January 22, 2022
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Factbox: Yellen’s Watchlist for the US Currency Manipulator Tag

By on December 1, 2021 0

Former Federal Reserve Chairman Janet Yellen holds a press conference in Washington, United States, December 13, 2017. REUTERS / Jonathan Ernst / File Photo

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Dec. 1 (Reuters) – Treasury Secretary Janet Yellen’s second foreign exchange report, which has yet to be released, risks labeling some U.S. trading partners as currency manipulators, though the department has refrained from enforcing this label in his last report.

The designation of currency manipulator is based on three main criteria: a trade surplus of more than $ 20 billion with the United States, a current account surplus of more than 2% of GDP, and foreign exchange intervention exceeding 2% of the product. gross interior.

In April, the Treasury refrained from officially labeling Vietnam, Switzerland and Taiwan as currency manipulators, even though they crossed some of its thresholds under a 2015 U.S. trade law. The Trump administration had qualified Switzerland and Vietnam as currency manipulators in December 2020. read more

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In its April report, the Treasury said it found 11 economies warranted placement on its “watch list” of major trading partners. Read more

There is no automatic sanction resulting from a currency manipulator label, although U.S. law requires Washington to require negotiations with designated trading partners.

For the next report, originally scheduled for Oct. 15, analysts said the following trading partners are at risk – but they doubt they’ll get the label.

Currency valuations

SWITZERLAND

* Switzerland was labeled a currency manipulator by the Trump administration in December 2020, but was spared from being officially branded in Yellen’s first report in April.

* Switzerland is likely to meet all three criteria, although analysts doubt it will receive the designation.

* Switzerland’s bilateral merchandise trade surplus of $ 39 billion in the 12 months to June 2021 exceeds the treasury threshold, and it has a current account surplus equivalent to 3% of GDP over the 12 month at the end of the second trimester.

* Although the Swiss National Bank recently reduced its interventions, it spent 25.4 billion francs in the 12 months to June 2021, which is the equivalent of 3.5% of Swiss economic output and more than the limit of 2% fixed by the Treasury.

* Nonetheless, analysts believe Switzerland will not be on the list because the Treasury Department (TD) may also examine other factors such as currency developments, monetary policy and trade policy action.

TAIWAN

* Taiwan was last officially labeled a currency manipulator by the United States in December 1992. It was put back on the watch list in 2020.

* Taiwan violated all three criteria, TD analysts say, although they don’t expect Taiwan to be called a currency manipulator.

* Taiwan’s trade surplus with the United States reached $ 29.9 billion in 2020, according to official data, nearly $ 7 billion more than in 2019, while the current account surplus last year was about 11% of GDP, exceeding the Washington benchmark.

* In the first nine months of this year, Taiwan’s trade surplus with the United States reached $ 17.94 billion, up $ 5.13 billion from the previous year. The current account surplus in the first half of this year reached around 14.6% of GDP.

* The central bank said in September that during the first half of this year it bought $ 8.73 billion net to intervene and “prevent serious mess” in the currency market. Read more By comparison, the central bank bought a net amount of $ 39.1 billion for all of 2020. TD analysts said Taiwan’s purchases amounted to 7.8% of GDP.

* The 5.6% gain of the Taiwan dollar against the greenback last year was one of the strongest in Asia. It is up around 2.5% against the greenback this year and among the best performing Asian currencies.

* Taiwan’s case is complicated by geopolitical pressures, including heightened military tensions with China, and the island’s position as a major exporter of semiconductors that are needed to help alleviate a supply shortage for American manufacturers.

* The United States will likely take into account both Taiwan’s special economic situation vis-à-vis its booming technology exports and its key role in chip manufacturing, as well as the need to show US support in Taiwan in the face of Chinese pressure when it comes to deciding whether or not to label him a manipulator.

VIETNAM:

* Vietnam was labeled a currency manipulator by the Trump administration in December 2020, but was spared from being officially branded in the Yellen report in April. Read more

* Vietnam has met the criteria for its trade surplus with the United States of $ 83.8 billion and its foreign exchange intervention, 4.1% of GDP, but not in its current account, according to analysts at TD.

* After reaching a deal with the US Treasury to refrain from “competitive devaluation” and make its monetary and exchange rate policies more transparent in July, the State Bank of Vietnam (SBV) stopped buying US dollars in the futures markets after seven months of doing so, and returned to buying cash dollars. Read more

CHINA

* The Treasury Department under the Trump administration designated China as a currency manipulator on August 5, 2019, but in January 2020, the Treasury abandoned the designation days before signing a preliminary agreement to end the war Sino-American trade.

* Trade remains a controversial bilateral issue despite a recent bilateral summit between President Joe Biden and Chinese leader Xi Jinping. Read more

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Reporting by Ben Blanchard in Taipei, Andrew Galbraith in Shanghai, Aradhana Aravindan in Singapore, John Revill in Zurich; Compiled by Saikat Chatterjee; edited by Megan Davies and Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.


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