Across The Border | Taiwan and South Korea are closer to being named currency manipulators than China

China, South Korea and Taiwan are all on a US Treasury watch list for allegedly manipulating their currencies. As such, observers will be watching closely on April 15, when the Treasury issues its next report, the first of the Trump administration, where it may formally name one of the three a currency manipulator.

Analysts do not expect any country to meet the criteria that the Treasury uses to decide if a country should be so designated, but whether or not the Trump administration looks to change the rules after the report is published will give an indication of how it wants to proceed with its east Asian trade policy.

While campaigning for the presidency of the United States, Donald Trump said that he would declare China a currency manipulator “on day one”, but as of March 29, he has missed this self-imposed deadline by 68 days.

Out of the three countries on the watch list, Kevin Lai and Olivia Xia from Daiwa Capital Markets said in a research note that when the US treasury releases its report, South Korea and Taiwan were closer to being named currency manipulators than China, but that they felt none of the three fulfilled the designated criteria.

Nonetheless, they wrote that “precisely because the Treasury likely won’t name any economy this time around, we think there may be a temptation for Trump to consider changing the benchmarks in the future”.

Under current rule, declaring a country a currency manipulator is primarily a rhetorical device, and the only immediate consequence is the launching of a one-year negotiating period. Nonetheless, should the Trump administration change the benchmarks, this would suggest that they are taking a tougher line on China.