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To Date, a Critical Tool to Address Currency Manipulation and Stem Record-Setting Trade Deficits Has Been Underutilized

Will the U.S. Treasury Department’s “Report on Foreign Exchange Policies of Trading Partners” Again Fall Short of Its Mandate?

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Within the next few days, the U.S. Treasury Department is expected to produce its latest semi-annual “Report to Congress on the Foreign Exchange Policies of Major Trading Partners of the United States.” As with the first three reports under the Trump administration,
it is unlikely that the latest report will list any country as having distorted currency values to gain trade advantages. This does not entirely
reflect a sudden change in practice by countries with a history of managing exchange rates to gain trade advantages, particularly as
international capital outflows from emerging markets have made it possible for some trading partners to avoid intervention in foreign exchange markets recently. Rather, the complete lack of action by the U.S. Treasury Department reflects the criteria under which the U.S. government assesses countries’ practices.