The U.S. Department of the Treasury (USDT) publishes the report of the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States twice a year, in order to review and monitor its trading partners’ policy directions. The U.S. has set three conditions/criteria in determining a country as being a currency manipulator to gain trade advantages over the U.S., namely 1. Having had a trade surplus with the U.S. of more than USD20 billion in the past 12 months, 2. Having a current account surplus exceeding 2% of the country’s GDP, and 3. Having net purchases of foreign currency for 6 consecutive months and exceeding 2% of GDP. If any country meets these 3 conditions, it is eligible to be identified as “Currency Manipulator”, but if 2 of 3 the 3 conditions are met, it will be added to the “Monitoring List”.
As President Donald Trump is about to end his term, the USDT released its latest report for 2020 on December 16, 2020. The report has labelled Switzerland and Vietnam as currency manipulators to gain unfair advantage over the U.S., and added Thailand, Taiwan and India to the Monitoring List to be closely monitored by the U.S. along with other 7 countries including China, Japan, South Korea, Germany, Italy, Singapore and Malaysia. Although China recently managed to cease itself being identified as a currency manipulator in January 2020, China is still on the US watch list for currency manipulation.
This investigation result and the identification of countries manipulating their currencies for unfair trade advantages may be raised as an issue by the U.S. authorities in negotiations or may be used to take trade measures to counteract such countries, as has been the case with China over the past several years. However, the authorities of such countries can clarify and communicate with the U.S. authorities to reduce the chances of having to face an escalation of trade protection measures by the U.S.
For Thailand, the Bank of Thailand (BOT) has clarified that the adding of Thailand to Monitoring List will not affect the business operations between Thai and US businesses. However, it must be acknowledged that such status may increase pressure on the appreciation of the Thai Baht, while the US dollar still tends to weaken along with the signals of easing monetary policy of the Federal Reserve (Fed). The risk posed by a stronger Thai Baht will be one of the factors that could create vulnerability to the recovery path of the Thai economy in 2021.
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