The US Treasury Department dropped Trump-era accusations that Switzerland and Vietnam manipulated their exchange rates to gain a competitive trade advantage, saying on Friday there was “insufficient evidence” for the allegations.
While the Treasury Department is removing the manipulator label, the two countries continue to meet their currency policy oversight criteria, and is closely followed by Taiwan, according to its semiannual report to Congress.
China also remains on the Treasury Department’s “Watchlist”, after being removed from the currency manipulators’ ranks in January 2020, just before President Donald Trump signed an initial trade pact with Beijing.
Beijing has long been the subject of scrutiny under the report, and Washington has frequently accused the government of keeping the exchange rate artificially low, using massive deposits of US dollars.
In a recent report, “the Ministry of Finance urges China to increase transparency regarding its foreign exchange intervention activities” and its policies.
The watchlist also includes Japan, Korea, Germany, Italy, India, Malaysia, Singapore and Thailand, as well as Ireland and Mexico, which were added to the December list.
“The Treasury is working tirelessly to tackle attempts by foreign economies to artificially manipulate the value of their currencies which puts American workers in an unfair position,” Treasury Secretary Janet Yellen said in a statement.
Congress needs a biennial analysis to select countries that may be actively trying to keep their currencies weaker against the US dollar, which will make their exports cheaper while making American goods more expensive.
However, the findings in the report are largely symbolic and do not require sanctions.
A Ministry of Finance official told reporters that the Covid-19 pandemic made analysis for 2020 difficult because it caused a massive disruption in global trade and obliged the government to launch a spending program to mitigate the damage.
In the report, the Treasury Department reviewed 20 major trading partners with bilateral trade in goods with the United States of at least $ 40 billion per year. The countries account for about 80 percent of US merchandise trade, the official said.
The criteria are a large trade surplus with the United States, a significant current account surplus, and evidence of “ongoing unilateral intervention” in the foreign exchange market.
A Ministry of Finance official told reporters that Switzerland, Taiwan and Vietnam exceeded the threshold by a sizable margin.
Congress requires the Treasury Department to engage in “enhanced consultation” with these countries, which “includes urging the development of plans with specific actions to address underlying causes of currency depreciation and external imbalances,” the report said.
The Swiss National Bank (SNB) protested December’s appointment as a manipulator, and in a statement Friday again denied any inappropriate activity.
“Switzerland does not engage in any form of currency manipulation,” the SNB said in a statement.
“Foreign exchange market intervention is required in Swiss monetary policy to ensure suitable monetary conditions and thus price stability.”
The Swiss franc has long been considered a safe haven currency, meaning investors rush to buy it in times of crisis, driving up its value and causing the SNB to intervene.
The IMF noted last week that the franc had risen by six percent despite the SNB’s efforts to counter an influx of funds seeking safe investment.