By David Lawder
WASHINGTON (Reuters) – No major U.S. trading partner manipulated its currency in the year to June 30, the Treasury Department said on Thursday in the Biden administration’s final six-month currency report before handing oversight of currency practices to President-elect Donald Trump. .
Trump, who has often complained that the strong dollar is eroding U.S. trade competitiveness, ended his first term in the White House in December 2020 with Treasury Department declarations of Vietnam and Switzerland as currency manipulators for their market interventions to weaken the value of their currencies .
Trump also directed then-Treasury Secretary Steven Mnuchin in August 2019 to label China a currency manipulator, a move taken at the height of US-China trade tensions. The Treasury Department dropped the designation in January 2020 as Chinese officials arrived in Washington to sign a trade deal with the US
For much of the past four years, however, U.S. trading partners’ currency interventions have gone in the opposite direction, with the value of their currencies rising against the dollar, mainly to combat inflation.
President Joe Biden’s term will end with the Treasury Department having made no manipulation statements but regularly raising concerns about China’s currency practices in its biannual currency reports.
The department’s latest analysis shows that for the four quarters ended June 30, no major U.S. trading partners met all three criteria for an “enhanced analysis” of their currency practices. This process leads to intensive consultations and can ultimately lead to trade sanctions.
The Treasury Department said China, Japan, South Korea, Taiwan, Singapore, Vietnam and Germany were on the “monitoring list” for additional foreign exchange surveillance. Malaysia, which was on the list in the previous report, was dropped, while South Korea was added due to its large global current account surplus and significant trade deficit in goods and services with the US.
Countries that meet two of the criteria – a trade surplus with the US of at least $15 billion, a global account surplus of more than 3% of GDP, and sustained, unilateral net foreign exchange purchases – are automatically added to the list.
CHINA discrepancies
China was kept on the monitoring list because of its large trade surplus with the US and a lack of transparency around its currency policy, the Treasury Department said.
The report noted that despite a slight decline in China’s current account balance to 1.2% of GDP, China’s export volume had risen sharply, indicating a decline in export prices. It said the trend continued after the monitoring period until the third quarter of 2024.
“Partly due to weak domestic demand, China has become increasingly reliant on foreign demand to drive growth this year, with net exports contributing an unusually high share (43%) of real growth in the third quarter.” , the report said. “Thus, while the reported current account surplus is not material, rapidly growing export volumes amid falling prices are likely to have major implications for China’s trading partners.”
The report also reiterated a call for greater transparency in China’s currency practices, including the use of a daily correction to prevent the yuan from weakening without official explanation. It said these policies “make China an outlier among major economies and warrant close scrutiny by the Treasury Department.”
Trump has pledged to impose tariffs of at least 60% on imported Chinese goods regardless of Beijing’s currency practices, and wants a 10% to 20% levy on imports from the rest of the world.
According to the currency report, Japan was kept on the monitoring list due to its $65 billion trade surplus with the US during the period under review and a rise in the global current account surplus to 4.2% of GDP from 2% a year earlier.
The Treasury said Japan’s finance ministry has intervened to support the yen’s value three times since April: on April 29, May 1 and July 11-12. It noted that Japan’s actions were transparent, but reiterated that intervention “should only be reserved for very exceptional circumstances, without prior consultation.
