(last week) U.S. Treasury labels Vietnam, Switzerland as currency manipulators
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The Treasury Department on Wednesday formally accused two U.S. trading partners of manipulating their currencies in ways that harmed U.S. economic interests, as President Trump fired what could be one of the final shots in his global trade war.
Both Vietnam and Switzerland met all three criteria set by Congress for determining when other countries are preventing market forces from setting their currency values, the Treasury Department said in a 71-page report. This marked the first time that any U.S. trading partners had met all of the benchmarks under U.S. law, including maintaining a large trade surplus with the United States and conducting sizable intervention in foreign exchange markets.
Wednesday’s action, in particular, will add to pressure on Vietnam, which has been trying to thread a course between China, its powerful neighbor, and the United States. Vietnam wants better relations with the United States, but it also has been seeking to increase its shipments of low-cost goods to American markets as factories leave China under pressure from Trump’s tariffs.
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In October, U.S. Trade Representative Robert E. Lighthizer launched a broad investigation of Vietnam’s currency practices, saying the dong has been routinely undervalued. A cheaper currency makes Vietnamese goods less expensive for U.S. buyers, potentially harming American factories. In recent years, the dong has been undervalued by more than 8 percent, according to the Office of the U.S. Trade Representative.
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In the 12 months through the end of June, Vietnam ran a $58 billion goods trade surplus with the United States, up from about $47 billion last year, according to Treasury. Hanoi’s intervention in foreign exchange markets also rose significantly, to more than 5 percent of its gross domestic product from less than 1 percent during the earlier period.
Switzerland’s intervention, designed to prevent the Swiss franc from appreciating against the dollar, was particularly massive. Swiss officials have spent an amount equal to more than 14 percent of the tiny nation’s economic output to offset a weaker dollar, according to a senior Treasury official who briefed reporters on the condition he not be named.
Through the first 10 months of this year, the United States has run a trade deficit with Switzerland of $51 billion, more than twice the 2019 pace, according to the Commerce Department.
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Treasury plans to begin talks with both countries aimed at persuading them to adopt “specific policy actions” that would allow their currencies to reset against the dollar.
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Prospects for significant early changes are limited. The Swiss government, for example, has defended its currency policy as an effort to avoid a destabilizing spiral of price and asset declines known as deflation.
If the talks fail, the United States could bar Vietnam or Switzerland from participating in specific government trade financing and procurement programs, said the official, who declined to elaborate on potential sanctions.
“The Treasury Department has taken a strong step today to safeguard economic growth and opportunity for American workers and businesses,” Treasury Secretary Steven Mnuchin said in a statement. “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.”
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The Treasury analysis covered 20 countries that were responsible for $3.4 trillion in goods trade with the United States during the year ended June 30. That equaled more than 80 percent of all U.S. merchandise trade during the period, according to the Treasury official.
Nine countries met two of the three criteria lawmakers have set for judging a country to be a currency miscreant: Japan, Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand and India. Treasury officials plan to monitor their foreign exchange practices as well as those of China.
In 2019, after years of discussion, Treasury suddenly labeled China as a currency manipulator, although it met only one of the three requirements at the time.
In January, Treasury dropped China from the list, saying it had agreed to refrain from lowering the yuan’s value to gain a trade advantage as part of a limited trade deal with the United States.
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