Introduction

Until recently, partly due to Gillian Tett, the 2024 economic policy paper by Stephen Miran appeared to have been read by few mainstream economists. However, it had been the topic of much discussion within one of the three Maga groups, loosely attached to President Trump. These are the populist nationalist group led by Steve Bannon, the techno-libertarians effectively led by Elon Musk, and the third, economically and politically influential group, involving Treasury secretary Scott Bessent, Stephen Miran, the chair of the Council of Economic Advisers, and Vice-President Vance.

This latter group, whose technical economic policy views are best represented by Miran’s paper (Miran 2024), though other economists are sympathetic to the policy being advocated, is committed to re-arranging the global trade and currency structure, to the long-term benefit of the US trading economy, by depreciating the effective value of the US dollar. The chosen weapons are tariffs and US and global debt restructuring.

The policy strategy will involve a replication of the 1985 Plaza Accords that was established by the US in discussions of the G7 as a multilateral agreement to engender an effective 40% devaluation of the US dollar, achieved by 1987, via the gradual appreciation of other key currencies, especially the Japanese Yen. The motivation in the second-half of the 1980s was the substantial export success of Japan that had generated a considerable trade surplus with the US during the1980s Frankel 2015).

The danger is that the current unilateral rather than multilateral political approach adopted by Trump, who is temperamentally averse to first attempting to persuade others in making a “deal”, will lead to the dollar appreciating for an indeterminate period before it depreciates against other key currencies (Miran highlights this possibility). Such an outcome will damage US domestic welfare and interests. A dollar appreciation will have damaging trade impacts on emerging market economies and may also lead to financial market panic and instability.

The aim of Miran’s, paper is to explore the potential to establish what may be called the Mar-a-Largo Accords via a multilateral approach, encouraged by relatively modest US tariffs. Currently, President Trump appears to be wholly on board with such a policy, although somewhat inconsistently. Trump has announced that average tariffs are likely to be around 20% across many countries. It should be noted that US average effective tariffs were around 2%. However, tariff policy alone will not achieve the desired objective, as in 1985 there will be required currency adjustment policies across a number of currencies as well as the US dollar.

Miran’s paper discusses the pros and cons of the use of both unilateral and multilateral currency approaches to achieving the desired aim of establishing a Mar-a-Largo Accords, in a real-world global trading and financial context that is very different from the 1980s. The trade and economic weight of China being one significant example, the existence of the euro being another. Moreover, as Miran indicates the US debt to GDP ratio was 40% in 1985, it is now 120%. We need to establish how credible would be such a policy approach, via an agreed and coordinated multilateral approach.

The Miran Paper – A Brief Comment

To be fair to Miran, his paper is stated to be an exploration of policy instruments, taking account of both the current US debt and current global trading and currency situation, and is not a policy advocacy paper. Nonetheless, given the support of Bessent, Vance, and others, and conceivably endorsed by Trump (at least unless it fails), it appears to be a possible US administration trade and currency policy option.

From a technical economic perspective, the paper is interesting and has considerable merit, the problem is the practical implementation of the theoretical recommendations of the author. This is frankly admitted by Miran. He insists that the practical implementation of the ideas and technical instruments he reviews is perilously close to walking a tightrope. He uses the phrasing of their being only a “narrow path” to securing the objective.

Plaza Accord – Resume

The Plaza Accord essentially involved the US intervening to buy other currencies, i.e. those of the other four countries involved, Germany, Japan, France, and the UK, and the other countries selling US dollars. The aim was to ensure over time an effective depreciation of the US dollar against these other countries. These actions, effective revaluations upwards of the other four countries and an effective devaluation of the US currency. The interventions were “sterilised” by ensuring there were no changes in the money supply in the countries involved.

The general consensus among economist commentators subsequently has been that the Accord had been a modest success in dealing with the persistent trade surplus countries at the time, especially Japan, and certainly benefitted the US However, it has not yet been repeated and, indeed, such currency interventions have been deliberately eschewed. Times may be changing.

In 2015, when reviewing the Plaza Accord, Jeffrey Frankel concluded his review with the following:

The Plaza should remain the classic precedent for coordinated G-7 intervention in the foreign exchange market when one or more of their currencies is very far out of line. Those conditions do not apply today. But the pendulum will swing back. The day will come when Plaza-style intervention is again appropriate. (Frankel 2015)

From a US perspective, and perhaps more widely, the situation in 2025 appears, at least on the surface, to be an appropriate time to revisit a coordinated intervention.

US Public Debt Situation

The US public debt situation, both in terms of its size and the make-up of those holding the debt. In 1985, the US public debt to GDP ratio was 40%, in 2025 it is 120%. In 2025 the foreign holders of that debt have altered.

The largest owners of the $36 trillion debt are the US private sector, 55%, with a further 20% held by other US agencies. Foreign official institutions hold around 11% (the top three being Japan, China, and the UK), with other foreign holders having the remaining 14%. Source ING 2025). It will be these foreign ownings, official and other, that will be the target of any US government currency adjustment action (explained below).

Tariffs and Impacts

According to Miran, the aim of Trump’s tariff policy should be: (a) to attempt re-establish a rough global trade equilibrium by setting US tariffs at an overall 20% (the intention from April 2^nd 2025, and b) to be used as a weapon (failing multilateral agreement) to “corral” recalcitrant countries into groups that will be offered security agreements as rewards for agreeing to the currency adjustments (explained below).

The outcomes of a Mar-a-Largo agreement would culminate in new trade and currency equilibria (over say two years) which would see a significant US dollar depreciation, following a rise in the dollar linked to the tariffs (Plaza saw a 40% depreciation over two years) and a relatively stable global monetary situation with the US dollar still at the apex of the global monetary hierarchy, though with a probably greater level of Euro reserve holdings as the only other significant global trade and reserve currency.

One important caveat is that the benign outcome will not emerge if retaliatory tariffs are used by other countries to any substantial degree. Hoover, if the US fails to explain its underlying strategy (and achieves an agreed multilateral approach) and pursues, instead, a unilateral, bullying approach then this outcome may well occur, with damage to multilateral global trading and welfare and potentially inflationary impacts in the US.

Currency Adjustments

The required currency adjustments are the key to the Miran/Trump approach, via a Mar-a-Largo agreement. Essentially the requisite effective depreciation against the other currencies of countries having substantial surpluses with the US (The UK does not have a goods surplus with the US, but it does have a services trade surplus of £71billion (ONS 2025).

The mechanism to achieve this adjustment requires significant and coordinated intervention in currency markets, with the US buying substantial amounts of other currencies, perhaps especially the euro, and other key countries reducing their US dollar holdings. This would apply to the official holdings of Japan, China, the EU, and the UK, and some other countries such as Vietnam.

Assuming a benign trajectory at the end of say two years the coordinated intervention would cease as the desired effective devaluation of the US dollar would have been achieved. Ironically, both the Plaza Accord and the putative Mar-a-Largo Accord would not be needed had the IMF scarce currency clause, inserted in the original IMF agreement by Keynes, been invoked to deal with persistent export surplus countries on a regular basis. Nonetheless, it may be doubted if Keynes could have foreseen the dominant export success of China.

Will it Work?

A great deal depends on whether the rest of the G7 and China and Vietnam, are willing to negotiate a multilateral deal in the context of Mar-a-Largo In 1985, with the Plaza Accord, relations between the US and the four other G7 countries involved were cordial and collaboration was possible. One obvious problem is that, as observed above, the world has substantially changed in the intervening 40 years. Globally the world has become far more integrated in terms of trade and complex supply chains. The relative economic size and goods manufacturing trading prowess of non-Western countries has massively expanded. The US debt has substantially expanded and with it the foreign holdings of major countries are substantial, including the 14% held by the private sector internationally and in global markets. How these private holders of US sovereign debt would respond to substantial currency movements in and out of US dollars in unclear and problematic.

At this stage, with little evidence of multilateral trade and currency discussions taking place in the G7 or the G20. Hence, any coordinated intervention does not appear to be on the cards. Moreover, it is difficult to perceive any clear strategy from President Trump’s wild use of tariff weapons in the absence of an articulated strategy. Perhaps after April 2^nd such a strategy and multilateral discussion may occur.

The role and attitude of China is a critical issue in how rapidly there could be movement to multilateral agreement on what key members of the Trump administration, including Miran see as necessary to reposition the US in global trading and currency markets.

In summary, the various signs that might lead to a satisfactory outcome and a Mar-a-Largo Accord are not propitious.

Conclusion

It may be argued, as does Miran, that, despite an era of floating exchange rates, the world trading and hence currency system is in a significant state of disequilibrium. The idea of using a contemporary version of the 1985 Plaza Accord could be an appropriate option. Insofar this would be an attractive alternative to a potential return to the trade conflicts of the 1930 – especially if retaliatory tariffs become the norm for all countries – may seem a desirable aim.

If such a coordinated currency Mar-a-Largo accord could be achieved via a multilateral approach via agreement among the G7 plus China and Vietnam) it could resolve some global trading and currency issues. Nonetheless, this would not be a repeat of the relatively simple political process that happened in 1985 with the Plaza Accord.

At that time the US appeared a relatively benign hegemon and Japan was a close and dependent ally of the US. China was not the huge economic and exporting country it now is. (Ironically, Japan still has probably the most undervalued currency against the dollar of the key countries). The US budget deficit and debt to GDP ratio are both relatively higher than in 1985.

A new set of currency accords to achieve a limited depreciation of the US dollar might help to preserve the stability of the hierarchical global monetary system, with the US at its apex. The system relies on US beneficent actions for a stable system. This needs to be recognized by all the players, including by the Trump administration, and its maintenance preserved for the time being.

Miran’s suggested approach should not be written off, but the conditions required for a successful achievement appear to be extraordinarily difficult to meet. As Miran states there is a path, but it is a narrow one and getting narrower with each passing day as Trump’s tariff war proceeds.