The U.S. Department of the Treasury designated Korea as a currency monitoring country in its semiannual report on 'Macroeconomic and exchange rate policies of major trading partners,' which was submitted to Congress on the 5th (local time).
This is the first report since the Trump administration began, and it is the first report issued after U.S. President Donald Trump identified currency manipulation as the number one unfair trade practice in the '8 major unfair trade practices list' last April.
In addition to Korea, the report also listed China, Japan, Singapore, Taiwan, Vietnam, Germany, Ireland, and Switzerland as currency monitoring countries. Compared to November of last year, Ireland and Switzerland were added to the list of currency monitoring countries.
Korea was removed from the currency monitoring list in November 2023, marking the first time in over seven years since April 2016. However, it was included again as a currency monitoring country last November, prior to the inauguration of the Trump administration.
Under the Trade Promotion Act established in 2015, the U.S. evaluates the macroeconomic and currency policies of the top 20 countries with which it has significant trade. If these countries meet certain criteria, they are designated as either a monitoring country or a country for in-depth analysis.
The evaluation considers whether a country has a trade surplus of more than $15 billion with the U.S., whether it records a current account surplus equivalent to 3% of Gross Domestic Product (GDP), and whether it has made net purchases of dollars exceeding 2% of GDP for at least 8 of the previous 12 months. If all three criteria are met, that country is designated for in-depth analysis, while if two of them are met, it is designated as a monitoring country.
Similar to last November, Korea was designated as a monitoring country based on trade surplus and current account surplus criteria. The U.S. Department of the Treasury explained that Korea's current account surplus is expected to increase to 5.3% of GDP in 2024, up from 1.8% the previous year.
The Treasury noted that Korean authorities intervened in the foreign exchange market in April and December of last year to address excessive volatility amid pressures on the won to devalue. It reported that Korean authorities had net sold $11.2 billion, which corresponds to 0.6% of GDP in 2024. The Treasury indicated that Korea should limit foreign exchange interventions due to exceptional circumstances arising from disordered foreign exchange market conditions in the future.
The Treasury stated that under the 'America First trade policy,' it will strengthen the analysis of trading partners' currency policies and practices in future reports. The department intends to focus more on situations in which trading partners intervene to mitigate market conditions or volatility while their currencies are under appreciation pressure. This could lead to a recommendation for imposing tariffs on countries where unfair currency practices are detected.
Scott Bessent, Secretary of the Treasury, said, 'We will continue to strengthen our analysis of currency practices and increase the expenses associated with being designated as a manipulating country. In the future, the Treasury will use all available tools to implement strong responses against unfair currency practices.'