Team Trump has a plan. Initially dismissed by a report in The Economist as an idea “somewhere between clickbait and hysteria”, it would seem wise, in an increasingly unpredictable global environment, to start paying close attention to the concept, as the potential consequences could be significant.
The cacophony of executive orders, policy U-turns and general turmoil in US economic policy in recent weeks is starting to coalesce into what appears to be an unorthodox but coherent and ambitious plan.
The most comprehensive insight into this idea, thus far, is to be found in “A User’s Guide to Restructuring the Global Trading System”, an essay by Stephen Miran published in November 2024. Miran is US President Donald Trump’s designated chair of the Council of Economic Advisors, which places him in a position of some influence.
The full implications of the proposal, which Miran describes as “a generational change in the international trade and financial systems”, will require ongoing analysis, as will a proper assessment of the likelihood of actual implementation of any (or all) of the plan. However, recent comments by Trump and others in his orbit, and actions they have taken, suggest that some significant changes are possibly already under way.
Miran’s paper identifies the root cause of America’s current economic imbalances to be “persistent dollar overvaluation”. This overvaluation, he argues, is the result of unrelenting demand for the US dollar due to its role as the global reserve currency. Undue dollar strength has eroded the US’s export competitiveness, resulting in persistent trade deficits and the erosion of the US manufacturing sector.
Miran’s essay proposes a co-ordinated plan to depreciate the dollar via the so-called Mar-a-Lago Accord, which references the location of Trump’s private residence in Florida and draws inspiration from the 1985 Plaza Accord. The last-mentioned agreement, signed at New York’s Plaza Hotel by what was then called the G5 nations (West Germany, France, Japan, the UK and the US), addressed the soaring dollar at the time, as it was hampering US exports and fuelling global trade imbalances.
Trump himself has conceded that Americans should expect a ‘little disturbance’ from his tariff arrangements, while Bessent mentioned a likely ‘detox period’
The five nations agreed to intervene in foreign exchange markets and adjust economic policies in a co-ordinated manner to weaken the US currency. Within two years the greenback had declined by about 40%, according to the US National Bureau of Economic Research.
A key element of the success of the Plaza Accord was the concerted action of the major trading nations. But the new US administration’s confrontational behaviour towards its historical allies in recent weeks could hamper any constructive policy co-ordination in negotiating a new currency devaluation.
This brings the recent spate of trade tariffs into focus. While allegedly linked to illegal immigration and the drug fentanyl, there is a suggestion that the intention behind the hefty trade tariffs is actually to inflict — or threaten to inflict — economic pain on trading partners as a means of pushing these former allies to the negotiating table to discuss a realignment of currencies.
Miran’s paper notes that when the Plaza Accord was signed, gross US debt was roughly 40% of GDP, whereas it is now more than 120% of GDP — an indication of America’s unsustainable levels of debt. Miran argues that at least some of this debt is the result of the underwriting by the US of the global security order, and suggests that measures should be taken to ensure that trading partners pay an increased share of the financial burden associated with global safety.
One possible solution would be for foreign governments to swap their holdings of US bonds for zero-coupon century (100-year) bonds. Instead of paying interest, these bonds would be sold at a discount to their face value and the only way to recoup the investment would be to hold them to maturity. This would help ease the country’s debt burden via a forced restructuring of foreign-held US debt into long-term, low-yield securities.
Theoretically this could reduce interest payments on federal debt, which last year exceeded $1-trillion for the first time.
This would provide the US with 100-year financing without interest payments in the interim. While it would hold little appeal for US creditors, it has been suggested that the current US administration would be willing to use the cudgel of trade tariffs and the possible loss of ongoing access to the US security umbrella as sources of coercion.
In a recent Financial Times article US treasury secretary Scott Bessent suggests that trading partners could identify themselves as “friends” (green), “adjacent players” (yellow) or “foes” (red). Green countries would get tariff relief and military protection, but only if they are signatories to a currency accord. Other countries could potentially negotiate transactional deals.
The possible flaws and unintended consequences in the proposed plan are numerous. The plan itself is unorthodox, and the experience of recent weeks cautions against ruling out seemingly controversial decisions and actions.
Among the numerous concerns is the apparent disregard among the Mar-a-Lago Accord proponents for potential market volatility and economic pain. In fact, the view exists that there is at present an attempt to get the “short-term economic pain” out of the way early in Trump’s term, rather than to attempt to avoid it or allow it to curtail planned measures. Trump himself has conceded that Americans should expect a “little disturbance” from his tariff arrangements, while Bessent mentioned a likely “detox period”.
If implemented, the plan is likely to result in marked volatility in global currency and bond markets. The deliberate devaluation of the dollar and forced conversion of US debt to 100-year bonds would result in a huge reassessment and repricing of global central bank reserves. This would be particularly significant given that US treasuries are widely considered one of the world’s most liquid asset classes.
The Mar-a-Lago Accord, as outlined by Miran, represents a bold, or maverick, vision to reshape the global financial order in America’s favour rather than just to use a devaluation of the dollar to address the US’s current trade imbalance. Whatever the potential merits of the plan and the likelihood of any of the plan actually being implemented, it certainly seems wise to continue monitoring developments in Mar-a-Lago closely.
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