Vietnamese Dong: Trade deal hopes and stable FX – Commerzbank

Commerzbank analysts discuss Vietnam’s progress toward a US trade deal, which officials say is essentially complete and could be signed soon. The agreement aims to address tariffs, transshipment and regulatory standards, potentially easing a key growth headwind. Despite ongoing investigations and high duties, USD/VND has traded in a tight range as the State Bank of Vietnam stabilizes the fixing.

US deal and FX range trading

"Deputy Prime Minister Pham Gia Tuc said talks with the US on a trade deal are “essentially complete”, with Vietnam having submitted its final comments to US counterparts. He added that “We have sent the final comments to the US side and if both sides agree on this, we will sign the deal soon”. Key sticking points have included concerns over transshipment and non-tariff barriers."

"Vietnam currently faces a 12.5% tariff on exports to the US following a Section 301 investigation related to forced labour. The US Trade Representative has two ongoing investigations into Vietnam concerning industrial overcapacity and intellectual property (IP) protection. Separately, goods deemed to be transshipped face a 40% tariff."

"A favourable trade deal could ease a key headwind to Vietnam’s medium-term growth ambitions. The economy expanded 8.9% in the first three quarters of this year. It may come in below the government's target of 10%, as this would require a sharp acceleration to 12.5% in Q4."

"Given the importance of external demand, a deal that narrows Vietnam’s tariff differential with regional peers could improve its relative export competitiveness."

"In FX, USD/VND held steady around 25,893 yesterday. It has been range bound between 26,050-25,800 since mid-September. Over this period, the State Bank of Vietnam (SBV) has held the fixing rate steady to stem FX volatility."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)