Private foreign capital is weaponizing US dollar against domestic producers
For Immediate Release
Washington. The US Treasury Department has released its latest semi-annual report on exchange rate policies. As expected, the report did not cite any countries for engaging in “currency manipulation” that would push the dollar higher relative to their own currencies. However, the Coalition for a Prosperous America (CPA) notes that Treasury failed to address inflows of foreign private capital that are now driving currency misalignment and harming America’s businesses and workers.
“Ten years ago, our manufacturers, farmers, ranchers, and workers were struggling against currency manipulation by foreign central banks,” said Michael Stumo, CEO of the CPA. “But financial markets have changed greatly in recent years, and Treasury has failed to keep up. While currency manipulation is always a serious risk, a flood of foreign capital inflows is our problem today. Those excessive inflows are driving up the dollar’s value and weaponizing it against our own domestic producers and exporters.”
In its report, Treasury did expand the number of countries it tracks for currency issues. Countries with a trade surplus of 2 percent of GDP will now be considered as having a serious imbalance, rather than the previous 3 percent threshold.
Said Stumo, “Treasury is at least acknowledging the importance of the problem of global trade imbalances. And their concerns regarding Germany, Vietnam, and Ireland are entirely appropriate, since all three countries are intentionally using government policy to alter trade flows. But Treasury needs to go further to fix the problem.”
The dollar’s overvaluation remains the single largest impediment to US trade competitiveness. CPA recently released a study that found the US dollar to be overvalued by roughly 27 percent. CPA believes that adjusting the dollar to a competitive level would yield persistent economic benefits, including an estimated $1 trillion in additional GDP and more than 5 million new jobs over six years.
“President Trump cannot achieve his campaign promise of significantly narrowing our trade deficit without Treasury refocusing on this flood of foreign capital inflows,” said Dan DiMicco, CPA Chairman. “China, Europe, and other countries enjoy large trade surpluses with the US because of the noncompetitive dollar. We do strongly support the recent proposal by the Department of Commerce to use tariffs to counter currency misalignment.”
A realignment of the dollar would greatly improve export competitiveness and enable domestic industries—including manufacturing, mining, and agriculture—to grow at significantly higher rates. Because of this, CPA is urging Washington to adopt a “Market Access Charge” (MAC) to manage the ongoing influx of foreign capital. As CPA’s research demonstrates, a fee applied to incoming investment could slow foreign capital inflows, gradually adjusting the dollar to a trade-balancing price.
Click here to read CPA’s full study on dollar overvaluation.