TAIPEI (Reuters) – Taiwan has never sought to use foreign exchange rates to gain an unfair trade advantage, the central bank said on Sunday, after the U.S. Treasury said Taiwan tripped thresholds for possible currency manipulation under a 2015 U.S. trade law.
The U.S. Treasury Department on Friday refrained from formally labelling Taiwan, along with Switzerland and Vietnam, as manipulators, citing insufficient evidence under a separate law.
Taiwan’s tech-focused exports have soared during theCOVID-19 pandemic because of global demand for laptops, tablets and other equipment to support the work-from-home boom, driving its trade surplus with the United States and jacking up the value of the Taiwan dollar.
The China-U.S. trade war has also boosted U.S. demand for Taiwanese technology.
In a statement, Taiwan’s central bank said it had provided a report to the United States ahead of the Treasury’s decision suggesting they suspend the three criteria used to judge manipulation during the pandemic.
“Due to the special circumstances during the U.S.-China trade dispute and the COVID-19 pandemic, the current three U.S. inspection standards should not be used as appropriate indicators for the U.S. to assess the economic, trade and exchange rate policies of its trading counterparts,” it said.
Those thresholds are a more than $20 billion bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of gross domestic product and a global current account surplus exceeding 2% of GDP.
The central bank said that when communicating with the United States it had emphasised that Taiwan’s exchange rate policy “aims to maintain an orderly foreign exchange market and financial stability, and has never intended to gain unfair trade advantages”.
Given the global free movement of capital, most foreign exchange transactions have “little relevance” to the import and export situation, it added. “The huge and frequent movement of international funds has become the main cause of exchange rate fluctuations.”
The central bank also noted the close and mutually beneficial bilateral trade relationship Taipei and Washington have, and that they are “important partners in the technology supply chain”.
(Reporting by Liang-sa Loh; Writing by Ben Blanchard. Editing by Gerry Doyle)