“To the untrained eye”, Donald Trump’s tariff policy may look like an “incoherent” and “self-destructive mess”, says Rogé Karma in The Atlantic. But some believe it to be “the first step of a carefully orchestrated master plan”. On Wall Street, there is talk that the aim is to make the world’s leaders come crawling to Mar-a-Lago, Trump’s Florida residence. There, they will be forced to agree to build factories in the US and strengthen their own currencies to help US manufacturing.
There is a historical precedent for the mooted “Mar-a-Lago accord”, says Gillian Tett in the Financial Times. In 1985, Washington persuaded Japan, Germany, Britain and France to coordinate on devaluing the dollar in the Plaza Accord. There are many barriers to a 2025 repeat, and most economists are dismissive, but investors should understand that the Trump team’s apparently baffling actions are animated by “a potent internal logic”.
It is “wholly reasonable” for Trump to seek to bring home manufacturing jobs, says John Authers on Bloomberg. But that doesn’t mean that “other countries have any reason to go along with” his plans.
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The White House thinks it can leverage threats of tariffs and withdrawn US security guarantees to dictate terms. But America might have already overplayed its hand. Europe is rearming by building up its own defence base rather than buying US-made weapons, and longstanding US allies are planning independent nuclear deterrents. Rather than bow to Trump, the global response “has been to look for alternatives”. China, which is already struggling with sluggish demand, also has no interest in doing a deal that harms its own exporters, says Neil Shearing of Capital Economics.
Is there any foundation for a Mar-a-Lago Accord?
Fundamentally, US trade deficits are the mirror reflection of the willingness of foreigners to buy large amounts of dollar-denominated assets, allowing Americans to consume more than they produce. One way to fix this would be to limit those inflows by imposing capital controls, but that would lower US living standards and damage the dollar’s status as the global reserve currency.
The “analytical foundation for the Mar-a-Lago” plan is “very weak”, agrees George Saravelos of Deutsche Bank. “There is a fundamental inconsistency” between Trump’s desire “to maintain dollar reserve status” and many of the proposals currently floating around for engineering a weaker dollar. Talk of a Mar-a-Lago deal rests on a “misidentification” of the true sources of imbalanced global trade, namely very large fiscal deficits in the US and a very high savings rate in China.
The Mar-a-Lago plan is a “far-fetched policy” that is “easy to pick holes in”, says Adam Tooze in his Chartbook newsletter. Yet, serious commentators have convinced themselves that the White House is playing “five-dimensional chess” when it seeks to sink the stock market with tariffs and needlessly alienates allies. It’s comforting to think there’s some kind of rational strategy at play, rather than confronting the fact that “none of us really knows where this clown car is headed and what drives it on its crazy course”.
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