One year later, Korea back on U.S. watch list for foreign exchange
Published: 15 Nov. 2024, 19:16
Updated: 15 Nov. 2024, 19:16
- SHIN HA-NEE
- [email protected]
Audio report: written by reporters, read by AI
Korea is back on the U.S. watch list for foreign exchange policies after a year of absence.
While the latest reinstatement will not have a direct or immediate impact on Korea, it signals increased scrutiny from the United States, especially as the incoming Trump administration threatens heavy tariffs to combat the country’s trade deficits.
The U.S. Treasury included Korea on its updated “Monitoring List of major trading partners,” defined as economies “whose currency practices and macroeconomic policies merit close attention,” in its Report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States published Thursday.
The report, published twice a year, named China, Japan, Taiwan, Singapore, Vietnam, Germany and Korea on its monitoring list, all of which — except for Korea — had been on it before.
Korea had been on the list since April 2016, excluding a brief respite in the first half of 2019, and was removed last November.
Countries that meet at least two of three criteria — a bilateral trade surplus of more than $15 billion with the United States, a material current account surplus of more than 3 percent of a country’s GDP and persistent one-sided intervention in the foreign currency market — are named on the monitoring list.
Korea met the first two conditions, with its trade surplus with the United States having steadily risen in recent years.
Korea posted the largest trade surplus with the United States among its partners this year. The country logged a bilateral trade surplus of $39.9 billion with its North American ally in the January-September period, larger than the total trade surplus of $36.8 billion during the same period, according to data from the Korea International Trade Association
If the trend continues through the end of this year, Korea’s U.S. trade surplus is expected to surpass the $50 billion threshold, higher than a record of $44.4 billion logged last year.
The United States' trade deficit with Korea was the eighth-largest among all trading partners as of August, significantly up from its 14th-place ranking back in 2021.
Meanwhile, Korea’s material current account surplus took up 3.7 percent of its GDP as of June, compared to 0.2 percent a year earlier, according to the U.S. Treasury Department.
“Korea should limit currency intervention to only exceptional circumstances of disorderly foreign exchange market conditions,” the report also mentioned in regard to its foreign exchange policy amid the won's steep depreciation against the dollar. As the won-dollar exchange rate has been hovering around the 1,400 threshold for several days, the government issued a verbal intervention on Thursday to rein in the heightened volatility.
The growing U.S. trade surplus may put a bigger target on Korea’s back, as U.S. President-elect Donald Trump promised to raise trade barriers significantly with a universal tariff of 10 to 20 percent during his campaign.
The Korea Institute for International Economic Policy estimated that a 10 percent tariff would knock the country's shipments to the United States down by $15.2 billion per year and those to other countries by $7 billion to $8.9 billion.
BY SHIN HA-NEE [[email protected]]
with the Korea JoongAng Daily
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