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 semi-annual currency report before turning over policing of foreign exchange practices to President-elect Donald Trump.
Trump, who has frequently complained about the strong dollar eroding U.S. trade competitiveness, ended his first term in the White House with Treasury declarations of Vietnam and Switzerland as currency manipulators in December 2020 over their market interventions to weaken the value of their currencies.
For much of the past four years, however, foreign exchange interventions by U.S. trading partners have moved in the opposite direction, to push up the values of their currencies against the dollar, mainly to fight price inflation.
The Treasury's semi-annual currency report found that for the four quarters ended June 30, no major U.S. trading partners met all three criteria for "enhanced analysis" of their currency practices. That process leads to intensive consultations and could ultimately produce trade sanctions.
The Treasury said it had seven countries on its "monitoring list" for extra foreign exchange scrutiny: China, Japan, South Korea, Taiwan, Singapore, Vietnam and Germany. Malaysia, which was on the previous report's list, dropped off, while South Korea was added due to its large global current account surplus and its sizable goods and services trade deficit with the U.S.
Countries that meet two of the criteria - a trade surplus with the U.S. of at least $15 billion, a global account surplus above 3% of GDP and persistent, one-way net foreign exchange purchases - are automatically added to the list.
China was kept on the monitoring list because of its large trade surplus with the U.S. and because of a lack of transparency surrounding its foreign exchange policies. The report noted that a slight decline in China's current account balance to 1.2% of GDP, its export volumes have risen sharply, indicating a decline in export prices, and the trend continued beyond the monitoring period to the third quarter of 2024.
"Partially as a result of weak domestic demand, China has increasingly relied 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 Treasury Department said in the report. "Thus, while the reported current account surplus is not material, the rapidly growing export volumes amid falling prices will likely have large impacts on China's trading partners."
The Treasury Department also reiterated its call for more transparency in China's foreign exchange intervention practices.
Trump has vowed to impose tariffs of at least 60% on Chinese goods, and 10%-20% on imports from the rest of the world.
