WASHINGTON – The U.S. Treasury Department said Tuesday it has retained Japan, China, South Korea, Germany and Switzerland on a list of countries it monitors over what it calls potentially “unfair” currency practices.
In line with President Donald Trump’s concern over the U.S. trade deficits with Japan, China and other major trading partners, the department said it “remains concerned by the persistence of the large bilateral trade imbalance between the United States and Japan.”
The department issued the warning ahead of Trump’s trip to Japan and four other Asian countries next month, increasing the likelihood that the U.S. president will urge Tokyo to reduce its trade surplus with Washington.
In a semiannual report to Congress, the department said, “Japan maintains the second-largest bilateral goods trade surplus with the United States, with a goods surplus of $69 billion over the four quarters through June 2017.”
The department recommended that Japan promote structural reforms so as to support a sustained expansion of domestic economic activity, create a more sustainable path for long-term growth and help reduce the country’s trade imbalances.
However, the report said Japan has not intervened in currency markets in almost six years.
“Treasury’s expectation is that in large, free-traded exchange markets, intervention should be reserved only for very exceptional circumstances with appropriate prior consultations,” it said.
The department, meanwhile, concluded that no major U.S. trading partner is manipulating its currency to gain an unfair trade advantage.
Taiwan was off the monitoring list in the latest report because it apparently has halted “persistent, one-sided intervention in foreign exchange markets.”
“The United States should not and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners, whether through imbalanced macroeconomic policies or unfair trade barriers,” the report said. “It is crucial that our major trading partners durably avoid foreign exchange and macroeconomic policies that facilitate unfair competitive advantage.”
The Treasury also criticized China for running “an extremely large and persistent bilateral trade surplus” with the United States, by far the largest among any of the major U.S. trading partners, with the goods trade surplus standing at $357 billion over the four quarters through June.
The department called for “further opening of the Chinese economy to U.S. goods and services, as well as reducing the role of state intervention and allowing a greater role for market forces.”
Such action “would provide more opportunities for American firms and workers to compete in Chinese markets and facilitate a reduction in the trade and investment imbalance between the United States and China,” it said.
Commenting on the report, Treasury Secretary Steven Mnuchin said the Trump administration remains vigilant to ensure that trade is “free, fair and reciprocal” with U.S. partners.
“We will continue to monitor foreign exchange policies for unfair currency practices which adversely impact all Americans,” Mnuchin said in a statement.
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