The U.S. Treasury Department has redesignated South Korea as a currency watchlist country. The main reasons are that South Korea’s trade surplus with the U.S. and its current account surplus exceeded the thresholds set by American standards.
In response, the South Korean government emphasized its commitment to maintaining close communication with the U.S. and continuing cooperation to stabilize the foreign exchange market.
According to the Ministry of Finance on Friday, the U.S. Treasury released its Macroeconomic and Foreign Exchange Policies of Major Trading Partners report on Thursday, designating 10 countries, including South Korea, China, Japan, Germany, and Switzerland, as watchlist countries.
The U.S. Treasury evaluates other nations based on three criteria: a trade surplus with the U.S. exceeding 15 billion USD, a current account surplus greater than 3% of gross domestic product (GDP), and persistent net purchases of U.S. dollars exceeding 2% of GDP for more than eight months. A country meeting two or more criteria is classified as a watchlist country, while meeting all three results in a currency manipulator designation.
In this report, the U.S. Treasury found no countries requiring in-depth analysis for meeting all three criteria.
South Korea met two of the three criteria – the trade surplus with the U.S. and the current account surplus – resulting in its classification as a watchlist country for the third consecutive time since the second half of 2024.
South Korea’s trade surplus with the U.S. reached 52 billion USD, while its current account surplus was 5.9% of GDP. In contrast, the scale of foreign exchange market intervention was -0.4% of GDP.
Notably, the U.S. Treasury stated in the report that the won weakened further in the second half of 2025, which was inconsistent with South Korea’s strong economic fundamentals.
This comment reflects the U.S. Treasury’s view that the won has excessively weakened in one direction since the latter half of last year.
Furthermore, the U.S. Treasury assessed that South Korea’s capital market maintains significant openness and that the country continues to implement certain macroprudential measures to manage vulnerabilities in the foreign exchange and financial sectors. They added that efforts to extend foreign exchange market trading hours and allow foreign financial institutions to participate in the domestic forex market will enhance its resilience and efficiency.
Regarding government investment institutions, they explained that the National Pension Service’s foreign currency purchases aim to diversify overseas investments. They also noted that the foreign exchange swap between the National Pension Service and the Bank of Korea helped alleviate downward pressure on KRW during increased volatility in the fourth quarter of 2024.
U.S. Treasury Secretary Scott Bessent stated in a press release that President Donald Trump is committed to eliminating destructive trade deficits and combating unfair trade practices. He emphasized that they will strengthen the analysis of trading partners’ currency practices to support the America First trade policy.
The Ministry of Finance announced plans to maintain close communication with the U.S. Treasury, expand mutual understanding and trust regarding the foreign exchange market, and continue cooperation for its stability in light of this watchlist announcement.
