Trump administration places strong emphasis on exchange rates
On 5 June, the US Treasury released its Report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. This was the first such report issued since the start of President Donald Trump's second term. With bilateral trade negotiations underway ahead of the 9 July deadline for the provisional suspension of "reciprocal tariffs," no country was designated a currency manipulator—an action that could have triggered additional US tariffs. However, from the outset of the Executive Summary, the report underscores the Trump administration's strong focus on exchange rates, implicitly reviving speculation of a push to correct the strong dollar. Regarding Japan, the report attributes the yen's depreciation primarily to interest rate differentials and calls for further progress by the BOJ in normalizing monetary policy. The section on Japan goes further than those on South Korea and Taiwan, both of which have recently drawn attention over speculation of currency strengthening, suggesting a stronger US desire to see the yen strengthen.
Report signals desire to correct dollar strength
The Executive Summary opens with the statement "President Trump is committed to pursuing economic and trade policies that will spur an American revitalization marked by strong economic growth, the elimination of destructive trade deficits, and countering unfair trade practices." It emphasizes that this includes "combatting unfair currency practices that facilitate competitive advantage, such as unwarranted intervention in currency markets." The report states that "in this Administration, the Secretary of the Treasury will be vigilant in identifying and taking action against currency manipulation. Treasury will also examine other macroeconomic and financial policies implemented by our trading partners that propagate imbalances or result in an unfair competitive advantage in trade." It further asserts that "for decades, unfair currency practices abroad have contributed to the US trade deficit and hollowed out US manufacturing employment" and notes that "in very recent years the dollar has generally been strong relative to historical averages." Based on this view, the report warns that Treasury "is closely monitoring whether our trading partners may act through foreign exchange intervention, or non-market policies and practices, to manipulate their currencies for unfair competitive advantage in trade and prevent the swift recovery of American economic strength."
