TAIPEI (Reuters) - Taiwan hopes to cut its trade surplus with the United States to address U.S. concerns about the Taiwan dollar’s exchange rate, the island’s central bank said on Thursday.
The comments come after the U.S. Treasury on Wednesday added Taiwan to a “monitoring list” of countries whose currency practices have caused concern, the first time the island has appeared on the list since 2017.
Speaking at parliament, Taiwan central bank deputy governor Yen Tzung-ta said maintaining the stability of the foreign exchange rate was their obligation and priority, and that the U.S. decision was based on information for last year rather than the current exchange rate.
The U.S. Treasury’s decision is a reflection of the international economic situation and the island’s trade surplus with the United States, he added.
“We hope to cut the trade surplus with the United States,” Yen said. “This is the long-term solution.”
Taiwan’s 2019 trade surplus with the United States hit $23 billion. The economy has benefited this year from global demand for Taiwan’s high-tech goods from people forced to work and study at home during the COVID-19 pandemic.
Taiwan’s central bank has continued to stress to the U.S. Treasury that the benchmarks they use are disputed, Yen added.
Countries must at least have a $20 billion-plus 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 to be labelled a manipulator, according to U.S. Treasury criteria.
The Taiwan dollar has strengthened 7% against the U.S. dollar this year, and jumped more than 1% on Thursday morning.
Taiwan was last formally labelled a currency manipulator by the United States in December 1992, but was later put on the U.S. Treasury monitoring list in 2016 and 2017.
The issue is particularly sensitive for Taiwan as the government is keen to keep in Washington’s good books, with the United States being the Chinese-claimed island’s most important international backer and arms seller.