Unveiling the Mar-a-Lago Accord: A Critical Analysis
In our annual recap series, we're revisiting The Interpreter's most-read articles from 2025. This piece was originally published on March 26th. The Interpreter will resume regular publishing on January 7th, 2026.
The Mar-a-Lago Accord, an idea proposed by Stephen Miran, newly appointed Chairman of the US Council of Economic Advisers, presents a novel approach to addressing the US's current account and fiscal deficits. However, this proposal, akin to the 1985 Plaza Accord, relies on a controversial strategy: compelling the rest of the world to appreciate their currencies, thereby enhancing US export competitiveness. This strategy, with its roots in Donald Trump's personal retreat, Mar-a-Lago, also envisions foreign governments holding US Treasuries converting them into 100-year bonds. The proposed mechanism involves threatening trade and investment partners with tariffs and the withdrawal of US security guarantees.
The implications of these proposals, including the establishment of a US sovereign wealth fund and a cryptocurrency stabilisation fund, are likely to be profoundly disruptive to the global financial system. Moreover, they are unlikely to achieve the primary goal of reducing deficits and creating well-paying jobs. The logic behind the Mar-a-Lago Accord is flawed for several reasons.
Firstly, making manufacturing more competitive, a key Trumpian objective, is not solely about a weaker US dollar; it also hinges on investment. The crux of the matter is that the required manufacturing investment for import replacement and export expansion must be financed. For nearly five decades, the US has been a net borrower from the rest of the world, with its current account deficit reflecting this imbalance in savings and investment. To reduce the current account deficit, the US must decrease its capital account surplus, meaning it needs to borrow less from the rest of the world. However, this paradoxically makes the US dollar stronger in the short term, as the investment must be financed by borrowing from abroad.
Secondly, even if the Mar-a-Lago Accord and the Trump tariff agenda successfully boost manufacturing, they won't restore well-paid jobs in struggling regions. Technological advancements that replace labor and shifting consumption patterns due to population changes and rising incomes have significantly altered employment dynamics in the US, as evidenced by recent studies.
Thirdly, the forced conversion of US Treasuries held in official reserves to long-term bonds would diminish the liquidity value of US Treasuries, accelerating the shift away from the US dollar as the primary reserve currency. This role has been a cornerstone of American exceptionalism, enabling the US to maintain substantial fiscal deficits without facing sky-high interest rates or currency collapse. The UK's former Prime Minister, Liz Truss, learned the hard way about the consequences of financial markets when they deem fiscal policies unsustainable. The US has avoided similar market discipline, but the Mar-a-Lago Accord could jeopardize this unique position.
Fourthly, Trump and his administration have no intention of relinquishing the US's reserve currency status. This status, alongside lower borrowing costs, grants the US significant power to impose sanctions on other nations. Reflecting this influence, Trump and previous administrations have resisted efforts by other countries to reduce their reliance on the US dollar.
Lastly, the Mar-a-Lago Accord assumes that economic coercion and gunboat diplomacy will compel trade and investment partners to strengthen their currencies and accept US debt restructuring. However, Trump's treatment of allies suggests that compliance with such an accord may not guarantee stability. Even if some countries comply, it won't resolve the US deficit issue. International cooperation is crucial to countering the Mar-a-Lago Accord, not just for the global community but also for the American people.
