The US dollar slid to its weakest level in three years on Monday, as investors reacted to US President Donald Trump’s latest attacks on Fed Chair Jerome Powell, whom he blasted for not lowering interest rates faster, even as economists and investors worry that tariffs will stoke inflation. The greenback has already shed 10% of its value since Trump took office.
But is a weak dollar part of a bigger plan? Last year, Stephen Miran, who is now Trump’s top economic adviser, argued that the US could use tariffs and threats of military retrenchment to force major trading partners to revalue their currencies to Make the Dollar Weak(er) Again.
The reasoning: Global demand for the dollar as the world’s most desirable reserve and transactions currency has, Miran and others argue, made the greenback artificially strong. That, in turn, hurts US exports and harms US manufacturing. Forcing other countries to revalue their currencies is one solution.
There’s a precedent: In 1985, Ronald Reagan used the threat of US protectionism to get Japan and close European allies to sign the “Plaza Accord”, revaluing their currencies against a surging dollar which was hurting American exporters.
Could a “Mar-a-Lago Accord” work today? Critics say it’ll be a tough sell, needing to include not only the Europeans – whom Trump has openly antagonized on a number of fronts – but also China, which the US now frames as at best a rival, and at worst an enemy. Why would China go along?
Supporters say power is power: The threat of losing access to the US market and America’s defense umbrella would be enough to scare other countries into a deal, whether they like it or not.