No three strikes for major trade partners

While no country met all three criteria to be designated a currency manipulator, Treasury does identify six nations subject to monitoring of economic trends and foreign exchange policies.

   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 and possible sanctions, 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, South Korea, India, Germany and Switzerland met two of the three criteria necessary to be a U.S.-designated currency manipulator, and China “constitutes a disproportionate share” of the United States’ global trade deficit.
   Japan, Germany and South Korea 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.
   Treasury is including all six of these countries on its “monitoring list,” meaning the agency will “closely monitor and assess” economic trends and foreign exchange policies of each of the economies, the report says.
   The report also highlights the Trump administration’s ongoing concern with global trade balances.
   “While no economy met all three of the criteria for the current reporting period, Treasury remains deeply concerned by the significant and persistent trade imbalances in the global economy,” the report says. “The global adjustment process has not worked effectively to promote a symmetric adjustment toward smaller imbalances in a manner that sustains — rather than inhibits — global growth.”
   Treasury’s report covered the 12 largest U.S. trading partners, including economic, trade and exchange rate developments for the last six months of 2017 and, where data is available, developments through the end of March 2018, the agency said.