Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States
Global growth decelerated in the second half of 2018, weighed down by slowing activity in
China and the euro area, though growth in the United States remained strong. More recent
data suggest that the global slowdown persisted in early 2019, with signs of sluggish growth
across several major regions of the global economy. While there is good reason to think that
at least part of this weakness will prove transitory - in the United States, strong underlying
fundamentals are likely to sustain solid growth going forward, and China's growth appears
to be stabilizing on the back of recently enacted support measures - major economies
should proactively pursue policies that will bolster confidence and help raise both near
- term and medium-term growth.
The Administration’s focus is on helping American workers and businesses to thrive, raising
productivity, and increasing real median incomes. Following the first major reform of the
U.S. tax code in three decades, the United States saw business investment and productivity
accelerate notably in 2018. The President’s Budget for FY 2020, released in March, aims to
bring down the U.S. fiscal deficit over the medium term by curtailing spending, with the
deficit falling to 2.6 percent of GDP by 2024 under the Administration’s proposals and policies.
The Administration is working actively to dismantle unfair barriers to trade and achieve
fairer and more reciprocal trade with major U.S. trading partners. This includes combatting
unfair currency practices that facilitate competitive advantage, such as unwarranted
intervention in currency markets. The U.S.-Mexico-Canada trade agreement incorporates
commitments that all three countries will avoid unfair currency practices and publish
related economic information. Additionally, in March, Korea for the first time reported
publicly on its foreign exchange intervention. Treasury welcomes this important development
in Korea’s foreign exchange practices.
Treasury continues to carefully monitor developments in the Chinese renminbi (RMB). The
RMB depreciated by 3.8 percent against the dollar during the second half of 2018 and is
down 8 percent over the past year to 6.92 RMB to the dollar. China’s exchange rate
practices continue to lack transparency, including its intervention in foreign exchange
markets. Based on Treasury estimates, direct intervention in foreign exchange markets by
the People’s Bank of China (PBOC) over the last several months appears limited.
Nonetheless, given China’s long history of facilitating an undervalued currency through
protracted, large-scale intervention in the foreign exchange market, Treasury has continued
to have ongoing discussions with the Chinese authorities about RMB developments and
intervention practices.
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