Macroscope | US appoints itself prosecutor, judge and jury on currency manipulation

Hillary Clinton, the frontrunner for the Democratic Party nomination in this year’s US presidential election, repeated her opposition on May 1 to the proposed Trans-Pacific Partnership trade deal, while Donald Trump, leading the Republican Party’s nomination race, called the US trade deficit with China “the biggest theft in history”.

While a lot of words get thrown about in the hurly-burly of the US electoral process, and much of the rhetoric remains just that, policymakers and investors in Asia, and indeed in Europe, cannot just ignore the tone of the conversation being held in the United States, particularly when the US Treasury is also now weighing into the argument.

April 29 saw the publication of the US Treasury’s semi-annual Report to Congress on the Foreign Exchange Polices of Major Partners of the United States and unveiled a new watch list of economies whose currency policies would be scrutinised for evidence that they unfairly disadvantage US producers.

“The [US] Treasury is creating a new ’Monitoring List’ that includes these economies: China, Japan, Korea, Taiwan and Germany,” said the report, applying “the intensified evaluation provisions of the Trade Facilitation and Trade Enforcement Act of 2015”.

That Act “establishes a process to monitor key indicators related to foreign exchange operations, engage economies that may be pursuing unfair practices, and impose meaningful penalties on economies that fail to adopt appropriate policies”.

While this would occur within the framework of US international obligations, those countries on the watch list might reasonably conclude Washington has appointed itself prosecutor, judge and jury where the accused are essentially being investigated due to their success in exporting goods to the United States.