Proposals for a new “Mar-a-Lago Accord”—an international currency agreement similar to the Plaza Accords of the 1980s or Bretton Woods in the 1940s—appear to have gained traction within the Trump administration. Stephen Miran, chairman of the Council of Economic Advisers, outlined a framework for such an accord before entering his current role, and Secretary of the Treasury Scott Bessent has also expressed interest in “some kind of global economic reordering.”
Indeed, an international accord on these issues seems eminently desirable and is probably necessary to achieve any rebalancing of global trade and capital flows. But it is not clear whether the interests of other countries are sufficiently aligned to secure such an arrangement, or whether the United States is capable of executing a larger strategy of reindustrialization.
Although the second Trump administration seems especially inclined to pursue what Bessent calls “Bretton Woods realignments,” interest in new international monetary agreements has been growing for some time across the political spectrum. American Affairs, the policy journal I edit, published a piece titled “Toward a New Bretton Woods Agreement” in May 2017. In 2023, Representative Ro Khanna, a Democrat representing parts of Silicon Valley, called for a new Plaza-style accord with China in Foreign Affairs. An internet search for “new Bretton Woods” will return dozens of articles written from seemingly every ideological perspective in just the last few years. But discussion of a currency accord goes back much further: In fact, President Bill Clinton advocated for a new “international financial architecture” as early as 1998, in the wake of the Asian Financial Crisis.
Viewed in this light, the Trump administration’s interest in a new monetary order is not particularly surprising. The more intriguing question is why the current, post-Plaza system—or what financial writer Russell Napier has termed the “international monetary non-system”—has persisted for so long. Ironically, perhaps, the high tide of “end of history” globalism was made possible by the absence of any international monetary agreement.
Modern economic history has seen the rise and fall of many such agreements, none of which lasted much longer than a generation, with the ensuing chaos motivating the creation of a new one. After the First World War, Britain attempted a return to the gold standard—or, technically, to a “gold exchange standard”—which Winston Churchill, then chancellor of the exchequer, later lamented as the worst mistake of his political career. That system collapsed with the outbreak of the Second World War. The Bretton Woods conference was held in 1944, and this regime was under serious pressure by the late 1960s. It effectively ended when Nixon suspended dollar-gold convertibility in 1971. The Plaza Accord was signed in 1985, followed by the Louvre Accord in 1987.
The next monetary era effectively began in 1994, when China devalued its currency and began managing its exchange rate. Other Asian exporters also followed this approach after the Asian Financial Crisis, and the adoption of the euro in 1999 essentially gave Germany an undervalued currency when it entered a monetary union but not a fiscal union with weaker economies such as France, Italy, and Spain. No international agreement birthed this new order, as Napier points out, and no one would have agreed to it in a formal negotiation. Nevertheless, this monetary “non-system” has lasted longer than Bretton Woods.
Despite the lack of a formal agreement establishing the non-system—and the predictable problems and imbalances that it would give rise to, which Clinton had warned about in 1998—it was tolerated and even encouraged by the United States for various reasons. The West was then in the throes of “end of history” delirium, and many assumed that Chinese liberalization and democratization were just around the corner. Academic economists did not (and many still don’t) acknowledge the differing strategic significance of industry sectors: “Potato chips, computer chips—what’s the difference,” as Michael Boskin, chairman of George H. W. Bush’s Council of Economic Advisors, supposedly put it. Policymakers and business leaders assumed that any industry lost to offshoring would be low-value and low-tech, and the United States would always dominate advanced technology. The Cold War was over and the dot-com bubble was about to take off, so who cared about shipyards and the defense industrial base?
Additionally, the growing flood of Chinese imports kept consumer prices low, and China’s currency policies helped inflate the balance sheets of American capital holders. With China (and others) as a non-price-sensitive buyer of U.S. Treasuries, a gap opened between interest rates (and the discount rates used to value assets) and growth rates. Asset valuations rose, and U.S. investors were incentivized to pursue returns through rising asset prices rather than investments in productive capacity. As Napier summarizes,
Something changed in America in the 1990s. The U.S. federal funds rate began a decline from above 5 percent to reach the effective zero bound by 2009. U.S. ten-year Treasury yields declined from above 6 percent to levels not even recorded during the Great Depression. Credit to the U.S. nonfinancial corporate sector rose from 56 percent of GDP to a new all-time high of 87 percent, and U.S. Government debt rose from 60 percent of GDP to a recent high of 106 percent, very near the peak level recorded during World War II. The valuation of U.S. equities rose from a cyclically adjusted price-to-earnings ratio (CAPE) of 15x to the current level of 34x, having reached a new all-time high of 44x in 2000. U.S. tangible investment declined from 7 percent of GDP to as low as just 1 percent of GDP, a level only previously recorded in the Great Depression and briefly in the hiatus of investment after World War II.
So although policymakers expressed concerns about the perils of the international monetary non-system from early on, no one really wanted to do anything about it. Perhaps, that is, until now.
At this point, the American industrial base is so hollowed out that even key elements of the defense industrial base are severely strained, threatening the security of the United States and its allies, and by extension the foundations of the existing economic order. Asset bubbles, high debt levels, and deindustrialization have also contributed to domestic economic shocks that have destabilized political institutions and all but undermined any sense of civic cohesion. Thus, the motivations driving the United States to seek a fundamental economic reordering are painfully obvious. At the tactical level, moreover, measures like tariffs cannot serve the function of promoting domestic industry if they are simply offset by currency adjustments, adding to the importance of new international arrangements.
But what about China? The current situation arose in part because Americans have continually misunderstood the motives behind Chinese policy. Beijing has not primarily pursued consumer welfare or stock market gains, but manufacturing and export dominance. Showing little interest in Anglo-American liberal traditions that sharply distinguish market and state, the Chinese Communist Party (CCP) has consistently viewed economic policy through the lens of its political interests.
Hence economists’ calls for China to rebalance its economy toward consumption and away from investment have fallen on deaf ears for decades. Indeed, in recent years, the CCP has explicitly chosen to double down on manufacturing, especially advanced manufacturing, at the expense of overall GDP growth. The Western mind seems unable to comprehend that China’s economic goals go beyond maximizing private wealth, as is the case for the United States.
In this context, it is unlikely that China would agree to an international currency accord simply in the interests of global economic welfare. China has shown time and again its willingness to tolerate massive internal and external imbalances, and even to sacrifice overall growth, to strengthen its geopolitical position. Additionally, with China leading an independent geopolitical bloc outside U.S. military alliances, America has much less leverage with Beijing than it did over Japan and Germany in the days of the Plaza Accord.
Nevertheless, the Chinese model is beginning to show signs of stress. To maintain its high investment levels, Beijing has had to rely on rapidly rising debt, with China’s total nonfinancial debt now above 300 percent of GDP, having increased by 48 percentage points in the past five years alone. The country has experienced a rolling crisis in property values, private and local government credit distress, and deflationary pressures.
Internationally, as the world’s leading exporter and creditor, China finds itself, mutatis mutandis, in a situation somewhat similar to that of the United States in the interwar period. Although economically dominant, this position is inherently unstable because debtors with growing imports cannot repay their debts. Eventually, this limits growth and returns on investment for the exporting nation and inevitably generates political resistance in the importing countries.
In 2025, it is not just the United States that is erecting trade barriers against China. Germany is facing its own “China Shock,” leading the EU to impose auto tariffs. Meanwhile, many developing countries—to which China has pivoted as relations with the United States have deteriorated—have experienced “premature deindustrialization.” Brazil, a prime example of the latter, imposed tariffs on iron, steel, and fiber optics in 2024.
Thus, despite its increasingly advanced manufacturing sector, China may no longer be able to maintain sufficient export-led growth to sustain its high levels of industrial investment without exacerbating its debt problems. Although Beijing remains unlikely to agree voluntarily to a U.S.-led Plaza-style accord—which many in China see as contributing to Japan’s “lost decades”—the pressures on the Chinese model create an opportunity for a larger economic reordering.
What might such a reordering look like? Stephen Miran proposes that U.S. allies revalue their currencies while swapping short-derm debt for longer-term Treasury bonds. Such an agreement would allow the dollar to weaken, making U.S. industry more competitive, but also to remain the global reserve currency. Trading partners could be induced to accept these concessions, Miran argues, via the stick of unilateral tariffs and the carrot of continued security guarantees and assistance.
Although such an approach is clearly in line with the Trump administration’s goals, it is not obvious that this bargain is sufficiently attractive to gain purchase among a critical mass of potential partners. If the only alternatives on the table are U.S. tariffs or a currency revaluation that also harms the counterparty’s domestic industry, many countries might decide to take their chances with a trade war in hopes of waiting out the notoriously impatient American consumer, the stock market, or the next election. The Trump administration has already postponed or walked back multiple tariff threats in its first few months.
Security guarantees also have their own logic that limits their effectiveness as a bargaining chip in this negotiation. The countries most desirous of U.S. security guarantees—such as Ukraine, Poland, the Baltics, and Taiwan—are small players in currency and trade flows. For Western European nations, even with the war in Ukraine, the main threats today are more geoeconomic than military, and these countries are already highly skeptical of any deal with the Trump administration. On the other hand, the United States probably cannot credibly threaten to abandon the defense of Japan, Korea, or Saudi Arabia without undermining its own security position. If the Trump administration is too harsh with allies, they can always make overtures to China for leverage; too gentle, and they will have little motivation to accept a deal that is harmful to their own industry.
For any currency accord to be viable, the United States will probably have to make a more compelling offer. One possibility would be giving partner countries a freer hand in taxing and regulating giant American internet companies and supporting their own challengers in this sector. U.S. presidents from both parties, Trump included, have essentially treated these companies as national champions, going to great lengths to shield them from European taxation, antitrust actions, and other regulations. Indeed, the U.S. trade template of the neoliberal era was basically to reduce protections for manufacturing at home while strengthening intellectual property rules and investor protections abroad. Securing concessions for rebuilding U.S. manufacturing, then, might require giving up some ground on software. Making the platform companies less financially attractive relative to capital-intensive industrial sectors would also support the larger goal of directing more investment toward American manufacturing. A similar tradeoff might also be considered for the U.S. financial sector.
Any such deal will also be more attractive to all participants if it includes a plausible path toward retaking manufacturing market share from China, which could be apportioned among the signatories, rather than simply cannibalizing the West’s ever-declining share. Facile discussions of “friend-shoring” with allies have tended to treat it as an easy substitute for “reshoring” to the United States. But the reality is that potential friend-shorers, both developed and developing, often cannot compete with China either. Both friend-shoring and reshoring will require coordinated policy interventions to provide investment support, off-take agreements, and so on, along with some harmonization of tariff regimes against China. An additional incentive to join the currency pact, therefore, could be preferential access to joint supply-chain projects, such as the critical minerals deals that have already occurred between the United States, Japan, and Australia, or Korean shipyards’ investments in the United States. To be effective, this approach would require the United States, as the lead partner, to provide more clarity on its own industrial policy priorities, so that other countries could fall in behind it.
The need for such investment mechanisms points toward a deeper issue: Currency is only one piece of a much larger puzzle. American political commentary tends to place undue blame on the dollar’s reserve status as the source of all problems, as this narrative conveniently absolves policymakers of any responsibility for more recent decisions. But currency values alone did not cause the deindustrialization of the United States, and revaluations should not be expected to single-handedly reverse it. After all, the British pound—to take one example—has declined significantly relative to the U.S. dollar (and the Chinese yuan) in the last few decades, yet, by many measures, the deindustrialization of the UK has been even more dramatic during this period.
China’s currency management doubtless contributed to its present industrial strength, but these measures were always accompanied by other large-scale industrial policies. In contrast, from the 1970s until Trump’s first term, America effectively ran an economic strategy that intentionally traded away domestic manufacturing for intellectual property and financial rents. While the White House no longer actively encourages offshoring, as it did under George W. Bush, industrial policy still seems underdeveloped and under-resourced in the United States. The lack of any serious strategic investment authorities, supply-chain mapping, regional development strategies, and other capabilities will limit the effectiveness of any currency accord, as well as the prospects of it happening in the first place.
Ultimately, there is little upside for the West to unite on currencies if such an agreement does not complement a larger strategy to meaningfully alter the competitive dynamics vis-à-vis Chinese manufacturing. But capital-intensive strategic investments face many obstacles in the United States and enjoy ongoing subsidization in China, irrespective of currency interventions. Tariffs, meanwhile, are not especially effective when no alternative sources of production exist.
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In order to persuade allies to make concessions and convince rivals to change course, I suspect that the United States will first have to show more resolve—and more competence—in undertaking the difficult steps toward reindustrialization that do not require foreign agreement. Once American reindustrialization appears credible, however, it will likely be easier to enlist other countries in these efforts and, perhaps, to negotiate a détente with China on terms reasonably favorable to the United States.
The Trump administration is not the first to observe the dangers of the current monetary non-system or to call for a new international currency arrangement. What prevented any such agreement in the past was the inability of the U.S. political system to prioritize—or even to recognize—long-term geoeconomic interests over short-term asset value inflation.
We may finally have overcome such delusions, but only because our (defense) industrial base has deteriorated so rapidly. Today, the most pressing question for the Trump administration is not whether a new “Mar-a-Lago Accord” is desirable, but whether the United States still has the economic and diplomatic leverage to deliver it.
