- Reuters picBEIJING, April 15 ― Asian countries escaped the currency manipulator label in the latest US Treasury report, but remain wary of possible trade friction as President Donald Trump maintains his administration will seek to address trade imbalances.
In its semi-annual report released on Friday, the Treasury Department said China is not manipulating the value of its currency to gain an unfair trade advantage, but it should do more to reduce its large trade surplus with the United States. Treasury finds that six major trading partners warrant being placed on the Monitoring List for special attention: "China, Germany, Japan, Korea, Switzerland and Taiwan", it said. It said it will scrutinise China's trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the US.
While China had been intervening to prevent a depreciation of the yuan, its selling of foreign currency reserves abated early this year, Treasury said.
Treasury hasn't branded any nation a currency manipulator - a highly charged assertion - since the Clinton administration labeled China as such in 1994. China was labeled a currency manipulator between 1992 and 1994. That would have triggered talks between the countries and potentially led to U.S. sanctions - something experts warned would have prompted retaliation.
Trump may perhaps want to play big brother to Korea in order to coerce China into giving U.S. exporters greater market access and further rebalances the economy to rectify the huge trade imbalance. Such tariffs, though, could be overturned in a review by the World Trade Organization.
The report said that China remained on the list because of its "disproportionate share of the overall USA trade deficit", despite that China's current account surplus was only 1.8 percent of GDP in 2016, sharply down from 2.8 percent of GDP in 2015.
The Wall Street Journal said Trump explained during the interview that he made this decision because "China hasn't been manipulating its currency for months and because taking the step now could jeopardize his talks with Beijing on confronting the threat of North Korea". He also said: "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me". The U.S. may try to limit the dollar's rise against the yen in its first economic dialogue with Japan, scheduled for Tuesday. The dollar's strength in the past two years has been a drag on US exports. The administration has also put forward a draft proposal on renegotiating the North American Free Trade Agreement with Mexico and Canada that dropped some of the tougher positions Trump took during the campaign.