The US Treasury has labelled Switzerland and Vietnam currency manipulators, escalating tensions with the two countries in the waning days of the Trump administration.
The move could pave the way for punitive actions by Washington unless the dispute can be settled through “bilateral engagement”.
In a statement accompanying its semi-annual foreign exchange report, the US Treasury said Vietnam and Switzerland had each held their currencies lower to prevent “effective balance of payments adjustments” and in the case of Vietnam, “for gaining unfair competitive advantage in international trade”.
The foreign exchange report has gained notoriety for its focus on China’s currency policies in recent years. In 2019, the Trump administration labelled Beijing a currency manipulator at the height of the trade war between the world’s largest economies, but said this was no longer the case in January 2020 after the “phase one” trade deal was reached between Donald Trump and Xi Jinping, the Chinese president.
In Wednesday’s report, China remained on the Treasury’s monitoring list for its currency policies, which also includes Japan, South Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand, and India. The last three countries were added to the watchlist on Wednesday, while Ireland was removed.
During Mr Trump’s presidency, the US Treasury has taken a more aggressive approach to the currency practices of its trading partners compared with previous US administrations. This will present a dilemma for the incoming Treasury in Joe Biden’s administration, which is set to be led by former Fed chair Janet Yellen.
“The Treasury department has taken a strong step today to safeguard economic growth and opportunity for American workers and businesses,” said Steven Mnuchin, the US Treasury secretary. “Treasury will follow up on its findings with respect to Vietnam and Switzerland to work toward eliminating practices that create unfair advantages for foreign competitors.”