No major U.S. trading partner met all three criteria necessary to be designated as a currency manipulator and therefore none will be subject to increased U.S. bilateral engagement or penalties, according to Treasury’s biannual report to Congress on foreign exchange policies of major U.S. trading partners.
Countries must have a significant bilateral trade surplus with the U.S., a current material account surplus and engaged in persistent intervention in currency markets to be officially designated by Treasury as a currency manipulator, at which point the executive branch is statutorily required to ramp up bilateral engagement with such countries.
The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) sets forth the requirements for publication of the Treasury report and pursuant actions, including requirements for retaliation — to include exclusion from government procurement — if Treasury designees don’t adopt adequate policies to reverse currency undervaluation and external surpluses within a year of the start of bilateral engagement.
Major U.S. trading partners Japan, Germany, Ireland, Vietnam, Italy, Malaysia and Singapore met two of the three criteria necessary to be a U.S.-designated currency manipulator, and China has a “significant bilateral trade surplus with the United States, with this surplus accounting for a disproportionate share of the overall U.S. trade deficit.”
While South Korea met two of three criteria in every report between April 2016 and October 2018, it only met one criterion in this report — a material current account surplus, Treasury said.
But Treasury said that South Korea must demonstrate improvements against the currency manipulation criteria are durable before it is removed from the monitoring list.
Japan and Germany have met two of the three criteria in every biannual TFTEA-required Treasury currency report since the first one was published in April 2016, Treasury noted.
Starting with this report, Treasury is expanding the number of trading partners covered in the report from the 12 largest U.S. trading partners to all countries with goods that trade with the U.S. exceeding $40 billion annually. In 2018, there were 21 U.S. trading partners that had goods trading with the U.S. that exceeded $40 billion.