00:00In a cover story published last week, The Economist claimed that Taiwan keeps its currency cheap to help its economy boom.
00:08But why would a country be invested in keeping its currency weak?
00:12Well, The Economist claimed that Taiwan is an export-dependent economy,
00:17meaning that the cheaper Taiwan's money is, well, its goods and services will be more attractive to people who are buying things with overseas currency.
00:25Whenever a country undervalues its currency to gain a competitive edge, that's called currency manipulation.
00:32Take buying one cup of bubble tea, for example.
00:35So, in early 2025, the U.S. dollar was about 30 times stronger than the new Taiwan dollar, which is Taiwan's currency.
00:43So, one U.S. dollar equals 30 new Taiwan dollars.
00:47So, what if the U.S. wants to import Taiwanese bubble tea?
00:50To buy one large cup that costs 60 new Taiwan dollars in Taiwan?
00:55The U.S. would have to pay two U.S. dollars.
00:57Now, let's say the U.S. dollar was suddenly 35 times stronger than the Taiwan dollar.
01:01So, if the U.S. bought one large bubble milk tea in this case at that same 60 new Taiwan dollar price,
01:08instead of costing two U.S. dollars, it would cost a buck 70.
01:12The Taiwan product is now cheaper for the U.S. to import.
01:15But Taiwan doesn't just export a lot, it imports a lot.
01:18So, for consumers to buy any of those imported goods, a cheaper currency is going to put them at a disadvantage.
01:24So, a cheaper currency only really benefits exporters and big businesses, with regular consumers getting the short end of the stick.
01:32So, here's the million dollar question.
02:00Does Taiwan manipulate its currency?
02:03Well, a few days ago, Taiwan's central bank and the U.S. Treasury released a rare joint statement saying that neither side will engage in currency manipulation to gain an unfair advantage.
02:13The U.S. Treasury, however, listed Taiwan as a currency manipulator in 1988 and again in 1992.
02:20And while the U.S. currently says that none of its major trading partners are manipulating currency to gain an edge,
02:26it did put Taiwan on a watch list alongside six other countries, including China, this past June.
02:33In the wake of The Economist article, Taiwan's monetary policy is being closely watched once again.
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