US accuses Switzerland, Vietnam of currency manipulation

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Washington (AFP)

The US Treasury on Wednesday accused Switzerland and Vietnam of manipulating their currencies, in part to gain a trade advantage over US exports.

In the biannual foreign exchange report, the Treasury found that the two countries were intervening in currency markets to affect the balance of payments and, in Vietnam’s case, were also aiming to “gain an unfair competitive advantage in international trade.” .

US Treasury Secretary Steven Mnuchin called the move “a big step … to safeguard economic growth and opportunities for American workers and businesses.”

China remains on the Treasury’s “watch list”, along with Japan, Korea, Germany and others. The Treasury added three countries to the list: India, Taiwan and Thailand.

President Donald Trump has repeatedly criticized countries that have trade surpluses with the United States, accusing many of them of using a weaker currency to sell their products cheaply at the expense of American producers.

He mainly targeted Beijing for his criticism, but also Berlin, even though Germany uses the common currency of the euro.

The Treasury removed China from the list of currency manipulators in January, just before Washington and Beijing signed a “phase one” trade deal to partially resolve a destructive months-long trade war.

But the report calls on China to “improve the transparency” of its management of exchange rates, particularly by intervening in currency markets.

The findings of the report are largely symbolic and do not entail sanctions. Instead, it triggers “enhanced bilateral engagement” with each country to encourage “the development of a plan … to tackle the underlying causes of currency undervaluation and external imbalances.”

– Swiss event –

The Treasury examined 20 major U.S. trading partners whose two-way merchandise trade with the United States was at least $ 40 billion annually.

The criteria are a large trade surplus with the United States, a large current account surplus and evidence of “persistent and unilateral intervention” in foreign exchange markets.

Switzerland and Vietnam meet all three criteria, according to the report.

The Swiss National Bank immediately dismissed the accusation that it was manipulating its currency and said the authorities were in contact with their US counterparts “to explain the economic situation and monetary policy in our country”.

The Treasury said officials consulted the IMF when preparing the report and cited the IMF’s analysis of currency values ​​throughout.

Regarding Switzerland, the report notes that “IMF staff found that the franc was undervalued by around 3.5 percent on a real effective basis”.

The SNB stressed that its interventions in the foreign exchange markets were in no way intended to affect the balance of payments or to gain an unfair competitive advantage for the Swiss economy.

“Swiss monetary policy needs these interventions to guarantee appropriate monetary conditions and therefore price stability in Switzerland,” the bank said in an email to AFP.

The Swiss franc has long been viewed as a safe haven currency, meaning investors rush to buy it in times of crisis, driving up its value, forcing the SNB to intervene.

The US Treasury also declared that “Switzerland maintains tariff and non-tariff barriers which limit the access of American companies to Swiss markets, in particular as regards agriculture, but also intellectual property”.

“We strongly urge Switzerland to use its significant fiscal space to reduce the economy’s dependence on SNB policy measures, rebalance its external sector and stimulate potential growth. ”

– Dong undervalued –

The Treasury said the IMF’s most recent assessment indicated that the Vietnamese dong was undervalued by 8.4% on a real effective basis in 2018 and has been virtually stable against the US dollar since then.

The report called on Vietnam to “reduce its monetary intervention and allow the exchange rate to move.”

In addition, the country “should level the playing field for American workers and businesses by diligently dismantling barriers to American businesses and American exports.”

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