The US Treasury Department has put Switzerland back on a biannual list of countries that are under observation because of large trade surpluses with the United States. 

Switzerland was previously included on the Monitoring Listexternal link between October 2016 and October 2018, “having a material current account surplus and engaged in persistent, one-sided intervention in the foreign exchange market”. It was then removed in May 2019.

The US Treasury announced on Tuesday that Switzerland’s trade surplus with the US in the four quarters through the end of June 2019 totalled $21.8 billion (CHF21.1 billion). Switzerland also had a current account surplus which amounted to 10.7% of GDP in the same period. 

“To help narrow its large and persistent trade and current account surpluses, Switzerland should adjust macroeconomic policies – in particular, using its ample fiscal space to more forcefully support domestic economic activity and reduce reliance on monetary policy as it approaches its limits,” the Treasury urged in the report. 

The State Secretariat for International Finance (SIF) reacted quickly to the news. “It should be emphasised that Switzerland does not engage in any manipulation of its currency in order to prevent balance of payments adjustments or to gain unjustified competitive advantages,” it said in a statement on Tuesday.

SNB interventions 

The Treasury said it was also closely monitoring the interventions of the Swiss National Bank (SNB) in the foreign exchange market. The SNB has described the franc as “highly valued”.

Although the SNB does not publish figures on its interventions, the Treasury estimates that net purchases of foreign exchange over the four quarters through June 2019 totalled 0.5% of GDP. 

“Since mid-2019, Switzerland’s foreign exchange purchases have increased markedly as the Swiss franc has appreciated against both the dollar and the euro,” the report said. “Treasury continues to encourage the Swiss authorities to publish all intervention data on a higher frequency basis.” 

The Treasury report also cited continued concerns about currency practices of nine other countries: China, Germany, Ireland, Italy, Japan, Malaysia, Singapore, South Korea and Vietnam.

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