Taiwan remains on US currency monitoring list

UNDER WATCH:
The US Treasury report called on Taiwan to limit its foreign exchange intervention and allow currency movements in line with economic fundamentals

• Staff writer, with CNA, Washington

Taiwan has been kept on a monitoring list of currency manipulation by the US government in its semi-annual report on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.

In the latest report submitted to the US Congress on Tuesday, the US Department of the Treasury said it found that no major US trading partner has manipulated exchange rates to get an unfair competitive edge in international trade during the four quarters through June.

However, Taiwan remained on the watch list for currency manipulation, as did China, Malaysia, Germany and Singapore, while Vietnam was added to the list, the report said.

Photo: CNA

The trading partners analyzed in the report accounted for about 78 percent of US foreign trade in goods and services, the department said.

In the previous semi-annual report released in June, Taiwan, China, South Korea, Germany, Malaysia, Singapore and Switzerland were on the watch list.

The report uses three criteria to determine if a trading partner should be named a currency manipulator. They are: having a trade surplus with the US of at least US$15 billion; having a current account surplus of at least 3 percent of GDP; and persistent intervention in the foreign exchange market, with net purchases of foreign currency of at least 2 percent of GDP.

A trading partner that meets all three criteria can be tagged a currency manipulator, but if it meets only one of the three criteria for two reports in a row, it can be removed from the monitoring list.

Taiwan met the trade surplus and current account surplus criteria, but “foreign exchange intervention was limited in the first half of 2023, consistent with muted currency movements,” the report said.

It advised Taiwan to “deploy a careful mix of policies that better insulate the economy from external shocks and address structural issues to reduce external sector imbalances,” especially in terms of diversifying its energy imports.

It also said Taiwan’s “foreign exchange intervention should be limited and allow currency movements in line with economic fundamentals.”

“Most foreign exchange intervention by US trading partners over the Report period was in the form of selling dollars, actions that served to strengthen their currencies,” US Secretary of the Treasury Janet Yellen said in a statement.

“However, Treasury remains vigilant to countries’ currency practices and the [US President Joe] Biden Administration strongly opposes attempts by the United States’ trading partners to artificially manipulate currency values to gain unfair advantage over American workers,” Yellen said.

The report also called for greater transparency from China, saying its failure to disclose foreign exchange interventions and its lack of transparency on key features of its exchange rate mechanism made it an outlier among major economies and warranted close monitoring.