In this July 21, 2018 file photo, US Treasury Secretary Steven Mnuchin speaks during a briefing with the press in Buenos Aires in the framework of the G20 meeting of Finance Ministers and Central Bank Governors.(PHOTO / STR / AFP)

WASHINGTON - The Trump administration labeled Switzerland and Vietnam currency manipulators on Wednesday, in another parting shot at international trading partners that could complicate matters for US President-elect Joe Biden’s incoming team.

In a long-overdue report, the US Treasury also added India and Thailand to a list of countries it says may be deliberately devaluing their currencies against the dollar.

The Swiss National Bank said it does not manipulate its currency and “remains willing to intervene more strongly in the foreign exchange market”. Vietnam’s trade ministry declined to comment

The COVID-19 pandemic has skewed trade flows and widened US deficits with trading partners, an irritant to outgoing President Donald Trump, who won office four years ago partly on a promise to close the US trade gap.

The Swiss National Bank said it does not manipulate its currency and “remains willing to intervene more strongly in the foreign exchange market”. 

Vietnam’s central bank said on Thursday it will work with US authorities to ensure a “harmonious and fair” trade relationship.

The State Bank of Vietnam said in a statement that the country’s trade surplus with the United States was the result of “peculiarities of the Vietnamese economy”. It added that Vietnam’s monetary policies were not aimed at creating unfair trade advantage.

The manipulator labels will ramp up pressure on Biden before he takes over, Per Hammered, chief emerging markets strategist at SEB in Stockholm, said.

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“You set the agenda and force him (Biden) into positions that he will have to get out of somehow,” Hammered said.

A US Treasury official said Biden’s transition team had not been briefed, adding: “They are not implicated in this.”

US Treasury Secretary nominee Janet Yellen could alter the findings in her first currency report, which is due in April.

A spokesman for Biden’s team did not respond to a request for comment.

The President-elect’s team has been critical of other moves by US Treasury Secretary Steven Mnuchin, including ending some Federal Reserve pandemic lending programs.

Mnuchin said in a statement that the Treasury “has taken a strong step today to safeguard economic growth and opportunity for American workers and businesses.”

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Countries must at least have a US$20 billion-plus bilateral trade surplus with the United States, foreign currency intervention exceeding two percent of gross domestic product and a global current account surplus exceeding two percent of GDP to be labeled a manipulator.

Vietnam and Switzerland far exceeded these criteria, with foreign exchange interventions of five percent and 14 percent of GDP respectively.

The report said that at least part of Vietnam’s intervention was aimed at pushing down the dong for a trade advantage, while at least part of Switzerland’s action was aimed at pushing down the Swiss franc to prevent effective balance of payments adjustments.

The Treasury said Switzerland’s foreign exchange intervention totaled 14 percent of GDP.

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Vietnam, which has seen foreign investment by companies seeking to avoid US tariffs on Chinese goods, saw intervention of more than five percent of its GDP, it added.

Mark Sobel, a former Treasury and International Monetary Fund (IMF) official, said the manipulator designations were “mechanistic” interpretations of the thresholds that ignored subtleties and extenuating circumstances.

Mark Sobel, a former Treasury and International Monetary Fund (IMF) official, said the manipulator designations were “mechanistic” interpretations of the thresholds that ignored subtleties and extenuating circumstances

These include safe-haven inflows into Switzerland’s currency due to the pandemic and a rush of foreign investment into Vietnam in 2019.

The IMF has forecast that Vietnam’s current account surplus will fall below the two percent of GDP threshold for 2020.

“They’re missing some more obvious cases of harmful currency practices,” said Sobel.

The Treasury official said the United States will seek negotiations with Switzerland and Vietnam to bring them back below the manipulation thresholds and declined to speculate on whether the process could lead to US tariffs on their goods.

Among remedies specified in US laws governing the currency report are limiting offending countries’ access to government procurement contracts and to development finance.

Vietnam could be hit with tariffs under a separate investigation by the US Trade Representative’s office now underway into the causes of an undervalued dong. The Treasury findings could influence this probe and some in the business community fear that Trump may move quickly on it.

The label briefly lifted the value of the Swiss franc against the dollar. Forex strategists said the move may make it slightly more difficult for the SNB to intervene, but the easing of the coronavirus pandemic would reduce upward pressure on the franc.

The report said that India and Singapore had intervened in the foreign exchange market in an “asymmetric manner” but did not meet other requirements to warrant a manipulator label.