The Trump administration has officially declined to brand China a currency manipulator, in another major U-turn for the USA president, who had repeatedly pledged during his campaign to do so soon after taking office. Treasury finds that six major trading partners warrant being placed on the Monitoring List for special attention: "China, Germany, Japan, Korea, Switzerland and Taiwan", it said.
Upon announcing his candidacy in 2015, Trump said that China's currency practices were making it impossible for American companies to compete and declared, "They're killing us".
Instead, the first currency review of the Trump administration singled out China and five other countries as needing to be monitored for their currency practices.
"China continues to pursue a wide array of policies that limit market access for imported goods and services, and maintains a restrictive investment regime which adversely affects foreign investors", it said.
The report said the Korean government needs to enhance the flexibility of the exchange rate and the USA will continue to monitor the government's intervention.
US President Donald Trump and Chinese President Xi Jinping shake hands during a dinner at Mar-a-Lago, Thursday, April 6, 2017, in Palm Beach, Fla.
The three criteria include a significant bilateral trade surplus with the USA of at least USD20 billion and a material current account surplus which is at least 3% of GDP.
Now, China needed to show that its lack of intervention in the currency markets "to resist appreciation" over the past three years was a "durable" policy by allowing the yuan to strengthen "once appreciation pressures resume", the Treasury said.
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The decision not to name China a currency manipulator has marked one of the sharpest major reversals of Trump's young presidency.
However, the Korean government continues to remain alert as it's possible it may be elevated to manipulator status.
Trump on Wednesday said his administration would not label China a currency manipulator.
Korea was placed on watch lists after meeting the first two requirements previous year and is unlikely to be removed soon.
According to the official, through that mechanism they will try to boost USA exports and the reduction of the commercial deficit of Washington with Beijing, criticized once and again by Trump since his stage as Republican candidate to the presidency.
Trump is expected to continue to pressure its trading partners, including Korea, to weaken the US greenback.
Trump, in a recent interview to The Wall Street Journal, backed away from his promise during the presidential campaign to punish China for manipulating the yuan.
The next report by the U.S. Treasury will be in October.