramatically over the past five years, primarily driven by growth in goods trade, led by electronics and machinery, though this growth has levelled off.

The bilateral goods and services surplus was $103 billion over the four quarters through December 2023. Vietnam continues to have the third-largest goods surplus with the U.S.. Vietnam has modest bilateral services trade with the U.S. and has long run a small bilateral services trade deficit.

For the other criterion of foreign exchange intervention, the Treasury emphasized the Vietnamese authorities’ net purchases of foreign exchange in the four quarters through December 2023 were 1.5% of GDP. That figure is equivalent to about $7 billion. This amount of intervention was below the 2% of GDP threshold that marks persistent one-sided intervention.

“Vietnam also did not intervene persistently across the year enough to trigger this criterion,” the Treasury highlighted.

The Treasury assessed that “Vietnam engaged in moderate net purchases of foreign exchange in early 2023 to reaccumulate some of the more than $20 billion reserves sold in 2022.” Vietnam’s foreign exchange reserves stood at $88 billion as of November 2023, the U.S. department noted.