Trump’s game plan for devaluing the mighty dollar
Former US president Ronald Reagan pushed Washington’s
trade partners to devalue the dollar Credit: Dennis Cook/AP
There’s nothing new under the sun, so it won’t surprise you to know that we’ve been here before.
Rewind to the mid-1980s, when Ronald Reagan was the US president, and America was cursed by a similarly large trade deficit, and thanks to the administration’s expansionary fiscal policies, a relatively strong currency buoyed by high interest rates.
Valéry Giscard d’Estaing, a one-time French president, called it America’s “exorbitant privilege”.
Under threat of tariffs, the US’s four largest trading partners at the time – Japan, Germany, France and the UK – were persuaded to intervene in currency markets to weaken the dollar, an agreement that became known as the Plaza Accord.
It worked; from peak to trough, the dollar lost about 40pc of its trade weighted value.
That success has galvanised calls from some in the Trump administration for a sequel, already dubbed for obvious reasons the “Mar-a-Lago Accord”.
Yet the world is a very different place today, not least because of the arrival of another 10-ton gorilla on the global stage in the shape of the People’s Republic of China.
In a world where even allies are turning on each other, the necessary consensus for Plaza 2.0 would be hard to impossible to achieve.
There’s no telling where this will end. Badly, would be a reasonable guess.
Jeremy Warner Telegraph 15 March 2025
Weakening the dollar is a good idea
Trump Wants a Weaker Dollar. That Will Be Easier Said Than Done
A ‘Mar-a-Lago Accord’; like Plaza Accord, followed by Louvre Accord
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