US Refrains From Using Currency Manipulator Tag, Blasts China

(Bloomberg) — In the first formal assessment of US trading partners’ foreign-exchange practices since President Donald Trump returned to office, the Treasury Department declined to name any country a currency manipulator while singling China out for “its lack of transparency.”

The Treasury also said, in a semiannual foreign-exchange report released Thursday, it would strengthen its analysis of trading partners’ exchange-rate policies going forward. And it issued a stark warning against attempting to engage in “unfair” currency practices.

“The Trump Administration has put our trading partners on notice that macroeconomic policies that incentivize an unbalanced trading relationship with the United States will no longer be accepted,” Treasury Secretary Scott Bessent said in a statement. “We will continue to strengthen our analysis of currency practices and increase the consequences of any manipulation designation.”

While Trump has long accused countries including China for maintaining undervalued exchange rates that helped them amass trade surpluses with the US, his main avenue to address perceived grievances thus far has been tariffs. Bessent has said that currency policy hasn’t featured in trade talks with partners including China, Japan and South Korea.

“Tariffs are the first line of attack on the trade war front,” said Shaun Osborne, chief currency strategist at Scotiabank. “FX might figure more prominently down the road if tariffs don’t achieve this administration’s objectives.”

Thursday’s report saw Ireland and Switzerland added to a list of seven other economies that the Treasury is closely monitoring. The Biden administration’s final report, in November, had seven nations on that list for “enhanced analysis.” Trading partners that meet two of three criteria under a 2015 law get assigned to the list. China, Japan, Korea, Taiwan, Singapore, Vietnam and Germany were already on it.

The Treasury noted Ireland’s swelling current-account surplus, which has been propelled in part by exports of items including pharmaceuticals to the US. Switzerland, which has previously been on the monitoring list, also saw a rising trade surplus with the US, with the report saying that was “driven by the gold trade balance” between the two nations, along with pharmaceutical products.

China is on the list despite not triggering at least two of the criteria, Treasury officials noted on a call with reporters. As it has in the past, the Treasury blasted Beijing for standing out among major trading partners for its “lack of transparency around its exchange rate policies and practices.”

“This lack of transparency will not preclude Treasury from designating China if available evidence suggests that it is intervening through formal or informal channels to resist RMB appreciation in the future,” the report said. RMB refers to the renminbi, the official name for the Chinese yuan.

While the Treasury considered whether to adjust the thresholds for the monitoring-list criteria, Bessent didn’t see a reason to alter them at this time, the Treasury officials said.

Manipulator Tag

The last time the Treasury designated a country as a manipulator was in 2019, in Trump’s first term, when China got hit with the label. The tag was dropped five months later as a bilateral trade deal was negotiated. 

The report covers the four quarters through December 2024. That was a period of dollar appreciation, with the Bloomberg Dollar Spot Index having climbed almost 8% for 2024. Most of the gains were notched in the fourth quarter, propelled in part by expectations for faster growth and higher inflation and interest-rate risk from Trump’s plans for tax cuts and tariff increases.

This year, the dollar has been on the decline, undermined by worries over a weakening in the economy due to aggressive increases in import levies and uncertainty over a number of government programs since Trump took office. Concerns about US fiscal sustainability have also stoked angst with respect to foreign demand for dollar-denominated assets including Treasury securities — though data have yet to show any major exodus.

Because of the dollar’s retreat, trading partners are more likely to have intervened to slow their currency’s appreciation in recent months. Taiwan’s monetary authority revealed earlier Thursday that it had taken action to intervene in foreign-exchange markets. 

“Treasury will continue to monitor closely the extent to which intervention by our trading partners is two-way, and whether economies that choose to smooth exchange rate movements resist depreciation pressure in the same manner as appreciation pressure,” Thursday’s report said. “Treasury also will consider working with other countries to develop comprehensive measures” addressing policies that contribute to exchange rate “misalignments,” the report said.

More broadly, the Treasury said the US suffered from decades of unfair currency practices by others that had “hollowed out US manufacturing employment.”

Going forward, strengthened surveillance against potential manipulation “will also include greater vigilance about other potential means, beyond foreign exchange intervention, that may be employed by US major trading partners to influence exchange rates,” the Treasury said. Officials told reporters that may cover things like the activities of sovereign wealth funds and pension funds.

Earlier Thursday, Trump said he would travel to China, after receiving an invitation to do so during a phone call with President Xi Jinping to address the most recent spate of trade tensions. He didn’t specify when he might go.

A second round of top-level trade talks is set to occur “shortly,” the president said, after Bessent and US Trade Representative Jamieson Greer led the previous session in Geneva last month. Commerce Secretary Howard Lutnick will be included in the next gathering, Trump’s comments showed.

–With assistance from Carter Johnson and Saleha Mohsin.

(Updates with analyst comment in fifth paragraph.)

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