Vietnam's Designation as Currency Manipulator Likely to Affect South Korean Economy

The Korea Institute for International Economic Policy said on Dec. 25 that the United States' designation of Vietnam as a currency manipulator and enhanced analysis target on Dec. 16 could adversely affect the South Korean economy. 

The U.S. Department of the Treasury designated Vietnam as a currency manipulator in consideration of Vietnam’s increasing trade surplus with the United States, the possibility of China’s bypass export via Vietnam and Vietnam's large-scale forex market intervention.

“The United States may impose additional tariffs on Vietnam down the road, and then the value of the Vietnamese currency and the South Korean and Vietnamese economies may be exposed to adverse impacts,” the institute explained.

According to its analysis, the negative impacts are likely to take the form of a US$2.54 billion to US$3.76 billion decline in Vietnam’s exports to the United States and a US$220 million to US$330 million decrease in South Korea’s exports to Vietnam, the most vulnerable sectors are electrical, electronics and precision instrument, and South Korean companies in Vietnam may have to face declines in export competitiveness, profitability, production and exports.