currency manipulator
{{Short description|Designation applied by the US government to countries}}
{{Update|part=Countries in the list|reason=hasn't been updated since 2023, and recently in 2024 there is recent update from the U.S. government website|date=November 2024}}
Currency manipulator is a designation applied by United States government authorities, such as the United States Department of the Treasury, to countries that engage in what is called "unfair currency practices" that give them a trade advantage. Such practices may be currency intervention or monetary policy in which a central bank buys or sells foreign currency in exchange for domestic currency, generally with the intention of influencing the exchange rate and commercial policy. Policymakers may have different reasons for currency intervention, such as controlling inflation, maintaining international competitiveness, or financial stability. In many cases, the central bank weakens its own currency to subsidize exports and raise the price of imports, sometimes by as much as 30–40%, and it is thereby a method of protectionism.{{cite news | url=https://www.forbes.com/sites/realspin/2015/02/25/currency-manipulation-why-something-must-be-done/ | title=Currency Manipulation: Why Something Must Be Done | first=C. Fred | last=Bergsten | work=Forbes | date=February 25, 2015}}
Under the 1988 Omnibus Foreign Trade and Competitiveness Act, the United States Secretary of the Treasury is required to "analyze on an annual basis the exchange rate policies of foreign countries … and consider whether countries manipulate the exchange rate between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade" and that "If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments".{{cite web | url=https://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/authorizing-statute.pdf | title=OMNIBUS TRADE AND COMPETITIVENESS ACT OF 1988 (H.R. 3) : SEC. 3004. INTERNATIONAL NEGOTIATIONS ON EXCHANGE RATE AND ECONOMIC POLICIES | publisher=United States Department of the Treasury | access-date=2017-11-22 | archive-date=2017-12-28 | archive-url=https://web.archive.org/web/20171228164504/https://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/authorizing-statute.pdf | url-status=live }}
A designated currency manipulator can be excluded from U.S. government procurement contracts.{{cite news | url=https://www.reuters.com/article/us-usa-trade-china-currency/us-designates-china-as-currency-manipulator-for-first-time-in-decades-idUSKCN1UV2BK | title=U.S. designates China as currency manipulator for first time in decades | first1=Andrea | last1=Shalal | first2=David | last2=Lawder | first3=Lesley | last3=Wroughton | first4=Makini | last4=Brice | work=Reuters | date=August 5, 2019 | access-date=August 6, 2019 | archive-date=December 24, 2020 | archive-url=https://web.archive.org/web/20201224053925/https://www.reuters.com/article/us-usa-trade-china-currency/us-designates-china-as-currency-manipulator-for-first-time-in-decades-idUSKCN1UV2BK | url-status=live }}
According to the Trade Facilitation and Trade Enforcement Act of 2015, the Secretary of the Treasury must publish a semi-annual report in which the developments in international economic and exchange rate policies are reviewed. If a country is labeled a currency manipulator under this Act, "The President, through Treasury, shall take specified remedial action against any such countries that fail to adopt policies to correct the undervaluation of their currency and trade surplus with the United States."{{cite web | title=H.R.644 – Trade Facilitation and Trade Enforcement Act of 2015. 114th Congress (2015–2016), VII, Sec. 701 | url=https://www.congress.gov/bill/114th-congress/house-bill/644 | website=Congress.gov | date=February 24, 2016 | access-date=November 22, 2017 | archive-date=December 1, 2017 | archive-url=https://web.archive.org/web/20171201033831/https://www.congress.gov/bill/114th-congress/house-bill/644 | url-status=live }}{{cite web | url=https://home.treasury.gov/policy-issues/international/macroeconomic-and-foreign-exchange-policies-of-major-trading-partners | title=Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States | publisher=United States Department of the Treasury | access-date=2019-08-06 | archive-date=2019-08-01 | archive-url=https://web.archive.org/web/20190801202703/https://home.treasury.gov/policy-issues/international/macroeconomic-and-foreign-exchange-policies-of-major-trading-partners | url-status=live }}
It has been argued that the concept of "currency manipulation" is hypocritical, given that the US already has the privilege of having the main reserve currency of the world, which is needed for international trade. Massive interventions of the Federal Reserve since the 2008 financial crisis, such as Quantitative Easing and interventions in the REPO market have been cited as alleged examples of the U.S. itself engaging in currency manipulation.
Designations under the 1988 Act
Since the 1988 Act was enacted, the United States Department of the Treasury has designated the following countries as currency manipulators:
- South Korea in 1988.
- Taiwan in 1988 and again in 1992.
- China from 1992 to 1994.
- India was added to the list in 2017 for 'questionable foreign exchange policies'. It had stated that India had increased its purchases of foreign exchange over the last three quarters of 2017, although the rupee still rose in value. India's net purchases of foreign exchange in 2017 as a whole totaled $56 billion (2.2% of GDP).{{Cite web |url=https://thepolicytimes.com/india-removed-from-currency-manipulation-monitoring-list/ |title=India removed from 'currency manipulation' monitoring list |access-date=2020-01-14 |archive-date=2020-10-24 |archive-url=https://web.archive.org/web/20201024023217/https://thepolicytimes.com/india-removed-from-currency-manipulation-monitoring-list/ |url-status=dead }}
In May 2019, the US Treasury removed India and Switzerland from its currency monitoring list but China, Japan, South Korea, Germany, Italy, Ireland, Singapore, Malaysia, and Vietnam remained on the list.{{Cite news | url=https://www.business-standard.com/article/international/us-removes-india-from-its-currency-monitoring-list-china-japan-stay-119052900174_1.html | title=US removes India from its currency monitoring list; China, Japan stay | agency=Press Trust of India | publisher=Business Standard | date=May 29, 2019 | access-date=May 29, 2019 | archive-date=May 29, 2019 | archive-url=https://web.archive.org/web/20190529072709/https://www.business-standard.com/article/international/us-removes-india-from-its-currency-monitoring-list-china-japan-stay-119052900174_1.html | url-status=live }} India was removed from the list after it met one of the three criteria necessary for inclusion on the monitoring list, namely, a significant bilateral surplus with the US. India also reduced its level of foreign exchange reserves, to 0.2% of GDP.{{Cite web |url=https://www.thehindubusinessline.com/economy/us-removes-india-switzerland-from-its-currency-monitoring-list/article27282535.ece |title=US removes India, Switzerland from its currency monitoring list |date=29 May 2019 |access-date=2020-01-14 |archive-date=2019-05-29 |archive-url=https://web.archive.org/web/20190529074115/https://www.thehindubusinessline.com/economy/us-removes-india-switzerland-from-its-currency-monitoring-list/article27282535.ece |url-status=live }} An analysis by The Economist in 2017 noted that Switzerland has been manipulating its currency more than China since 2009 and Taiwan and South Korea have been doing so since 2014.{{cite news | url=https://www.economist.com/finance-and-economics/2017/03/02/china-and-currency-manipulation | title=China and currency manipulation: Champs or chumps | newspaper=The Economist | date=March 2, 2017 | access-date=August 5, 2019 | archive-date=August 5, 2019 | archive-url=https://web.archive.org/web/20190805224814/https://www.economist.com/finance-and-economics/2017/03/02/china-and-currency-manipulation | url-status=live }}
- In August 2019, the Trump administration, as part of the China–United States trade war, again designated China a currency manipulator,{{cite press release | url=https://home.treasury.gov/news/press-releases/sm751 | title=Treasury Designates China as a Currency Manipulator | publisher=United States Department of the Treasury | date=August 5, 2019 | access-date=August 5, 2019 | archive-date=August 6, 2019 | archive-url=https://web.archive.org/web/20190806014655/https://home.treasury.gov/news/press-releases/sm751 | url-status=live }}{{Cite news|url=https://www.washingtonpost.com/business/economy/trump-pressured-mnuchin-to-label-china-currency-manipulator-a-move-he-had-previously-resisted/2019/08/15/b487bb2e-bf84-11e9-a5c6-1e74f7ec4a93_story.html|title=Trump pressured Mnuchin to label China 'currency manipulator', a move he had previously resisted|newspaper=Washington Post|access-date=2019-08-15|archive-date=2021-03-15|archive-url=https://web.archive.org/web/20210315180116/https://www.washingtonpost.com/business/economy/trump-pressured-mnuchin-to-label-china-currency-manipulator-a-move-he-had-previously-resisted/2019/08/15/b487bb2e-bf84-11e9-a5c6-1e74f7ec4a93_story.html|url-status=live}} a designation not supported by the International Monetary Fund.{{Cite web|url=https://politi.co/2ONEhhu|title=New IMF report doesn't back Trump's currency manipulation charge against China|first=Doug|last=Palmer|website=POLITICO|date=9 August 2019 }} The designation against China was withdrawn in January 2020 after China agreed to refrain from devaluing its currency to make its own goods cheaper for foreign buyers.{{Cite news |url=https://www.bbc.com/news/business-51098294 |title=US reverses China 'currency manipulator' label |date=13 January 2020 |access-date=2020-01-14 |archive-date=2021-03-08 |archive-url=https://web.archive.org/web/20210308062343/https://www.bbc.com/news/business-51098294 |url-status=live }} The two countries are soon to sign a "Phase 1 U.S.-China trade agreement" that includes a provision that prevents China from manipulating its currency to gain trade advantages.{{cite web |title=US drops designation of China as currency manipulator |date=2020-01-13 |website=Associated Press |archive-url=https://web.archive.org/web/20230529025606/https://apnews.com/0c0897cfd101e269605fe1c3954e6b88 |archive-date=2023-05-29 |url-status=live |url=https://apnews.com/0c0897cfd101e269605fe1c3954e6b88}}
- In December 2020, the Trump administration designated Switzerland and Vietnam as currency manipulators. In April 2021, the Biden administration redesignated Vietnam and Switzerland; they were removed from the currency manipulator list and moved to enhanced monitoring list.{{Cite web|title=US removes Vietnam, Switzerland from currency manipulator list|url=https://www.aljazeera.com/economy/2021/4/16/us-removes-vietnam-switzerland-from-currency-manipulator-list|access-date=2021-04-17|website=www.aljazeera.com|language=en|archive-date=2021-04-16|archive-url=https://web.archive.org/web/20210416231515/https://www.aljazeera.com/economy/2021/4/16/us-removes-vietnam-switzerland-from-currency-manipulator-list|url-status=live}}{{Cite web|title=US lifts Vietnam, Switzerland from currency manipulator list|url=https://abcnews.go.com/Politics/wireStory/us-lifts-vietnam-switzerland-currency-manipulator-list-77115419|access-date=2021-04-17|website=ABC News|language=en|archive-date=2021-04-17|archive-url=https://web.archive.org/web/20210417002522/https://abcnews.go.com/Politics/wireStory/us-lifts-vietnam-switzerland-currency-manipulator-list-77115419|url-status=live}}
In December 2020, India, Thailand, and Taiwan were added to the monitoring list. China, Japan, South Korea, Germany, Italy, Singapore and Malaysia continued to be on the list.{{Cite web |url=https://www.theage.com.au/business/the-economy/trump-fires-parting-shot-as-us-labels-switzerland-vietnam-as-currency-manipulators-20201217-p56o6d.html |title=Trump fires parting shot as US labels Switzerland, Vietnam as currency manipulators |date=16 December 2020 |access-date=2020-12-16 |archive-date=2020-12-20 |archive-url=https://web.archive.org/web/20201220122253/https://www.theage.com.au/business/the-economy/trump-fires-parting-shot-as-us-labels-switzerland-vietnam-as-currency-manipulators-20201217-p56o6d.html |url-status=live }}{{cite web |title=Treasury Releases Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States |publisher=US Department of the Treasury |date=December 16, 2020 |url=https://home.treasury.gov/news/press-releases/sm1212 |access-date=December 17, 2020 |archive-date=December 17, 2020 |archive-url=https://web.archive.org/web/20201217064346/https://home.treasury.gov/news/press-releases/sm1212 |url-status=live }}
Evaluation criteria
| class="wikitable sortable mw-collapsible" style="text-align:right;"
|+{{nowrap|Evaluation criteria, June 2024}}{{cite web |title=Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States |publisher=US Department of the Treasury |date=June 2024 |url=https://home.treasury.gov/system/files/136/June-2024-FX-Report.pdf}} | ||||
| rowspan="2"|Country | FX Intervention | Current Account | Bilateral Trade | rowspan=2|Monitoring list |
|---|---|---|---|---|
| Net Purchases (% of GDP) {{color|red|≧ 2%}} || Balance (% of GDP) {{color|red|≧ 2%}} || Goods Surplus (billion USD) {{color|red|≧ 20 billion USD}} | ||||
| style="text-align:left;"|{{flag|Singapore}} | style="color:red;"| 7.1 | style="color:red;" | 19.8 | −28 | {{yes C}} |
| style="text-align:left;"|{{flag|Vietnam}} | 1.5 | style="color:red;" | 5.8 | 103 | {{yes C}} |
| style="text-align:left;"|{{flag|China}} | −0.1 — 0.5 | 1.4 | 254 | {{yes C}} |
| style="text-align:left;"|{{flag|Mexico}} | 0.4 | −0.3 | 153 | {{yes C}} |
| style="text-align:left;"|{{flag|Germany}} | - | style="color:red;" | 6.1 | 86 | {{yes C}} |
| style="text-align:left;"|{{flag|Japan}} | - | style="color:red;" | 3.6 | 62 | {{yes C}} |
| style="text-align:left;"|{{flag|Taiwan}} | -0.4 | style="color:red;" | 13.9 | 48 | {{yes C}} |
| style="text-align:left;"|{{flag|Malaysia}} | -2.3 | 1.3 | 25 | {{yes C}} |
| class="wikitable sortable mw-collapsible mw-collapsed" style="text-align:right;"
|+{{nowrap|Evaluation criteria, April 2021}}{{cite web |title=Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States |publisher=US Department of the Treasury |date=April 2021 |url=https://home.treasury.gov/system/files/206/April_2021_FX_Report_FINAL.pdf}} | |||||
| rowspan="2"|Country | FX Intervention | Current Account | Bilateral Trade | rowspan=2|Enhanced engagement | rowspan=2|Monitoring list |
|---|---|---|---|---|---|
| Net Purchases (% of GDP) {{color|red|≧ 2%}} || Balance (% of GDP) {{color|red|≧ 2%}} || Goods Surplus (billion USD) {{color|red|≧ 20 billion USD}} | |||||
| style="text-align:left;"|{{flag|Singapore}} | style="font-weigbt:bold; color:red;" |28.3 | style="font-weigbt:bold; color:red;" |17.6 | 4 | {{yes C}} | |
| style="text-align:left;"| {{nowrap|{{flag|Switzerland}}}} | style="font-weigbt:bold; color:red;" |15.3 | style="font-weigbt:bold; color:red;" |3.7 | style="font-weigbt:bold; color:red;" |57 | {{yes C}} | |
| style="text-align:left;"|{{flag|Taiwan}} | style="font-weigbt:bold; color:red;" |5.8 | style="font-weigbt:bold; color:red;" |14.1 | style="font-weigbt:bold; color:red;" |30 | {{yes C}} | |
| style="text-align:left;"|{{flag|Vietnam}} | style="font-weigbt:bold; color:red;" |4.4 | style="font-weigbt:bold; color:red;" |3.7 | style="font-weigbt:bold; color:red;" |70 | {{yes C}} | |
| style="text-align:left;"|{{flag|Thailand}} | 1.9 | style="font-weigbt:bold; color:red;" |3.2 | style="font-weigbt:bold; color:red;" |26 | {{yes C}} | |
| style="text-align:left;"|{{flag|China}} | −0.1 — 1.2 | 1.9 | style="font-weigbt:bold; color:red;" |311 | {{yes C}} | |
| style="text-align:left;"|{{flag|Malaysia}} | 0.6 | style="font-weigbt:bold; color:red;" |4.4 | style="font-weigbt:bold; color:red;" |32 | {{yes C}} | |
| style="text-align:left;"|{{nowrap|{{flag|South Korea}}}} | 0.3 | style="font-weigbt:bold; color:red;" |4.6 | style="font-weigbt:bold; color:red;" |25 | {{yes C}} | |
| style="text-align:left;"|{{flag|Japan}} | 0.0 | style="font-weigbt:bold; color:red;" |3.3 | style="font-weigbt:bold; color:red;" |55 | {{yes C}} | |
| style="text-align:left;"|{{flag|Mexico}} | −0.2 | style="font-weigbt:bold; color:red;" |2.4 | style="font-weigbt:bold; color:red;" |113 | {{yes C}} | |
| style="text-align:left;"|{{flag|Germany}} | - | style="font-weigbt:bold; color:red;" |6.9 | style="font-weigbt:bold; color:red;" |57 | {{yes C}} | |
| style="text-align:left;"|{{flag|Ireland}} | - | style="font-weigbt:bold; color:red;" |4.8 | style="font-weigbt:bold; color:red;" |56 | {{yes C}} | |
| style="text-align:left;"|{{flag|Italy}} | - | style="font-weigbt:bold; color:red;" |3.7 | style="font-weigbt:bold; color:red;" |30 | {{yes C}} |
| class="wikitable sortable mw-collapsible mw-collapsed" style="text-align:right;" | |||||
| rowspan="2"|Country | Bilateral Trade | Current Account | FX Intervention | rowspan=2|Currency manipulator | rowspan=2|Monitoring List. |
|---|---|---|---|---|---|
| Goods Surplus (billion USD) {{color|red|≧ 20 billion USD}}|| Balance (% of GDP) {{color|red|≧ 2%}} || Net Purchases (% of GDP) {{color|red|≧ 2%}} | |||||
| style="text-align:left;"|{{flag|China}} | style="font-weigbt:bold; color:red;" |310 | 1.1 | −0.1 | {{yes C}} | |
| style="text-align:left;"|{{flag|Germany}} | style="font-weigbt:bold; color:red;" |62 | style="font-weigbt:bold; color:red;" |6.8 | – | {{yes C}} | |
| style="text-align:left;"|{{flag|Vietnam}} | style="font-weigbt:bold; color:red;" |58 | style="font-weigbt:bold; color:red;" |4.6 | style="font-weigbt:bold; color:red;" |5.1 | {{yes C}} | |
| style="text-align:left;"|{{flag|Japan}} | style="font-weigbt:bold; color:red;" |57 | style="font-weigbt:bold; color:red;" |3.1 | 0 | {{yes C}} | |
| style="text-align:left;"|{{nowrap|{{flag|Switzerland}}}} | style="font-weigbt:bold; color:red;" |49 | style="font-weigbt:bold; color:red;" |8.8 | style="font-weigbt:bold; color:red;" |14.2 | {{yes C}} | |
| style="text-align:left;"|{{flag|Italy}} | style="font-weigbt:bold; color:red;" |30 | style="font-weigbt:bold; color:red;" |3.0 | – | {{yes C}} | |
| style="text-align:left;"|{{flag|Malaysia}} | style="font-weigbt:bold; color:red;" |29 | style="font-weigbt:bold; color:red;" |2.5 | 1.1 | {{yes C}} | |
| style="text-align:left;"|{{flag|Taiwan}} | style="font-weigbt:bold; color:red;" |25 | style="font-weigbt:bold; color:red;" |10.9 | 1.7 | {{yes C}} | |
| style="text-align:left;"|{{flag|Thailand}} | style="font-weigbt:bold; color:red;" |22 | style="font-weigbt:bold; color:red;" |6.3 | 1.8 | {{yes C}} | |
| style="text-align:left;"|{{flag|India}} | style="font-weigbt:bold; color:red;" |22 | 0.4 | style="font-weigbt:bold; color:red;" |2.4 | {{yes C}} | |
| style="text-align:left;"|{{nowrap|{{flag|South Korea}}}} | style="font-weigbt:bold; color:red;" |20 | style="font-weigbt:bold; color:red;" |3.5 | −0.6 | {{yes C}} | |
| style="text-align:left;"|{{flag|Singapore}} | −1 | style="font-weigbt:bold; color:red;" |16.1 | style="font-weigbt:bold; color:red;" |21.3 | {{yes C}} |
Impact on manufacturing
Currency manipulation has a disproportionate effect on the secondary sector of the economy and lobbyists of the U.S. manufacturing sector have regularly referred to China as a currency manipulator. A 2013 analysis by Carlos D. Ramirez found that "an increase of one percentage point in the share of congressional district labor force in manufacturing is associated with a 19.6% increase in the likelihood that the district legislator will label Mainland China a currency manipulator".{{cite journal | last=Ramirez | first=Carlos D. | title=The political economy of "currency manipulation" bashing | journal=China Economic Review | date=December 2013 | volume=27 | pages=227–237 | doi=10.1016/j.chieco.2012.10.005 | citeseerx=10.1.1.408.3085}}
Reactions
In 2020, the COVID-19 pandemic has exacerbated U.S. trade deficits with a number of nations, including Switzerland and Vietnam. While the Swiss National Bank continued to practice currency interventions to stop the influx of foreign money during economic crisis, the State Bank of Vietnam as well said that its foreign exchange rate policy "is a way to contain inflation, ensure macro stability and not to create an unfair trade advantage". A senior U.S. treasury official said the US aimed "to resolve our issues" with Vietnam and Switzerland within a year. He added that the Biden administration had not been briefed on the issue, and that "they are not implicated in this."Politi, James; Szalay, Eva (December 16, 2020).[https://www.ft.com/content/9bcd4d84-fdec-4f03-9560-dc58f2721899 "US declares Switzerland and Vietnam currency manipulators"] {{Webarchive|url=https://web.archive.org/web/20201217105516/https://www.ft.com/content/9bcd4d84-fdec-4f03-9560-dc58f2721899 |date=2020-12-17 }}. ft.com.[https://thegreaterindia.in/news/business/us-treasury-lists-switzerland-and-vietnam-as-currency-manipulators-business-economy-news/ "US Treasury lists Switzerland and Vietnam as forex manipulators."]{{Dead link|date=December 2023 |bot=InternetArchiveBot |fix-attempted=yes }} thegreaterindia.com. Retrieved 17 December 2020.
After the Biden administration moved Switzerland, Vietnam and Taiwan to an enhanced engagement status in April 2021, US treasury officials confirmed that the COVID-19 pandemic has caused massive trade and capital flow distortions, increasing the necessity for currency interventions in those export-oriented countries. Taiwanese and Vietnamese officials welcomed the move not to categorize them as currency manipulators, since US authorities understood their "special situation". Both the State Bank of Vietnam and the Swiss National Bank would continue to practice currency interventions to contain inflation, and ensure macro-economic stability.[https://www.metro.us/u-s-stops-short-of/ "U.S. stops short of branding Vietnam, Switzerland, Taiwan currency manipulators"] {{Webarchive|url=https://web.archive.org/web/20210427083336/https://www.metro.us/u-s-stops-short-of/ |date=2021-04-27 }} metro.us. Retrieved 27. April 2021.