A few items: no 20 person meetings, exports, Ford and currency manipulation

I am working on a bit longer piece that won’t get done today, so I thought I would just go over a few items that caught my attention.

First, now all meetings above 20 people are prohibited. So basically, Vietnam is moving towards total shut down, like we saw in Wuhan (although not yet that drastic). There is a good New Yorker piece on the quarantine in China here.

Second, export contracts are falling, at least for the seafood industry.

Vietnam's seafood exporters have seen up to 50% of their export contracts cancelled or delayed due to the coronavirus outbreak, the country's seafood exporters association said on Tuesday.

Source: Vietnamese Customs, chart by Vietecon.com

This is surprising to me, because food sales in the US, at least, are way up as people eat at home much more. I wonder if it will reverse.

My favorite seafood provider, Minh Phu, which usually has monthly updates, hasn’t provided any yet this year. The last one was in December. I always feel this is the wrong decision. Transparency is better! People are going to expect the worst, if you don’t give them anything to hang on to.

I assume that we are going to see a drastic fall in exports, but it hasn’t shown up in the numbers yet. Exports in the first half of March were up yoy (16.4%), and there was a trade surplus.

Third, Ford has stopped production in Vietnam, along with production in India, South Africa, and Thailand. That doesn’t count the main production halt in North America.

Think of the car sales process as a pipeline. Suppliers to factories to car dealers to customers. Right now, there aren’t any, or are very few, customers. No one is taking cars off the lot, so dealers are seeing a build up of inventory. So they stop ordering cars: Nah, we don’t need any more Tauruses. If no cars are going out, then there’s no point to making more. Once the market comes back, cars will start to leave the lots, and factories can start pushing out more product. But until then, it makes sense to shut down production.

But that’s not great for workers (some of which won’t be paid). And it is bad for suppliers or their workers that will definitely not be paid.

Fourth, here is a long post by Brad Setser at the Council on Foreign Relations that looks at whether Vietnam is manipulating its currency. His view is that Vietnam now definitely meets the US Treasury’s definition of currency manipulation, and that previously he would want the US to take it seriously, but given COVID-19, he argues that it makes sense to back off for now.

Remember when I have written about this before that it is backward looking - the April report looks at what happened in 2019. I would say that the whole world is completely different and that it doesn’t make sense to hurt Vietnam during this time.

Treasury will put out a report in April - it is a statutory requirement by the US Congress. And it will probably not look great for Vietnam. But the process takes a very long time, and Treasury could say that it is not in the interest of the US to label Vietnam as a currency manipulator.

Anyway, it is very interesting. Also, he talks about Thailand and Taiwan, both of which probably can skate throughout without the label, given some changes on their end.

More tomorrow.