Vietnam State Bank readies measures to counter tariff impact
Risks in global markets are "putting pressure on the management of monetary policies, exchange rates, and interest rates domestically, as well as on our efforts to achieve the 2025 economic growth target of eight per cent or higher,' State Bank of Vietnam Deputy Governor Pham Thanh Ha said at a briefing in Hanoi Tuesday (July 8).
The central bank will continue to manage the dong in a flexible manner and use monetary policy tools to keep the FX market stable, to help boost the economy and control inflation, Ha added.
After announcing a deal that will see a 20 per cent tariff on Vietnamese-produced goods and 40 per cent on those trans-shipped from elsewhere last week, US President Donald Trump stepped up his trade offensive Monday, unveiling letters threatening higher tariffs on a range of key trading partners.
Vietnam said last week that negotiators are still working to finalise the details of the deal, providing little clarity to businesses and investors beyond the tariff rates disclosed so far.
The South-East Asian nation saw growth accelerate in the second quarter as foreign buyers racing to get ahead of the threatened tariffs boosted Vietnam's exports. Still, Prime Minister Pham Minh Chinh cautioned last week that the economy "continues to face significant limitations, difficulties and challenges.'
Vietnam's decision to maintain "low interest rates to support lending and economic growth requires some trade-offs,' and one of those trade-offs is the weaker dong, said Pham Chi Quang, head of the central bank's department for monetary policy, also speaking at the briefing.
Trump's tariff letters "will have a significant impact on global supply chains, affect capital flows and influence FDI around the world,' as investors weigh the differing tariff levels, therefore, it will have a major impact on the currency, Quang said.
The Vietnamese dong has been under pressure in recent weeks, hovering near a record low. Given the global slowdown, a weaker currency could help make Vietnamese goods more competitive as tariff pressure persists.
The dong was little changed at 26,121 per dollar as of 11:31 a.m. after the briefing. The daily reference rate had been set at a record-low 25,121 per dollar Tuesday, the weakest since at least 2005, according to data compiled by Bloomberg. The dong is allowed to trade as much as five per cent on either side of the reference rate. - Bloomberg
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