CPA’s Take: Very bad! The IMF has failed to stop currency manipulation. The US has acted with a modest regulation that defines when we can countervail foreign currency manipulation. Now the IMF is outrageously trying to stop that very modest regulation from being utilized. The US needs to go further and realign our overvalued dollar so our trade deficit narrows instead of balloons.
The Trump administration’s new approach to undervalued currency as a countervailable subsidy threatens to increase trade tensions and impinge on monetary policy, the International Monetary Fund staff said in a report this week.
[August 13, 2020 | InsideTrade.com]
The Commerce Department in February issued a new rule that allows for the imposition of CVD duties on products found to receive unfair currency subsidies. The rule, which took effect in April, is being used in a CVD investigation, instigated by United Steelworkers, into passenger vehicle and light truck tires from Vietnam. Other countries and the U.S. Chamber of Commerce have expressed concern that the new rule could violate World Trade Organization rules and prompt retaliation.
IMF staff, in a report released on Monday also decried the new rule, saying “the imposition of countervailing duties on imports from countries that the Department of Commerce finds to have an undervalued currency represents a significant risk to the multilateral trade and international monetary system which could potentially escalate trade tensions harming the U.S. economy and having negative spillovers for other countries. Instead, the U.S. should work constructively with its trading partners to better address these underlying distortions."...
Read the entire article here.