On Nov. 14 (local time), the United States Department of the Treasury again placed South Korea on its currency watchlist, a year after the country was removed in Nov. 2023. The Treasury noted South Korea’s current account surplus as a key factor in the decision.
In its biannual “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” report submitted to Congress, the Treasury designated South Korea along with China, Japan, Singapore, Taiwan, Vietnam, and Germany as currency watchlist countries. South Korea, which had been removed from the list in Nov. 2023 for the first time since April 2016, was also excluded in the June 2024 report but has now been added back. The other six countries have remained on the watchlist since June.
Under the 2015 Trade Facilitation and Trade Enforcement Act, the U.S. Treasury evaluates the macroeconomic and currency policies of its top 20 trading partners and designates countries as either watchlist nations or countries subject to enhanced analysis if certain criteria are met.
The evaluation is based on three key criteria: a trade surplus with the U.S. exceeding $15 billion, a current account surplus exceeding 3% of a country’s gross domestic product (GDP), and persistent net purchases of foreign currency totaling at least 2% of GDP over 12 months in at least eight of those months. A country meeting all three criteria is flagged for enhanced analysis, while those meeting two are added to the watchlist.
In the last report, South Korea only met the trade surplus criterion. However, the country’s current account surplus has now exceeded the threshold, leading to its return to the watchlist. As of June 2024, South Korea’s annual current account surplus reached 3.7% of its GDP, up sharply from 0.2% a year prior. The Treasury attributed this increase to heightened demand for South Korea’s technology-related products and a rise in its goods surplus. South Korea’s trade surplus with the U.S. also grew to $50 billion, up from $38 billion the previous year.
