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- The Trump administration proposed numerous economic reforms to China and eight other trading partners on its watchlist.
- The US Treasury made the recommendations to countries that "merit close attention to their currency practices and macroeconomic policies."
- Its advice ranged from making it easier for South Korean firms to fire people to expanding the social safety net in Singapore.
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Whether the topic is Iran or the Green New Deal, President Donald Trump hasn’t shied away from sharing his opinions. The US Treasury followed suit in its semi-annual report this week: it proposed economic reforms for nine of America’s trading partners — including China, Japan, and Germany — which "merit close attention to their currency practices and macroeconomic policies."
The nations on the watchlist have at least $40 billion in bilateral trade goods trade with the US, and meet at least one of three criteria. They have a bilateral trade surplus with the US of at least $20 billion, they run a current account surplus equal to at least 2% of GDP, or they intervene in currency markets with net foreign-exchange purchases of at least 2% of GDP in at least six months of the year.
We’ve outlined the Treasury’s advice for each country below:
"China continues to run an extremely large, persistent, and growing bilateral trade surplus with the United States, by far the largest among any of the United States’ major trading partners," the US Treasury said in its report.
The agency expressed "significant concerns" about China’s currency practices, adding it was "deeply disappointed" by the country’s failure to disclose its intervention in foreign-exchange markets.
It also accused the nation of "persistent and widespread use of non-tariff barriers, nonmarket mechanisms, state subsidies, and other discriminatory measures that are increasingly distorting China’s trading and investment relationships."
"China should make a concerted effort to enhance transparency of its exchange rate and reserve management operations and goals," the Treasury advised.
"China needs to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment."
REUTERS/Shohei Miyano/Illustration/File Photo
The US Treasury highlighted Japan’s $68 billion bilateral goods trade surplus with the US and current account surplus of 3.5% of GDP in 2018. It also emphasized the country’s sluggish expansion: the IMF’s forecasts less than 1% annual growth between 2020 and 2024.
Against that backdrop, the agency recommended Japanese authorities pursue labor-market and other structural reforms to boost productivity and "support sustained faster expansion of domestic demand, create a more sustainable path for long-term growth, and help reduce Japan’s public debt burden and trade imbalances."
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The Treasury flagged South Korea’s efforts to support the won in 2018, advising the country to limit interventions to "exceptional circumstances of disorderly market conditions." It also highlighted the country’s negative output gap and weakening growth prospects.
The agency suggested South Korean authorities could "more forcefully support domestic demand" through structural measures that boost potential growth. Specifically, they could "support labor force participation by pairing new budget initiatives with comprehensive labor market reforms that reduce restrictions on laying off regular workers and incentivize hiring non-regular workers," it said.
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