(Reuters] – Treasury Secretary Janet Yellen’s 2nd foreign exchange report has yet to go public. This report risks naming some U.S. trading partner currency manipulators. But, it was not applied in the last report.

It is possible to be designated as a foreign exchange manipulator if you have a total trade surplus of more than $20 billion with the United States and a current account surplus that exceeds 2%. You also need currency intervention greater than 2%.

In April, the Treasury did not officially label Taiwan, Switzerland, and Vietnam as currency manipulators despite them having surpassed some thresholds set by a U.S. Trade Law in 2015. Trump had in December 2020 declared Vietnam and Switzerland currency manipulationators.

According to the Treasury’s April Report, 11 nations were deemed worthy of inclusion on its “Monitoring List,” which includes major trading partners.

Although there is no mandatory punishment for currency manipulators, U.S. law states that Washington must negotiate with their designated trading partners.

Analysts said that the following trading partners were at risk in the latest report due Oct. 15. However, they are not likely to receive the label. 

Graphic: FX valuations, https://fingfx.thomsonreuters.com/gfx/mkt/byprjkagape/FX%20valuations.JPG SWITZERLAND

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

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

    * Switzerland’s bilateral goods trade surplus of $39 billion in the 12 months to June 2021 exceeds the Treasury’s threshold, and it has a current account surplus equivalent to 3% of GDP in the 12 months to the end of the second quarter.

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

    * Still, analysts believe Switzerland won’t be on the list because the Treasury Department (TD) can also look at other factors like currency development, monetary policy and trade policy action.

TAIWAN

* Taiwan was last formally labeled a currency manipulator by the United States in December 1992. It was re-added to the monitoring list in 2020.

* Taiwan breached all three of the criteria, according to analysts at TD, although they do not expect Taiwan to be labeled a currency manipulator.

* Taiwan’s trade surplus with the United States hit $29.9 billion in 2020, according to official data, almost $7 billion more than in 2019, while the current account surplus last year was around 11% of GDP, exceeding Washington’s criterion.

* In the first nine months of this year Taiwan’s trade surplus with the United States hit $17.94 billion, up $5.13 billion on the year-ago period. Around 14.6% GDP was the current account surplus for the first half.

* The central bank said in September that in the first half of this year it bought a net $8.73 billion to intervene and “avoid serious disorder” in the currency market.By comparison, the central bank purchased a net $39.1 billion for all of 2020. According to TD analysts, Taiwan’s purchase amount was 7.8% of the country’s GDP.

* The Taiwan dollar’s 5.6% gain against the greenback last year was among the strongest in Asia. This year, it is up 2.5% against USD and one of the most 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 that are needed to help ease a supply shortage for U.S. manufacturers.

* The U.S. is likely to take into account both Taiwan’s special economic situation vis-à-vis its booming tech exports and key role in making chips, as well as the need to show U.S. support for Taiwan in the face of Chinese pressure when it comes to making a decision on whether to label it a manipulator.

VIETNAM:

* Vietnam was labeled a currency manipulator by the Trump administration in December 2020 but was spared being formally branded in Yellen’s report in April.

* 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 analysts at TD.

* After having reached an agreement with the U.S. 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 U.S. dollars in the forward markets after seven months of doing so, and reverted to purchasing spot dollars.

CHINA

* The Treasury Department under the Trump administration designated China a currency manipulator on Aug. 5, 2019, but in January 2020 Treasury dropped the designation days before the signing of a preliminary agreement to end the China-U.S. trade war.

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