U.S. Treasury Secretary Janet Yellen, former chairwoman of the Federal Reserve, holds a news conference in Washington, U.S. December 13, 2017. REUTERS/Jonathan Ernst/File Photo

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

The designation of exchange manipulator is based on three main criteria: a trade surplus of more than 20 billion dollars with the United States, a current account surplus greater than 2% of GDP and a monetary intervention greater than 2% of product raw interior.

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

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

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

For the next report, originally scheduled for October 15, analysts said the following trading partners were at risk – but doubt they would get the label.

SWITZERLAND

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

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

* Switzerland’s bilateral goods 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 in the 12 months until the end of the second trimester.

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

* Still, analysts believe Switzerland will not make the list as the Treasury Department (TD) may also look at 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 breached 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 around 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 year-ago period . The current account surplus in the first half of this year reached around 14.6% of GDP.

* The central bank said in September that in the first half of this year it had bought $8.73 billion net to intervene and “avoid serious unrest” in the foreign exchange market. read more By comparison, the central bank bought a net $39.1 billion for all of 2020. TD analysts said Taiwan’s purchases amounted to 7.8% of GDP .

* The Taiwan dollar’s 5.6% gain against the greenback last year was among the strongest in Asia. It is up about 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 needed to help ease a supply shortage for American manufacturers.

* The United States is likely to consider both Taiwan’s unique economic situation vis-à-vis its booming technology exports and key role in chip manufacturing, as well as the need to show US support for Taiwan in the face of Chinese pressure when it comes to making a decision on whether to label it as a manipulator.

VIETNAM:

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

* Vietnam 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 on its current account, according to TD analysts .

* After reaching an agreement 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 reverted to buying spot 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 dropped that designation days before a preliminary agreement was signed to end the currency manipulator. Sino-American trade war.

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

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

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