In many cases, the central bank weakens its own currency to subsidize exports and raise the price of imports, sometimes by as much as 30–40%, and it is thereby a method of protectionism.
[1] Under the 1988 Omnibus Foreign Trade and Competitiveness Act, the United States Secretary of the Treasury is required to "analyze on an annual basis the exchange rate policies of foreign countries … and consider whether countries manipulate the exchange rate between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade" and that "If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments".
Since the 1988 Act was enacted, the United States Department of the Treasury has designated the following countries as currency manipulators: In May 2019, the US Treasury removed India and Switzerland from its currency monitoring list but China, Japan, South Korea, Germany, Italy, Ireland, Singapore, Malaysia, and Vietnam remained on the list.
"[22][23] After the Biden administration moved Switzerland, Vietnam and Taiwan to an enhanced engagement status in April 2021, US treasury officials confirmed that the COVID-19 pandemic has caused massive trade and capital flow distortions, increasing the necessity for currency interventions in those export-oriented countries.
Taiwanese and Vietnamese officials welcomed the move not to categorize them as currency manipulators, since US authorities understood their "special situation".