US trade deficit with Vietnam widens as dong weakens

The US trade deficit with Vietnam surpassed $110 billion in the first eleven months of 2024, according to the latest US figures, as exports from the Southeast Asian industrial hub rose in the context of a record fall of its currency against the dollar.

The latest figures, published Tuesday by the American statistics agency, show an increase of almost 18% in the deficit compared to the same period of the previous year. The data confirms that the country has the fourth highest trade surplus with the United States, trailing only China, the European Union and Mexico.

A situation that is being watched closely by American clothing brands and the Vietnamese textile and clothing industry. Vietnam is in fact the second supplier to the United States in this market, behind China and ahead of India and Bangladesh. The country shipped to UNITED STATES no less than $15.3 billion in goods over the first ten months of 2024.

However, the significant gap in the trade balance is considered by analysts as a major risk for the country, dependent on exports, while President-elect Donald Trump threatens to impose customs duties of up to 20% on all American imports. A customs shock whose effects are feared in the United States as well as in Asia and the European Union.

For Vietnam, this threat has been compounded by the sharp fall in the value of the dong in recent months, with the local currency falling to one of its lowest levels against the dollar. This trend is closely followed by Washington, as Vietnam is also one of the countries under surveillance for potential currency manipulation.

Vietnam, of which the United States is its largest export market, is home to large export-oriented industrial companies from American multinationals such as Apple, Google, Nike and Intel.

$111.6 billion surplus

The latest seasonally adjusted trade data shows that during the January-November period, Vietnam accumulated a trade surplus with the United States of $111.6 billion, compared to $94.8 billion during the same period in 2023. Unadjusted data shows a larger gap of $113.1 billion.

In November, the trade gap widened further by $11.3 billion, accelerating from October, as Vietnamese exports to the United States increased, according to the adjusted data, perhaps supported by the weakness of the dong.

“If the United States perceives that Vietnam is deliberately keeping the dong weak to gain an unfair trade advantage, it could trigger further accusations of currency manipulation,” said Leif Schneider, director of international law firm Luther in Vietnam .

Donald Trump ended his first term in the White House by declaring that the Treasury Department had labeled Vietnam and Switzerland currency manipulators because of their market interventions aimed at weakening the value of their currencies.

Vietnam's central bank has said it is ready to intervene in the foreign exchange market in the event of a negative economic impact from currency movements, and has sold dollars in the past to strengthen the dong.

On Tuesday, before the new trade figures were released, the bank said it would monitor Trump's policies and adjust accordingly. The latest depreciation of the dong against the dollar is broadly in line with that of other major currencies.

(with Reuters)