Taiwan Still on U.S. Treasury Currency Watch List: What It Means and Why It Matters

The U.S. Treasury Department has released its latest semi-annual currency report, and Taiwan, once again, finds itself on the currency “monitoring list”, not labeled a currency manipulator, but flagged for continued observation. The decision, while not punitive, raises key questions about the sustainability of Taiwan’s foreign exchange strategies and their alignment with global monetary standards — especially as Taiwan’s central bank continues to intervene in markets.

🔍 Background: What is the U.S. Treasury Currency Report?

The U.S. Treasury’s report, officially titled “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States,” is published every six months. Its purpose is to evaluate if major U.S. trading partners manipulate their currency to gain unfair trade advantages. If a country is found to meet three specific criteria, it may be labeled a currency manipulator, potentially inviting diplomatic pressure or economic penalties.

The three criteria are:

1. Bilateral trade surplus with the U.S. of at least $15 billion
2. Current account surplus of at least 3% of GDP
3. Persistent, one-sided foreign exchange market intervention, equal to at least 2% of GDP

🇹🇼 Taiwan: Meeting Two Out of Three Criteria

According to the 2024 report:

• Trade Surplus with the U.S.: $74 billion ✅
• Current Account Surplus: 14.2% of GDP ✅
• Net Forex Purchases: Negative, not one-sided ❌

Because Taiwan met two of the three thresholds, it remains on the Treasury’s “Monitoring List,” along with China, Japan, Korea, Singapore, Vietnam, Germany, Ireland, and Switzerland.

💬 Central Bank of Taiwan Responds: Policies Are Aligned

In a rare and carefully worded statement, Taiwan’s central bank stated that the guidance from the U.S. Treasury was “consistent with Taiwan’s forex policies.” It emphasized a preference for limited and non-persistent interventions in the foreign exchange market — used only to smooth short-term volatility, not manipulate currency direction over time.

The U.S. Treasury echoed this sentiment, saying:

“Foreign exchange intervention should be limited and allow currency movements in line with economic fundamentals.”

📈 May 2025: A Month of Heavy Intervention

However, economists are warning that Taiwan’s aggressive forex operations in May could draw renewed U.S. scrutiny in the next report due in late 2025. The Taiwan dollar appreciated sharply — over 6.2% in just two days (May 2–3) — prompting the central bank to intervene heavily by buying U.S. dollars to cap the local currency’s rise.

This led to a record jump of $10.12 billion in Taiwan’s forex reserves, reaching $592.95 billion, the fifth-largest monthly increase in history.

Economist Darson Chiu of Tunghai University expressed concern:

“This kind of active intervention, even if defensive in nature, could risk crossing the red line set by the U.S. if it appears persistent or disproportionate.”

🌐 Global Context: Why This Matters

For Taiwan, remaining on the U.S. Treasury’s currency watch list is not just symbolic — it’s tied closely to:

• Trade Relations: Especially sensitive in the U.S.-China context, where Taiwan is a key chip manufacturer and U.S. strategic partner.
• Investor Confidence: Persistent currency intervention might raise questions about market transparency and independence.
• Economic Policy: Taiwan walks a fine line between stabilizing its export-dependent economy and aligning with international forex norms.

🔄 Conclusion: Watch List, Not Blacklist — But A Warning

Although Taiwan avoided the “currency manipulator” label, it cannot rest easy. The global spotlight remains fixed on its monetary behavior, especially after the May intervention. The next report will likely examine whether the Central Bank’s strategy crosses into “persistent, one-sided” territory.

With Taiwan’s economy increasingly intertwined with the global tech supply chain and U.S. policy, currency diplomacy will remain a crucial balancing act.

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