U.S. Labels Switzerland, Vietnam as Currency Manipulators

The Trump administration called Switzerland and Vietnam currency manipulators on Wednesday.

In a long-overdue foreign exchange report, the U.S. Treasury also added India, Thailand and Taiwan to a watchlist of countries it says it suspects may be deliberately devaluing their currencies against the dollar.

The COVID-19 pandemic has skewed trade flows and widened U.S. deficits with trading partners, an irritant to outgoing President Donald Trump, who won office four years ago partly on a promise to close the U.S. trade gap.

A U.S. Treasury official said the Biden transition team had not been briefed, adding: “They are not implicated in this. This is a decision of the Trump administration.”

A spokesman for the Biden transition team could not immediately be reached for comment.

U.S. Treasury Secretary nominee Janet Yellen could alter the findings in her first currency report, which is due in April.

In response to the allegation, the Swiss National Bank said it does not manipulate its currency and its monetary policy would be unchanged, adding that it “remains willing to intervene more strongly in the foreign exchange market”.

Vietnam’s trade ministry declined to comment on the report and referred questions to the foreign ministry in Hanoi.

To be labeled a manipulator by the U.S. Treasury, countries must at least have a $20 billion-plus bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of gross domestic product and a global current account surplus exceeding 2% of GDP.

Vietnam and Switzerland exceeded these criteria by a “substantial margin,” the Treasury official said.

The report said that at least part of Vietnam’s foreign exchange intervention was aimed at pushing down the dong for a trade advantage, while at least part of Switzerland’s action was aimed at pushing down the Swiss franc to prevent effective balance of payments adjustments.

The Treasury said Switzerland’s foreign exchange intervention totaled 14% of GDP.

Vietnam, which has seen a rush of foreign investment by companies seeking to avoid U.S. tariffs on Chinese goods, saw intervention of more than 5% of its GDP, it added.

The Treasury official said the United States wants to work cooperatively with both countries to bring them back below the manipulation thresholds and declined to speculate on whether the process could lead to U.S. tariffs on their goods.

Among remedies specified in U.S. laws governing the currency report are limiting offending countries’ access to U.S. government procurement contracts and to development finance.

Vietnam could be hit with tariffs under a separate investigation by the U.S. Trade Representative’s office now underway into the causes of an undervalued dong. The Treasury findings could influence this probe and some in the business community fear that Trump may move quickly on it.

The label briefly lifted the value of the Swiss franc against the dollar. Forex strategists said the move may make it slightly more difficult for the SNB to intervene, the easing of the coronavirus pandemic would reduce safe-haven upward pressure on the franc.