Meeting in Mar-a-Lago: Is a new currency deal plausible?
In 1985, finance ministers from France, Germany, Japan, the United Kingdom, and the United States came to an agreement in the Plaza Hotel in New York City to intentionally devalue the US dollar. In the five years leading up to the Plaza Accord, the US dollar had doubled in value, threatening to upend global trade and destabilize the international financial system.
Today, Washington is once again chattering about the possibility of a currency deal. This time, the venue may move south for what Trump’s incoming chairman of the Council of Economic Advisers, Stephen Miran, described as a “Mar-a-Lago Accord.” In a September report, Miran declared the overvaluation of the US dollar responsible for the “roots of economic discontent.”
Several in Trump’s inner circle have expressed an interest in devaluing the dollar to address the US trade deficit. Weak-dollar advocates believe that the strong dollar creates international trade imbalances, handicapping US manufacturers. A weaker dollar would make US exports more competitive.
But there’s a key difference between the countries that would gather in Palm Beach today and the group that met in New York in the 1980s—the countries that comprise the US trade deficit.
How will this different constellation impact any potential negotiation? It makes a deal much more complicated.
Miran and others want to use tariffs to get countries to the negotiation table. If these countries are worried enough about the cost of tariffs, Miran thinks they will be willing to make major changes to their currencies that they’d never otherwise consider. But Miran doesn’t stop there. He knows tariffs alone aren’t enough of a stick, so he thinks it is time to put the US security umbrella up for debate.
Miran argues that the security zone should be financed by the beneficiaries, and this can be leveraged to both depreciate the dollar and to mitigate the inflation effect of tariffs. Countries in the security zone should “fund it by buying Treasuries,” especially century bonds, and “unless you swap your bills for bonds, tariffs will keep you out.” US Treasury Secretary Scott Bessent has also discussed the idea that countries can enjoy shared defense as long as there are shared currency goals, while tariffs can be used for negotiation of terms. This administration seems at least open to the idea of linking the US security umbrella with the restructuring of the global trade system to benefit the United States.
The problem, of course, is that the countries the United States has the highest trade deficits with are no longer allies dependent upon this security umbrella. In 1985, the United States provided the security guarantee for France, Germany, Japan, and the United Kingdom. These signatories of the Plaza Accord hosted nearly a fourth of all overseas US military bases in the ’80s. Neither China, nor Mexico, nor Vietnam rely on the US military in 2025.
Without the incentive of shared security, are tariffs enough to push non-allies towards a currency agreement? It doesn’t seem to be for China. A major reason for resistance is that Beijing sees Japan’s experience after the Plaza Accord as a cautionary tale.
The “Japanification” of China?
The Plaza Accord forever altered the trajectory of Japan’s economy. The appreciation of the Japanese yen contributed to bursting Tokyo’s asset bubble and the lost decades of economic stagnation. At least, that is the lingering impression of the 1985 currency agreement in China.
There are certain similarities between Japan’s economic slowdown in the ’90s and the one that China is currently experiencing, such as deflation, low consumer demand, and capital flight. In January, China’s thirty-year government bond fell below that of Japan’s for the first time, and over the weekend, China’s inflation dropped below zero again. China is willing to go to lengths to avoid a “Japanification” of its own economy, including refusing to appreciate the renminbi against the dollar, even if it means weathering a protracted trade war.
China has previously raised concerns about the US dollar’s role as the dominant reserve currency and wouldn’t necessarily complain if the dollar’s preferential position in foreign reserves and global finance weakened. But with persistently sluggish consumer demand, China is still counting on the export sector to help drive economic growth in 2025. Beijing won’t want to risk any changes to the renminbi that would decrease the competitiveness of its exports in the midst of a trade war.
The idea of a Mar-a-Lago Accord is going to appeal to Trump. After all, he was the man who bought the Plaza Hotel in 1988, right after the famous agreement. But getting there is going to require more than just tariffs and a threat to remove security guarantees. China is going to have to see what’s in it for them. And that, so far, remains a mystery.
Josh Lipsky is the senior director of the Atlantic Council GeoEconomics Center and a former adviser to the International Monetary Fund.
Jessie Yin is an Assistant Director with the Atlantic Council GeoEconomics Center.
This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org
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