The US Treasury Department on Wednesday designated Switzerland and Vietnam as currency manipulators and placed ten other countries, including China, on a watchlist of countries suspected of devaluing their currencies in order to gain an unfair trade advantage over the United States.
One of the advantages of having a relatively inexpensive local currency is that exports become more attractive to foreign buyers who buy these goods in a relatively stronger currency.
Washington has long criticized suspected currency manipulators for punishing US goods and, more importantly, US jobs related to manufacturing those goods, in exchange for cheaper imports from foreign competitors.
The US Treasury, in its semi-annual report to Congress, concluded that Vietnam and Switzerland met all three criteria for currency manipulators, including massive interventions in currency markets in the four quarters through June 2020, resulting in an unfair trade advantage.
“The Treasury has taken a strong step today to protect economic growth and opportunities for American workers and companies,” Treasury Secretary Steven Mnuchin said in a statement posted on the Treasury’s website. “The Treasury will follow its findings on Vietnam and Switzerland to eliminate practices that create unfair advantages for foreign competitors.”
The Swiss National Bank rejected the finance ministry’s allegations and issued a statement that it would not tamper with its currency and that its monetary policy approach would not change. It also said that it “is still ready to intervene with greater force.”
This is the most recent semi-annual report on currency manipulation from the outgoing administration of US President Donald Trump.
Janet Yellen, the president-elect of Treasury Secretary Joe Biden, could change the results of Wednesday’s report when the department releases its next report scheduled for April.
The last country the United States described as a currency manipulator was China, which damaged the mark late last year but was lifted in January after the two countries reached a trade deal for the first stage.
Countries identified as currency manipulators may face punitive measures such as restricting access to U.S. government procurement contracts and financing development.
The tariffs could also be imposed on Vietnam as part of a separate investigation by the Office of the United States Trade Representative, which is currently investigating the causes of the undervalued donuts.
The Treasury’s list of countries on its watch list for suspected currency manipulation includes Taiwan, Thailand and India – all new to this year’s list – as well as China, Japan, Korea, Germany, Italy, Singapore and Malaysia.