Some of the biggest exporting nations in the developing world could be in trouble with President-elect Trump for manipulating currencies, and may receive a massive tariff charge on their goods when the republican comes into power in January.
Nations such as Taiwan, China and Japan are already in violation of several U.S. Treasury rules and are in danger of falling foul of new regulations the government could bring in under a new administration. Even developed nations in Europe such as Germany and Switzerland have met some of the criteria to be tarred with the same brush.
Mr Trump’s pledges to lower taxes and increase infrastructure spending are generally seen by the markets as indicators that interest rates will be hiked in the very near future. Bets orientated around that outcome have caused a surge in the dollar after the election, taking the greenback to nine year highs versus the yuan and 6-month highs versus the yen.
“There is the possibility that some blame will be attached to many Asian countries for manipulating exchange rates given the Treasuries potential new regulations,” said a representative at Japans Ministry of Finance.
During Trumps election run Asian trade surpluses were clearly on his radar, with China running a huge $370 billion surplus last year, the biggest in Asia by far. Japan was a distant second with $70 billion, according to government data.
The republican candidate, who won the White House comfortably in the end after a close race, said in his speeches that he would label China and other Asian exporters as “currency manipulators” and slap a 45-50 percent tariff on their goods.
A recent report from Japan-based investment firm CITIC Tokyo International revealed Asian economies would be greatly affected by Trumps protectionist stance, with companies standing to lose 15 percent of revenue annually.
This could result in blowback from China, with the communist nation potentially going to the World Trade Organization to raise disputes.
Many analysts think Trump will significantly relax the criteria used to label a country as a currency manipulator, including the surplus levels and the degree of intervention a country makes into its foreign exchange rates.
An official from the South Korean government said this week that the country is “on the lookout” for any potential regulatory changes and that they are working hard to make sure they don’t fall foul of the manipulation label as it could have a devastating effect on their economy.
