The Mar-a-Lago Accord: What it is and What it Means for the Dollar, Global Trade and Gold

Origins of the Mar-a-Lago Accord

The phrase has gained traction following the release of a November 2024 paper written by Stephen Miran, Trump’s nominee for the White House Council of Economic Advisers. In it, Miran proposes several strategies to reform global trade and counteract the economic imbalances caused by what he calls an excessively strong dollar.

Similarly, prior to assuming his position as secretary of the treasury, Scott Bessent suggested in June 2024 that a “grand economic reordering” could take place in the coming years.

While details remain speculative, the general premise behind the Mar-a-Lago Accord revolves around Trump’s commitment to boosting American manufacturing and exports. The challenge lies in the dollar’s current strength, which makes US goods less competitive abroad. With the US trade deficit reaching a record US$1.2 trillion in 2024, some economists argue that a weaker dollar could help bridge the gap by making American exports more attractive.

The idea of a coordinated effort to weaken the dollar is not new.

In 1985, the US and key trading partners — including Japan, France, the UK and West Germany — agreed to the Plaza Accord, a deal aimed at curbing the dollar’s strength. At the time, US manufacturers were struggling against Japan’s export dominance, much like today’s concerns regarding China.

The Plaza Accord succeeded in lowering the dollar’s value, but it also had unintended consequences, such as Japan’s economic stagnation in the 1990s.

Potential mechanisms of a Mar-a-Lago Accord

If such an agreement were to take shape, it could involve several key components.

Trade and tariff adjustments could be central, as Trump has floated the idea of replacing the Internal Revenue Service with an “External Revenue Service” that collects funds from foreign countries.

This indicates a shift toward economic policies that could pressure trading partners into compliance.

Currency interventions might also play a role, with governments potentially agreeing to coordinated efforts in foreign exchange markets to adjust currency values. However, given today’s massive US$7.5 trillion daily foreign exchange trading volume, direct interventions might be less effective than they were in the 1980s.

Adrian Day, president of Adrian Day Asset Management, told the Investing News Network that the ideas that make up the Mar-a-Lago Accord form a “loose collection of disparate policies” rather than a cohesive plan.

However, he cautioned against dismissing them outright. “Jim Bianco said you don’t need to take all of this literally, but you need to take it very seriously,” he commented. Day also emphasized in the converation that Trump often starts negotiations with extreme positions before settling on more moderate policies.

A significant aspect of this discussion revolves around security. The US has long subsidized defense for Europe and other allies, and Trump has suggested that foreign governments should bear a larger financial burden.

Debt restructuring is another controversial idea related to the Mar-a-Lago Accord.

“One of the more extreme proposals, frankly, is that the US will require foreign governments who hold treasuries to exchange those treasuries for 100 year non-tradable zero coupons,” Day noted, adding that the proposal would tie these exchanges to security commitments, using military presence as leverage. “Carrot and stick — we’ll keep the Seventh Fleet in the Red Sea if you exchange your treasuries, but if you don’t, you’re on your own.”

A weaker dollar could lead to higher inflation by increasing the cost of imports. Investors who traditionally see US assets as a safe haven might also shift capital toward alternative currencies such as the euro or yen.

Furthermore, any attempt to force trading partners into an unfavorable debt swap could disrupt the US$29 trillion treasury market, a cornerstone of global finance.