EXCUSE FOR MEASURES TO NARROW KOREA’S TRADE SURPLUSAny adverse effect from Korea’s return to the FX monitoring watchlist is expected to be limited but concerns are growing that President-elect Trump would take Korea’s bigger trade surplus with the US as an excuse to pressure Korea into narrowing it.“Considering that against the US concerns, Korea has sold US dollars to prevent a fall in its currency value, it is unlikely that the US would take any extra measures” that are discriminative to Korea, said Jeong Young-sik, executive director of the International Macroeconomics and Finance department at the Institute for International Economic Policy (KIEP).“But the (new) US administration could use it as an excuse to narrow Korea’s trade surplus with the US.” Korea’s return to the US FX monitoring watchlist comes at a time when the country’s currency is grappling with a freefall in its value against the US dollar.
On Friday, Korea’s Ministry of Economy and Finance explained that Korea is added to the list again because its bilateral trade surplus with the US exceeded $15 billion, and the country’s current account surplus surpassed 3% of its gross domestic product (GDP).
As of end-June, Korea’s annualized current account surplus took up 3.7% of the country’s GDP due to a significant increase in the country’s current account surplus from July last year to June this year on higher goods surplus driven by strong global demand for Korean tech goods, according to the Treasury Department’s report.
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