Mar-a-Lago Accord
As the term 'Mar-a-Lago Accord' is circulating more frequently the lower the USD trades against major currencies, I want to post a summary of what is actually written in the paper by S. Miran (as summarized by Grok3).
It's interesting that the Trump administration has closely followed the outlined strategy so far—wherever that may lead.
The Mar-a-Lago Accord is a proposed economic framework outlined by Stephen Miran in a November 2024 paper titled A User’s Guide to Restructuring the Global Trading System, written while he was at Hudson Bay Capital, before becoming Chairman of the US Council of Economic Advisers under President Donald Trump. The paper, inspired by a June 2024 concept from Zoltan Poszar, aims to address US trade and fiscal deficits by weakening the US dollar and restructuring global trade and financial systems. Below is a summary of its key points, based on available sources, critically examined for coherence and implications.
Core Objectives
Weaken the US Dollar: Miran argues that an overvalued dollar, driven by inelastic demand for US Treasuries and the dollar’s reserve currency status, makes US exports less competitive and harms manufacturing. The accord seeks to devalue the dollar to boost exports and rebalance trade deficits.
Reduce Trade and Fiscal Deficits: The plan aims to lower the US trade deficit by making imports more expensive and exports cheaper, while addressing fiscal deficits through debt restructuring and new revenue streams.
Revive US Manufacturing: By correcting dollar overvaluation, the accord intends to make US industries more competitive, encouraging domestic production and job creation.
Maintain Dollar as Reserve Currency: Despite devaluation, Miran emphasizes preserving the dollar’s global dominance to ensure low borrowing costs and geopolitical leverage.
Key Mechanisms
Currency Devaluation via Multilateral Agreement:
Inspired by the 1985 Plaza Accord, the Mar-a-Lago Accord envisions a coordinated effort with trading partners (e.g., China, Eurozone, Japan) to appreciate their currencies against the dollar. This would involve foreign central banks selling dollars in FX markets.
Incentives include reduced tariffs or continued US security guarantees; disincentives include punitive tariffs or withdrawal of military support.
Miran suggests a sequenced approach: impose tariffs first to create leverage, then negotiate currency agreements to lower tariffs.
Debt Restructuring:
Proposes converting foreign-held US Treasuries into ultra-long-term bonds (e.g., 100-year zero-coupon bonds) to reduce liquidity and US repayment pressures. This would lower interest rate risks from dollar devaluation.
Suggests a “user fee” on foreign Treasury holders to generate revenue.
Aims to mitigate fiscal deficits without raising taxes or cutting spending.
Tariffs as Leverage:
Tariffs are a “stick” to force compliance, with Miran citing a 20% optimal tariff rate. Treasury Secretary Scott Bessent’s “country buckets” (green, yellow, red) would categorize nations based on trade policies and compliance with US goals.
Tariffs would also generate revenue to fund tax cuts (e.g., extending the Tax Cuts and Jobs Act) and encourage reshoring of manufacturing.
Security and Resource Leverage:
Links economic concessions to US security guarantees, requiring allies to fund defense costs (e.g., by buying long-term Treasuries) or face tariff penalties.
Proposes resource access agreements to benefit the US economy.
Sovereign Wealth Fund:
Suggests creating a fund using assets like gold, digital currencies, or tariff revenues to bolster US financial stability and reduce debt.
Speculates on revaluing US gold reserves (currently valued at $11 billion vs. market value of $758 billion) to enhance balance sheet assets.
Strategic Approach
Trump’s Role: Miran notes that Trump’s transactional style and willingness to break norms enable disruptive policies. The accord doesn’t require Trump to be the architect but to empower advisors like Miran and Bessent.
Sequencing: Tariffs and security threats precede currency negotiations to maximize leverage. A stronger dollar initially (from tariffs) would suppress inflation, followed by a weaker dollar post-accord.
Global Impact: The accord aims to reshape global trade and finance, potentially resembling a 21st-century Bretton Woods, with significant FX volatility (e.g., 20-25% USD/JPY adjustment).
Criticisms and Contradictions
Practicality:
Economists like Adam Slater (Oxford Economics) argue a 20%+ dollar depreciation is needed to significantly reduce trade deficits, which is hard to achieve multilaterally in today’s decentralized financial markets.
Trading partners may resist, preferring trade wars over currency appreciation that harms their exports. China, wary of the Plaza Accord’s impact on Japan, is likely to oppose.
Economic Risks:
Forcing Treasury conversions to 100-year bonds could reduce their liquidity, undermining the dollar’s reserve status and triggering a financial crisis (e.g., akin to Lehman Brothers).
Tariffs may raise import prices, fueling inflation, contradicting Miran’s claim that currency adjustments would offset this.
A weaker dollar could increase US borrowing costs, as foreign investors demand higher yields.
Contradictions:
Weakening the dollar while maintaining its reserve status is challenging. A cavalier approach to Treasuries may deter foreign investment.
Reshoring manufacturing reduces tariff revenue, conflicting with fiscal goals.
Linking security to economic concessions risks alienating allies, destabilizing alliances like NATO.
Skepticism:
Critics like Adam Tooze call market focus on the paper “Mar-a-Lago Accord Syndrome,” suggesting it rationalizes Trump’s chaotic policies.
Miran himself downplayed immediate implementation in March 2025, calling the paper a “menu” of options, with Trump focused on tariffs first.
Implications
For the Dollar: A successful accord could lead to a 20-25% depreciation, boosting exports but risking inflation and reserve status erosion.
For Global Trade: Tariffs and currency realignments could disrupt supply chains, with allies facing pressure to comply or face trade penalties.
For Gold and Assets: A weaker dollar and policy uncertainty are bullish for gold and bitcoin, as hedges against currency devaluation and market volatility.
For Geopolitics: Linking security to economic concessions could strain alliances, while benefiting adversaries like China, which seeks a less dollar-centric system.
Current Status
As of April 2025, the Mar-a-Lago Accord remains a theoretical framework, not a formal policy. Trump has not publicly endorsed it, but tariffs on China, Canada, and Mexico (announced March 2025) align with Miran’s sequencing.
Miran’s appointment and Bessent’s comments suggest influence within the administration, but economists and analysts (e.g., JP Morgan, Pictet) doubt a global accord’s feasibility.
Financial markets are volatile, with stock market declines attributed to tariff policies, and some anticipate further disruption if the accord advances.