February 10, 2020

Trump Administration Issues Rule for Countervailing Unfair Currency Subsidies

On February 3, the U.S. Department of Commerce issued a final regulation that would allow the federal government to impose countervailing duties on countries that it deems guilty of currency manipulation. In a press release, the department said the new rule identifies the criteria that the department would use to determine if countervailing duties should be imposed and noted Commerce will “not normally include monetary and related credit policy of an independent central bank or monetary authority.”

According to Bloomberg Government (subscription required), the criteria are whether there is:

  • Multilateral undervaluation and any corresponding bilateral undervaluation relative to the U.S. dollar;
  • Government action of the exchange rate that contributes to the undervaluation; and
  • Predominant or disproportionate use of the currency subsidy by the traded goods sector.

As Politico explained, while the U.S. Department of Treasury is the federal agency that determines whether other nations have manipulated their currency, under this new rule, the Commerce Department would determine whether new duties are warranted. Specifically, “a country could still be subject to countervailing duties on the basis of currency manipulation even if the Treasury Department does not fault that country’s exchange rates in its biannual currency report.” (Bloomberg noted the Treasury Department opposed this regulation when it was first proposed last year.)

Under the regulation, U.S. companies could file complaints with the Commerce Department regarding specific imported products, or the Commerce Department also could use its authority to self-initiate a countervailing duty investigation on the basis of currency manipulation.