Heisenberg Report

After Slapping ‘Abuser’ Vietnam With 400% Tariffs, Trump Tells ‘Manipulators’ China, Europe He’s No Dollar Dummy

Late Tuesday, Wilbur Ross’s Commerce Department hit Vietnamese steel imports with tariffs in excess of 400%, in the process serving notice that the Trump administration isn’t going to tolerate any kind of end-arounds in the trade war.

On June 26, during a wild interview with Fox’s Maria Bartiromo, Trump called Vietnam “the single-worst abuser of everybody”, which, when translated into adult English, means the White House isn’t particularly enamored with the fact that imports from Vietnam surged 40.2% in the first three months of 2019. That’s trade diversion at work. If things keep going like they’re going (which doesn’t seem likely, especially after Trump’s comments to Bartiromo), Vietnam could surpass France, India, Italy and the UK on the list of top importers to the US.

Read more on Vietnam and import substitution

Long story short, Commerce isn’t amused that businesses in other countries (in this case South Korea and Taiwan) are essentially routing products through Vietnam in an effort to circumvent duties. Here’s the official word:

The circumvention rulings cover certain steel products that are first produced in Korea and Taiwan, which are then shipped to Vietnam for minor processing, and finally exported to the United States as corrosion-resistant steel products (CORE) and cold-rolled steel (CRS).

As a result of today’s affirmative circumvention determinations, Commerce will instruct Customs and Border Protection to begin collecting cash deposits on imports of corrosion-resistant steel products and cold-rolled steel produced in Vietnam using Korean- or Taiwanese-origin substrate. These duties will be imposed on future imports, and also on any unliquidated entries since August 2, 2018 (the date on which Commerce initiated these circumvention inquiries). The applicable cash deposit rates will be as high as 456.23 percent, depending on the origin of the substrate and the type of steel product exported to the United States.

Vietnam is taking steps to try and curb opportunistic re-routing, but whatever they do won’t be enough for Trump. So, tariffs it is.

In its latest semi-annual report, Treasury added Vietnam to the list of major US trading partners who warrant monitoring for possible currency manipulation.

Speaking of currency manipulation (or the perception thereof in one person’s “very large brain”), Trump took aim at China and Europe again on Wednesday.

“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA”, he tweeted, on the way to reiterating his call for the Fed to “match” central bank dovishness abroad. “We should MATCH”, Trump digitally shouted.

The absence of an explicit reference to Jerome Powell may suggest the White House is once again considering actual FX intervention, something that garnered quite a bit of attention last August.

Read more on the mechanics of US FX intervention

Trump also calmly explained that the alternative is to “continue being the dummies who sit back and politely watch as other countries continue to play their games”.

And this is what he’s like after a trade truce.