Monday, February 6, 2017

Trump Risk: Who Has "...Currency Intervention and a Large Trade Reliance on the US?"

From FT Alphaville:

Switzerland’s own Trump risk
An actually decent amount of currency intervention and a large trade reliance on the US? Hmmm…
From Deutsche’s Robin Winkler, with our emphasis:
The Trump administration has spoken out against alleged currency manipulation from China, Japan and Germany. Yet the country most at risk of meeting the Treasury’s official criteria of currency manipulation is probably Switzerland. The risk of coming into US focus, perhaps as early as 2018, could add to the rationale for the SNB to gradually discontinue market intervention.
On Treasury rules, trading partners need to meet three criteria to be deemed currency manipulators. First, they need to intervene to the tune of at least 2% of GDP a year to cap their exchange rates. Besides Taiwan, Switzerland is the only country that ticks this box with a whopping 9%. Second, they need to run current account surpluses of at least 3% of GDP, well below Switzerland’s 10%. Third, they need to run at least a $20bn goods trade surplus against the US. Unlike most countries on the Treasury’s watch list, Switzerland is still below this threshold at $13bn, but the surplus has been growing at such a fast clip that it looks set to exceed the threshold in 2018, especially if USD/CHF strengthened further (chart 1).
Or charted, again from Deutsche:...MORE, including the provocative:
...Switzerland as the potential new China in potential for Trumpian accusations of unfair trade practices? Just way more vulnerable?