Is Trump engineering the decline and fall of the US dollar?

[CAMBRIDGE] In 1985, US officials met their counterparts from the other G5 countries at New York City’s Plaza Hotel to negotiate a coordinated intervention to bring down the value of the US dollar. The successful Plaza Accord is now apparently serving as inspiration for US President Donald Trump’s administration, as it seeks ways to weaken the dollar and, it hopes, improve America’s trade balance. True to form, Trump and his devotees – notably Stephen Miran, the chair of the Council of Economic Advisers – would call the arrangement the “Mar-a-Lago Accord”, as it would be negotiated at the president’s eponymous Florida resort.

One could imagine a sensible proposal for coordinated intervention among major economies to weaken the dollar. The United States would take steps to reduce its budget deficit, and large surplus countries such as Germany would increase theirs, thereby addressing the fundamental driver of today’s international trade imbalances.

But the Mar-a-Lago Accord does nothing of the sort. Instead, it is a coercive vision that risks doing exactly what the Trump administration fears: hurting America’s ability to finance its deficits (and, in particular, to keep interest rates low) and undermining the US dollar’s status as the leading international currency.