US labels Vietnam and Switzerland currency manipulators

The United States Treasury on Wednesday labelled Switzerland and Vietnam as currency manipulators and placed 10 other countries including China on a watch list of nations suspected of devaluing their currencies to gain an unfair trade advantage against the US.

One of the benefits of having a relatively cheap national currency is that it makes exports more attractive to buyers abroad who are purchasing those goods with a relatively stronger currency.

Washington has long railed against suspected currency manipulators because it places US goods and crucially – US jobs tied to the manufacture of those goods – at a disadvantage to less expensive imports from competitors abroad.

The US Treasury concluded in its semiannual report delivered to Congress that Vietnam and Switzerland had met all three criteria for being designated a currency manipulator, including intervening heavily in foreign exchange markets in the four quarters through June 2020, resulting in an unfair advantage in trade.

“The Treasury Department has taken a strong step today to safeguard economic growth and opportunity for American workers and businesses,” US Treasury Secretary Steven Mnuchin said in a statement posted on the department’s website. “Treasury will follow up on its findings with respect to Vietnam and Switzerland to work toward eliminating practices that create unfair advantages for foreign competitors.”

The Swiss National Bank pushed back on Treasury’s allegation, issuing a statement saying it does not manipulate its currency and its monetary policy approach would be unchanged. It also said that it “remains willing to intervene more strongly in the foreign exchange market”.

This is the last semi-annual report on currency manipulation produced by the outgoing administration of US President Donald Trump.

Janet Yellen, President-elect Joe Biden’s nominee for treasury secretary, could alter the findings of Wednesday’s report when the department issues the next one due in April.

The last country branded a currency manipulator by the US was China, which got slapped with the label late last year, only to have it lifted in January after the two countries reached a phase one trade deal.

Countries designated currency manipulators could face punitive measures such as limited access to US government procurement contracts and to development finance.

Vietnam could also be hit with tariffs under a separate investigation by the US Trade Representative’s office currently under way into the causes of an undervalued dong.

The list of countries the Treasury placed on the watchlist for suspected currency manipulation include Taiwan, Thailand and India – all three of which were new to this year’s list – as well as China, Japan, Korea, Germany, Italy, Singapore and Malaysia.