U.S. to Vet More Trading Partners for Currency Manipulation

The Trump administration will expand the number of countries it scrutinizes for currency manipulation in an upcoming report, people familiar with the matter said, after lowering the bar for foreign governments to come under scrutiny.

Vietnam may be named a manipulator outright for artificially holding down the value of the dong, the people said, after meeting all three criteria the Treasury Department uses to test for currency interventions. Internal debate is continuing over the issue and the administration has asked Vietnam to disclose more information before it releases the report.

Treasury issues a report twice annually on foreign currencies. In the latest report, expected this month, the number of countries whose currency practices the U.S. examines for possible manipulation will rise to about 20, from 12, according to people familiar with the matter.

The number increased after Treasury reduced one of the three criteria it uses to test for manipulations, the people said -- current account surplus, which captures the difference between the amount a country exports and imports. The criteria was reduced to a surplus of 2 percent of gross domestic product from 3 percent.

The people asked not to be identified because the report hasn’t yet been issued and they were not authorized to speak publicly about it.

President Donald Trump has in the past tweeted that China, Russia and the European Union all manipulate their their currencies to gain an unfair trade advantage over the U.S. He vowed on the campaign trail to label China a currency manipulator on his first day in office. But Treasury Secretary Steven Mnuchin has yet to do so because he has said Beijing doesn’t meet criteria set by Congress.

Russia and the EU also have not been officially designated currency manipulators. The label has no practical effect, other than requiring the U.S. to engage in negotiations with offending countries, but would have market repercussions for any government named a manipulator.

Currency policy has been a central tenet of trade deals that Trump has struck with Mexico, Canada and South Korea, and it’s expected to be part of an agreement with China, should one be reached.

Related: Here’s How Trump Can Formally Call China a Currency Manipulator

Treasury’s latest report is also expected to remove India and South Korea from its watch list for foreign-exchange practices of countries it monitors closely.

A Treasury spokesman declined to comment on specifics of the report ahead of its release.

The report was officially due to Congress in April. Mnuchin had initially expected to meet that deadline and had submitted the completed report to the White House for sign-off in early April, but it has since been delayed, according to two of the people. A spokesman said the Treasury Department has full control of the report and no officials outside the agency had influenced it.

The U.S. has not labeled a major trade partner a currency manipulator since 1994.

So far, Treasury has examined its 12 largest trade partners and Switzerland. An expanded watch list could include Russia, Thailand, Indonesia, Vietnam, Ireland or Malaysia, all of which have large trade surpluses with the U.S.

In addition to current account surplus, the criteria to assess if a country is interfering in its currency value are a minimum $20 billion trade surplus with the U.S. and repeated interventions in currency markets.