During his campaign and after the election Mr Trump said that he would instruct the Treasury to label China a currency manipulator, accusing Beijing of making its exports more competitive by weakening the renminbi.
"China has a long track record of engaging in persistent, large-scale, one-way foreign exchange intervention", the Treasury Department said in its semiannual report on the foreign-exchange policies of major USA trade partners. Treasury finds that six major trading partners warrant being placed on the Monitoring List for special attention: "China, Germany, Japan, Korea, Switzerland and Taiwan", it said.
Still, despite that reversal, the report said a decade of holding down the renminbi had imposed "significant and long-lasting hardship on American workers and companies" and left China with the largest trade surplus of any country against the United States - $347 billion previous year.
US President Donald Trump had repeatedly accused China of indulging in currency manipulation to boost exports.
Trump said during the WSJ interview that the US and China would instead work on improving their trading relationship if Beijing will help with the nuclear threat in North Korea.
The Treasury report said that for a decade China engaged in one-way large-scale interventions to hold down the currency, and then only allowed it to strengthen gradually - a practice that imposed "significant and long-lasting hardship on American workers and companies".
The Korea International Trade Association welcomed the U.S. decision not to label South Korea a currency manipulator, calling it a "rational outcome".
With a trade surplus in goods with the United States of US$347 billion (RM1.53 trillion) past year, and continued policies that restrict free trade, "Treasury will be scrutinising China's trade and currency practices very closely".
The decision was expected after President Donald Trump this week reversed himself and said China was not a currency manipulator.
The report also called on Japan to do more "to revive domestic demand and combat low inflation while avoiding a return to export-led growth".
Speaking with the Journal, Trump said he changed his mind because China hadn't been manipulating its currency for months, and that such a move could harm ongoing talks with Beijing on containing the nuclear threat from North Korea. "It's a clear statement to the Chinese that they need progress". But the US Treasury concluded China was doing the opposite, preventing its yuan from falling against the dollar and other currencies. The dollar's strength in the past two years has been a drag on USA exports. The U.S. may try to limit the dollar's rise against the yen in its first economic dialogue with Japan, scheduled for Tuesday. China was labeled a currency manipulator between 1992 and 1994. The administration has also put forward a draft proposal on renegotiating the North American Free Trade Agreement with Mexico and Canada that dropped some of the tougher positions Trump took during the campaign.