US to stop tagging currency manipulators in Vietnam, Switzerland and Taiwan

WASHINGTON, April 16 (Reuters) – The U.S. Treasury Department said on Friday that Vietnam, Switzerland and Taiwan had exceeded thresholds for possible currency manipulation under a 2015 U.S. trade law, but fell refrained from officially qualifying them as manipulators.

In the first biannual foreign exchange report released by Treasury Secretary Janet Yellen, the Treasury said it would begin an “enhanced engagement” with Taiwan and continue these talks with Vietnam and Switzerland after the Trump administration called it the latter two from currency manipulators in December. Read more

The Treasury said Taiwan, Vietnam and Switzerland exceeded 2015 monetary thresholds in 2020 – a bilateral trade surplus of more than $ 20 billion with the United States, a foreign exchange intervention exceeding 2% of gross domestic product and a global current account surplus exceeding 2% of GDP.

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Despite this finding, he found insufficient evidence under an earlier 1988 law to conclude that Vietnam, Switzerland or Taiwan manipulate exchange rates to gain a trade advantage or prevent balance of payments adjustments.

“For the calendar year 2020, we did not make a finding regarding the manipulation designation,” a Treasury official told reporters, adding, “We do not see this as a mixed message.”

This decision takes some pressure off Switzerland and Vietnam by lifting the designation of manipulator for at least six months.

The Swiss National Bank (SNB) denied manipulating the franc and said the report would not change its monetary policy. “In view of the economic situation and the still high value of the Swiss franc, the SNB remains ready to intervene in the foreign exchange market if necessary,” he said. Read more

A Taiwanese central bank official said the US decision not to apply the manipulative label shows continued good communication between Taipei and Washington on the matter and that US officials understand the “special situation” of Taiwan.

Taiwan’s tech-focused exports to the United States, including laptops and semiconductors, skyrocketed in 2020 due to the work-from-home boom sparked by the coronavirus pandemic.


In a statement released on Saturday, the State Bank of Vietnam said it would continue to pursue a flexible exchange rate policy managed to contain inflation, ensure macroeconomic stability and not create a trade advantage. unfair.

The Vietnamese Foreign Ministry said in a subsequent statement that it welcomed the Treasury’s decision, adding: “Vietnam will maintain dialogues and consultations with the United States on this matter.”

A treasury official said it was possible for countries to meet the tests of the 2015 “mechanical” law and not manipulate their currencies to boost exports.

He said the report’s findings took into account the massive distortions in trade and capital flows of the pandemic and the fiscal and monetary policy choices governments have made in response.

Without the pandemic, outcomes likely would have been quite different, including for the three economies that met engagement triggers, the official added.

The Treasury report also said the COVID-19 crisis is likely to continue to affect current account positions over the next year as recoveries accelerated in some economies and lagged in others. , adding that these changes were worrying.

“The Treasury is working tirelessly to respond to efforts by foreign economies to artificially manipulate the value of their currencies, which unfairly disadvantages American workers,” Yellen said in a statement.

The enhanced engagement includes formal talks to urge Vietnam, Switzerland and Taiwan to develop plans with specific actions to address the underlying causes of the currency’s undervaluation and external imbalances, the Minister said. Treasure.

The talks will also help the Treasury determine the reasons why the three trading partners are making substantial interventions in the foreign exchange market.

For Taiwan, he said he would initiate enhanced engagement in accordance with the 2015 Trade Facilitation and Enforcement Law. He expects those talks to help determine whether Taiwan has manipulated its currency under the 1988 law.


The Treasury said no other major U.S. trading partners meet relevant 1988 or 2015 legislative criteria for currency manipulation or in-depth analysis during the review period.

He urged China to improve transparency regarding its foreign exchange intervention activities, the policy objectives of its exchange rate management regime, the relationship between the central bank and the foreign exchange activities of public banks, and its activities. in the offshore yuan market.

He also said he found 11 economies deserving of being placed on his “watch list” of major trading partners that deserve special attention in their monetary practices: China, Japan, South Korea, Germany, Ireland, Italy, India. , Malaysia, Singapore, Thailand and Mexico. All except Ireland and Mexico were included in the December 2020 report to Congress.

The reaction in the forex market was moderate, with the Swiss franc slightly stronger and the Mexican peso slightly weaker.

Thailand’s central bank said it saw no impact on business flows or its ability to implement macroeconomic policies to preserve domestic stability after remaining on the US watch list.

The Bank of Thailand maintains that the country has never used the exchange rate as a tool to gain unfair trade advantage, Deputy Governor Chantavarn Sucharitakul said in a statement.

Thierry Wizman, global interest rate and currency strategist at Macquarie Group, said: “It strikes me as a political decision, not a rules-based decision,” adding that the Treasury appeared to be trying to determine the intention of exchange policies.

“It looks like the administration is trying not to offend the allies here… those allies who are going to be the most important in containing China,” Wizman said.

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Reporting by David Lawder and Andrea Shalal; Editing by Dan Burns

Our Standards: Thomson Reuters Trust Principles.

Janice J. Kostka