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Is Vietnam Trump’s Next Target for a Possible Trade War?

The Trump administration has set its sights on Vietnam‘s currency, and it could mean the start of yet another trade war.

The U.S. Treasury Department in January placed the Southeast Asian country, and one of the nation’s largest trading partners, on a watch list of 10 possible currency manipulators that also included Malaysia and Singapore. Fast forward to August when both the Commerce and Treasury Departments concluded that Vietnam depressed its currency, the dong, relating to tires for passenger vehicles and light trucks last year. But the finding could have broader implications, particularly because it stands to reason that goods from other sectors got a break.

Word surfaced Thursday that the Trump administration is planning to announce an investigation into Vietnam’s currency practices, according to a Bloomberg report citing three people familiar with the matter.

Vietnam could find itself on the receiving end of sanctions in the form of new tariffs, called countervailing duties, on imports. That’s due to a new federal rule allowing the Commerce Department to take into consideration currency manipulation as one of a number of factors in deciding on whether to raise duties on a trading partner.

What isn’t clear is how long it would take for any new duties to go effect, or whether they would be broad-based or limited to certain products.

According to the Commerce Department, the U.S. goods-trade deficit with Vietnam reached $34.8 billion this year for the period from January to July. The biggest shortfall was with China, at $163.3 billion, followed by Mexico at $55.7 billion and Switzerland at $40.4 billion.

The trade deficit with Vietnam has been steadily growing as companies scale back their reliance on China and shift production to nearby sourcing nations.

The Trump administration certainly hasn’t been shy about going after countries that export more goods to the U.S. than they import from American manufacturers. America’s egregiously large trade deficit with China eventually sparked the U.S.-China trade war. That started under what was referred to as a 301 investigation, the same section of the 1974 Trade Act that is expected to form the basis of the imminent U.S. investigation into Vietnam’s currency practices.

And because the Trump administration has been particularly aggressive in fighting trade battles—a trade dispute saw India lose its preferential access to American markets in June 2019—a trade fight with Vietnam could serve notice to Malaysia and Singapore that they could be next on the president’s hit list should he get re-elected on Nov. 3.