"They're not currency manipulators", Trump told The Wall Street Journal in an April 12 interview, adding that China hasn't been manipulating its currency for months and that labeling China a manipulator could discourage the country from helping the United States with North Korea.
However, it put China, China's Taiwan, Japan, South Korea, Germany, and Switzerland on its Monitoring List, saying their foreign exchange policies bear close monitoring.
According to the central bank, Taiwan only met one of the three criteria in the latest report as Taipei still enjoyed a large current account surplus, but did not meet the criterion which accused a trading partner of persistent one-sided currency intervention.
In its semiannual report to Congress, released on Friday, the Treasury department said no major trading partner met all three criteria, which would earn them the label of a currency manipulator, for the current reporting period.
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 reversal on branding China a currency manipulator is among several changes in which Trump has softened tough stances he had taken during the campaign.
The decision was expected after President Donald Trump this week reversed himself and said China was not a currency manipulator.
That "distortion in the global trading system. imposed significant and long-lasting hardship on American workers and companies".
"The president is beginning to adjust his policies to economic reality", says Joshua Meltzer, a specialist in worldwide trade and a senior fellow at the Brookings Institution. He said China may not be manipulating their currency "at the moment because it doesn't suit their economic needs" but "make no mistake about it, as soon as the tide turns they will", he said, adding that the Trump has given them a "green light to steal our jobs".
"It's very, very hard to compete when you have a strong dollar and other countries are devaluing their currency", Trump told the Journal.
But reflecting the views of most economists, Treasury concluded that China has recently been intervening to do the opposite - to keep the renminbi from falling against the dollar and other currencies.
"Treasury also places high importance on greater transparency of China's exchange rate and reserve management operations and goals", said the report.
The report also criticized Japan for failing to do more to stimulate domestic demand and thereby increase sales of US and other foreign goods.
The US report said Asia's fourth-largest economy posted US$28 billion in goods surplus with the USA last year, with its current account surplus accounting for 7 percent of the country's gross domestic product.
Economy is in increasingly good health and Wall Street has hit successive records that were boosted by president's promises of cutting taxes, spending on infrastructure and slashing regulations.