The US Treasury Department has reaffirmed Taiwan's placement on its currency monitoring list, emphasizing ongoing cooperation and communication between the two nations. Despite meeting criteria for trade and current account surpluses, there is no indication of pressure to appreciate the New Taiwan Dollar (NTD). The report highlights nine economies under scrutiny, including Taiwan, due to significant trade imbalances with the US.
Evaluation criteria include a goods trade surplus exceeding $15 billion, a current account surplus above 3% of GDP, and net foreign exchange purchases surpassing 2% of GDP over a year. Although Taiwan meets two out of three criteria, recent NTD appreciation stems from economic fundamentals rather than external pressures. The US Treasury recommends limited intervention in exchange rates while acknowledging smooth bilateral monetary policy discussions.
Trade Dynamics Shaping Currency Monitoring
While Taiwan remains on the US currency monitoring list, the reasons lie in robust trade dynamics rather than unfair practices. The nation’s trade surplus with the US reached $74 billion last year, coupled with a current account surplus of 14.2% of GDP. However, central bank interventions aimed at stabilizing the local currency align with broader economic goals.
The inclusion on the monitoring list primarily reflects the substantial demand for Taiwanese chips and electronic components by US tech giants. This high demand drives the trade surplus but does not indicate manipulative currency practices. The central bank sold $16 billion worth of US dollars last year, equivalent to 2.1% of Taiwan’s GDP, underscoring efforts to maintain stability rather than manipulate the exchange rate. Observers note that the NT dollar's recent rise aligns more closely with domestic economic growth and global market conditions rather than diplomatic considerations.
Constructive Dialogue on Monetary Policies
Bilateral discussions between Taiwan and the US remain constructive, focusing on ensuring transparent and fair financial practices. While the US Treasury suggests limiting central bank interventions, it recognizes the importance of allowing exchange rates to adjust according to economic fundamentals. This approach underscores mutual respect for each country’s monetary sovereignty.
Despite some speculation about potential NT dollar appreciation as a gesture toward Washington during trade talks, officials emphasize that the currency’s movement reflects genuine economic factors. These include strong first-quarter GDP growth, speculative activities by foreign capital, and concerns among exporters regarding exchange rate fluctuations. The central bank maintains that communication channels with the US Treasury are open and productive, ensuring alignment between recommendations and existing policies. Furthermore, the NT dollar has stabilized since mid-last month, reinforcing the effectiveness of these collaborative efforts. Such stability contributes to fostering a balanced and sustainable trading relationship between Taiwan and the US.