US currency manipulator: South Korea, Taiwan, China were previously tagged

The Trump administration formally labelled China a currency manipulator after the yuan weakened to its lowest level in more than a decade on Aug 5, escalating its trade war with Beijing.
The Trump administration formally labelled China a currency manipulator after the yuan weakened to its lowest level in more than a decade on Aug 5, escalating its trade war with Beijing.PHOTO: AFP

SINGAPORE - The US labelled China a currency manipulator on Monday (Aug 5), further escalating the trade war between the world's two-largest economies.

However, this is not the first time the US has slapped the tag on a country or region.

Since the Trade and Competitiveness Act was enacted in 1988, the US has named three regions as currency manipulators.

South Korea and Taiwan were first stamped with the label in 1988. In 1992, Taiwan was once again named as currency manipulator.

China was tagged with the label from 1992 until 1994.

Subsequently, a report by the US congressional Government Accountability office found that all three economies in their negotiations with the United States made substantial reforms to their foreign exchange regimes and saw the manipulator designation lifted after their "currencies appreciated and external trade balances declined significantly".

For example, Taiwan brought its current account surplus down from 19 per cent to 9 per cent of its gross national product (GNP) after it was first named as a currency manipulator in October 1988, and then to 4 per cent after it was cited a second time in May 1992.

China's current account decreased from 3 per cent to a small surplus by 1994 after being named a currency manipulator in May 1992.

The Asian giant also unified its dual exchange rate system in 1994 after the last designation, and has since pegged the value of its currency to the US dollar.

 

However, American current affairs magazine Foreign Policy in a 2012 report said the US trade deficit with China has increased every year since 1988 and that "evidently, the labelling in the early 1990s didn't do the trick".

Meanwhile, the US Treasury department has kept South Korea on its monitoring list for currency manipulating countries.

South Korea's ministry of Economy and Finance however, suggested that Seoul could be taken off the list in the next six months, reported the Korean Herald in May this year.

"Given that Korea now only meets one of the three criteria, Treasury could remove Korea from the monitoring list if this remains the case at the time of its next report," it said.

Under revised standards, a US trading partner is named a currency manipulator if it has a bilateral trade surplus of US$20 billion (S$27.64 billion) or more with the US, a current account surplus of 2 per cent or more of its gross domestic product, and persistent one-sided intervention in foreign exchange markets.

South Korea currently only meets the current account surplus criteria – 4.7 per cent of its GDP as of 2018.