The Strategist

US accuses Switzerland, Vietnam in currency manipulations

12/17/2020 - 05:11

The US said that Switzerland and Vietnam had manipulated their currencies to avoid balance of payments adjustments and, in the case of Vietnam, also to gain a competitive advantage in international trade. They reserved the right to take action.

The US Treasury Department called Switzerland and Vietnam currency manipulators following a review of the macroeconomic and currency policies of its main trading partners. 

At least some of the currency interventions by these countries during the four quarters to June 2020 raised questions for the US. According to Washington, Switzerland and Vietnam sought to prevent balance of payments adjustments, while Vietnam also sought to gain an unfair competitive advantage in international trade.

During Donald Trump's presidency, the U.S. Treasury has been keeping a closer eye on currency transactions, according to the Financial Times. The attacks on Switzerland and Vietnam will be a dilemma for the administration of Joe Biden, who will take over the White House in January, the newspaper believes. In 2019, at the height of the trade war, the US recognised China as a currency manipulator, which was the first such case since 1994. But in January 2020, Beijing was removed from that status.

The US is hoping for "bilateral engagement" with Switzerland and Vietnam, but reserves the right to take action, the FT noted. A newspaper source told the paper that Washington plans to resolve the issues within a year. Switzerland's national bank said it would not change its approach and rejected accusations of "any form of currency manipulation", the paper quoted it as saying.

The U.S. Treasury's decision is largely symbolic and requires the administration to consult with the International Monetary Fund, The Wall Street Journal noted. No automatic punishment for manipulation follows, although Washington may impose additional duties in the process of negotiations, the newspaper added.