US labels Switzerland and Vietnam currency manipulators

US Treasury Secretary Steve Mnuchin on Wednesday labeled Switzerland and Vietnam "currency manipulators."

His department's semi-annual foreign exchange report made note of both countries' interventions in global financial markets to augment profit. In the case of Vietnam, it found there had been attempts to exert an "unfair competitive advantage in international trade."   

Mnuchin called the decision to label the two countries currency manipulators, "A strong step to safeguard economic growth and opportunity for American workers and businesses."

Though the semi-annual report stops short of advising sanctions, the designation demands "enhanced bilateral engagement" as a means "to address the underlying causes of currency undervaluation and external imbalances."

Outgoing US President Donald Trump has repeatedly railed against countries with US trade surpluses, claiming they artificially maintained weak currencies to "rip us off."

Should negotiations with Switzerland and Vietnam fail to resolve the issue in Washington's eyes, sanctions could be triggered in one year's time.

Expanded monitoring list

The report also adds three new countries to the Department of the Treasury's "monitoring list": China, Germany, Italy, Japan, Malaysia, Singapore and South Korea were carryovers but India, Taiwan and Thailand are recent additions. The report calls on China, above all, to "improve transparency" over how it sets exchange rates.

In all, the Treasury report reviewed business relations with those countries doing at least $40 billion (€33 billion) in annual trade with the US. Of its 20 biggest trading partners, the US found that two, Switzerland and Vietnam, fulfilled the criteria defining currency manipulation. Each has a significant trade surplus with the US (in excess of $20 billion), each has a hefty current account surplus and each has been found to have engaged in "persistent, one-sided intervention" on global exchange markets.

The US sets its so-called manipulation threshold at 2% of GDP on foreign exchange markets —Switzerland's interventions totaled 14%, whereas Vietnam's exceeded 5%.

The US last labeled a country a currency manipulator in August 2019, when the charge was leveled against China. That designation was removed this January after the US and China agreed to a partial ceasefire in their ongoing trade war.

The currency manipulator designation will limit Switzerland and Vietnam's access to US procurement contracts as well as to development cash. Observers say Vietnam runs the risk of sanctions in a separate currency manipulation case under investigation by the US Trade Representative and that US President Trump — who was unable to fulfill his promise to close the US trade gap — may be quick to take punitive action before leaving office in January.

js/rc (AFP, AP, Reuters)