The U.S. Department of the Treasury released a report this week that reviewed and assessed the policies of major U.S. trading partners.
Among the major findings, the semiannual Report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States concludes that no major U.S. trading partner manipulated the rate of exchange between its currency and the U.S. dollar for purposes to prevent effective balance of payments adjustments or gain an unfair competitive advantage.
“The global economy has proven to be more resilient than many predicted at the time of our last Report. Nevertheless, Russia’s war against Ukraine continues to weigh on the outlook and has increased energy and food insecurity. Differing growth and inflation outlooks have led to a range of policy actions across countries, which, coupled with fundamentals including interest rate differentials, terms of trade shocks, and longer-term growth expectations, have had large impacts on currencies. Most foreign exchange intervention by U.S. trading partners last year was in the form of selling dollars, actions that served to strengthen their currencies. However, Treasury remains vigilant to countries’ currency practices and policy settings and their consistency with strong sustainable and balanced global growth,” Secretary of the Treasury Janet Yellen said.
Further, the report found that no major trading partner met all three criteria for enhanced analysis under the Trade Facilitation and Trade Enforcement Act of 2015 (2015 Act) during the four quarters ending December 2022.
In addition, the report revealed the even economies that are on Treasury’s “Monitoring List” of major trading partners that merit close attention to their currency practices and macroeconomic policies. Those economies include China, Korea, Germany, Malaysia, Singapore, Switzerland, and Taiwan.
Switzerland, which had previously exceeded the thresholds for all three criteria under the 2015 Act, only exceeded one of the three criteria last year. Though Switzerland no longer meets all three criteria for enhanced analysis, Treasury will continue to analyze Switzerland until it does not meet all three criteria under the 2015 Act for at least two consecutive reports.
The report also reiterated Treasury’s call for increased transparency from China. The country’s failure to publish foreign exchange intervention and broader lack of transparency around key features of its exchange rate mechanism make it an outlier among major economies and warrant Treasury’s close monitoring.