Despite rising trade friction with China, the Treasury Department again declined to label China a currency manipulator.
In a report released Friday, the department said that it remained worried about “the increasingly nonmarket direction of China’s economic development.” This posed a “growing risk” to China’s trading partners and the long-term global growth outlook.
The U.S. and China are threatening to place tariffs on each other’s goods. It may be weeks or months before it becomes clear if either side blinks.
The report is where Washington could have formally cited China for manipulating its currency lower to boost exports. The label could have added to an already worsening trade confrontation.
The report said that over 2017, the Chinese yuan “generally moved against the dollar in a direction that should, all else equal, help reduce China’s trade surplus with the U.S.” The agency said China’s goods trade surplus rose to $375 billion over the year, an increase of $28 billion over 2016.
India was added in this report to the Treasury monitoring list along with Japan, South Korea, Germany,and Switzerland. Countries that are under scrutiny for practices including a trade surplus in excess of $20 billion, a current account surplus larger than 3% of GDP and persistent intervention in currency markets in excess of 2% of an economy’s GDP. No countries broke all three of those actions, Treasury said.
The department cited India’s purchases of $56 billion of foreign exchange over the year, equivalent to 2.2% of GDP. Notwithstanding the increase in intervention,the rupee appreciated by more than 6% against the dollar. India had a goods trade surplus totaling $23 billion in 2017.
In 2017, the ICE U.S. dollar index DXY, -0.45% posted its weakest calendar-year performance since 2003, down almost 10%.
Some of the dollar’s weakness in 2017 was due to the surprising growth overseas, said St. Louis Fed President James Bullard on Friday.