In a hypothetical scenario set for 09/2025 Donald Trump and Xi Jinping might meet at Mar-a-Lago to discuss a currency agreement. This imaginary “Mar-a-Lago Accord“ would echo the Plaza Accord from 40 years back which led to a planned dollar devaluation
The likelihood of such an event seems low given the upcoming 11/2024 election and Chinas reluctance based on Japans post-Plaza Accord struggles. However Trumps threat of hefty tariffs on Chinese imports (if he returns to office) could push Xi to the negotiating table
Trumps dual aims – penalizing Chinese exports and weakening the dollar – present a challenge. The greenbacks current strength‚ near 1980s peaks‚ complicates his goal of boosting US manufacturing competitiveness. A potential treasury secretary pick Scott Bessent‚ suggests the tariff threat might be a negotiating tactic for a weak dollar policy
For Xi a stronger yuan seems problematic given Chinas export dependence and economic struggles. Yet prohibitive tariffs could be more damaging: UBS analysts estimate 60% tariffs could slow Chinas GDP growth by 2.5 percentage points in a year
Chinese policymakers have long studied Japans economic missteps including the aftermath of the Plaza Accord. However‚ it wasnt the yen appreciation that directly caused Japans economic woes but rather excessive monetary and fiscal easing afterwards
Some Chinese companies might benefit from a robust yuan. Manufacturers in sectors like electric vehicles and solar panels‚ facing weak domestic demand could find overseas expansion easier. A stronger currency could make foreign investments cheaper and help rebalance Chinas massive trade surplus (over $800 billion in 2023)
The main obstacle to a “Mar-a-Lago Accord“ is political optics. Xi wouldnt want to appear yielding to Trumps pressure. While such a deal remains unlikely if Trump and Xi could find a way to ease trade tensions and serve their interests this fantasy scenario might become reality