Here's Why 'Mar-a-Lago Accord' Chatter Has Everyone's Attention
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Bloomberg Audio Studios. Podcasts. Radio. News. I'm Caroline Hepkett and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg.

Most followers of US politics now know Mar-a-Lago, the summer residence and bolt hole of President Donald Trump. But financial markets are starting to talk about the resort for a different reason. It's about taking your creditors into a room for the United States of America

and actually saying you got to swap your treasuries for long term debt. Now this is radical. Nobody's saying that this is actually going to happen. Now why are we doing this? The idea is to reorient the world global trade system, which we seem to be trying to do with tariffs, to bring down the value of the dollar, to bring down interest rates,

and to make the US more competitive. That's what the goal is. I don't think anybody's really taken a really creative approach to problem solving with regard to this debt. And what we're seeing out of the Trump administration in so many different parts is a very creative and new thought approach. Trump is rewiring global trade with threats of tariffs. He's upended geopolitics, NATO and the global security framework.

Given the president's unconventional and high-stakes manoeuvres, some on Wall Street are wondering if the international financial system may be next. The concept of deliberately weakening the US dollar to help the American economy is causing a stir in the markets. So here's why the idea of a Mar-a-Lago accord has everyone's attention.

Our global economy correspondent, Enda Cohen, joins us now to explain. Hi, Enda. What is this phrase, Mar-a-Lago Accord, and where has it come from? At its core, it's all about how President Donald Trump wants to shake up the way the US trades with the rest of the world.

And at the core of that is the U.S. dollar as America's currency. And that's driving speculation that perhaps President Trump will look for some kind of a grand multinational bargain that would effectively end with a weaker U.S. dollar that would help U.S. exporters sell produce around the rest of the world and globally.

The name that some analysts are calling it is they're dubbing it the Mar-a-Lago Accord after Trump's private club in Palm Beach, Florida. As I say, this is all early days and speculation. But the thinking is that at some point, President Trump will turn his attention towards the currency and look for some kind of a big deal on that front. OK, so that's on weakening the dollar. What could this possible concept agreement attempt to accomplish beyond that?

So, here's the thing. The US trade deficit has blown out. It hit a record $1.2 trillion in 2024. President Trump is not happy with that. He sees that as America sending money abroad. Part of the story here is that the dollar is historically strong, that undermines US competitiveness by making imports cheaper, and of course, at the cost of their own exporters.

And in fact, some analysts in the currency market look at the dollar today as being overvalued when you say based on a domestic purchasing power of a currency. Now, when you consider all of that, the thinking is that President Trump might at some point get his advisors together and say, how could we meaningfully weaken the dollar to help our exporters? And that's where you get into the mechanics of how this might work. Indeed, how could a Mar-a-Lago agreement work?

So, there are different ways of approaching it. One simple way would be that America would reach an agreement with key trading partners asking those trading partners to boost domestic consumption of their own goods that they produce rather than sell their goods overseas at a cheaper price into America. That would reduce their manufacturers' reliance on exporting to the US, for example. And one case in point there, of course, would be China. It's a focus for its exports and huge manufacturing base.

and the fact that it's able to export at a competitive price compared to its US counterparts. So the thinking is, look, you foreign trading partners buy more of your own stuff rather than sell it to us. That's one way to rebalance it. Another way, of course, could be to intervene in the foreign exchange market, get your trading partners to agree on either buying

buying their own currency to make it stronger, selling the dollar to help weaken the dollar. But you know, the foreign exchange market is worth around 7.5 trillion. So it would take a lot of buying and spending of currencies to really make a dent in that. And then there are some other levers and tools that governments could pull. But, you know, it all comes down to what levers could they agree on that would effectively weaken the US dollar and strengthen their own currencies.

Have similar accords been agreed before? Yes, in 1985, we had what was called the Plaza Accord that was named after the hotel in New York where officials met. And it was a broadly similar backdrop and idea. The story back then was high inflation, high interest rates and a strong dollar. So the US needed an agreement with, at that time, it was France, Japan, UK and then West Germany.

that they would allow their currencies to strengthen against the dollar and allow the dollar to weaken because the thinking was back then that the strong greenback was hurting the global economy. Now, of course, back then, the central casting villain, so to speak, was Japan because they were dominating the manufacturing and export market. They were sparking protectionism backlash from US lawmakers in a way that China is today. So Japan came on and signed onto that agreement, though Japan

That deal was later blamed in part for some of Japan's own economic demise. What do different investors think about this idea? There are a couple of ways of thinking about it. On the one hand, it's still very early. Investors say a lot of this is speculation, to be clear. President Trump and his officials do talk about the need for a strong, continuing to strong dollar policy of the U.S., for example.

On the other hand, though, the same investors will say, you know, President Trump is serious about shaking up the way the US is doing business with key trading partners. He's already proven to be unconventional and with some of his policy decisions and announcements, his Treasury Secretary Scott Besant has, before he took office, spoken of the need for some kind of a grand economic reordering. So at the very least, the idea that

Trump and his officials won't be thinking about what they could do around a strong dollar. Doesn't sound completely implausible, but that's where, you know, the rubber hits the road when it comes down to what exact levers can the US pull? How effective would it be? How realistic is it that they could agree in accord with trading partners and indeed trading rivals to allow the dollar to weaken and their currencies strengthen? On paper, it sounds doable, but in practice, it might be a very difficult one to get across the line.

There's another market that could be affected, the US Treasury market, the debt market. What would be the consequences of restructuring that? So one of the ideas could be that the US government could issue government bonds that don't pay interest, so-called zero coupon, and they mature in 100 years. Some people out there, for example, former Credit Suisse analyst Zoltan Posner is one of those who have made the suggestion of maybe an agreement between the US and its military partners, which is a good idea.

whereby in return for a security guarantee, allies are required to buy these zero-centry bonds. And what would that do? It would take pressure off the US repayment schedule, take pressure off the US interest rate profile, interest rate burden, which of course is one of the key expense outlays for the government right now. And it could be bundled up as part of this whole grand package strategy.

of a Mario Largo Accord. As I say, you know, these are all talking points. These are what analysts say could be done. But getting all of these agreed, it seems to be, I think, a way off just yet. So what are the downsides to this agreement, if any, and who would have to deal with them?

So when we had the Plaza Accord back in 1985, it sounded like a good idea at the time. Japan signed on, but ultimately they blamed it for allowing the yen to become too strong. That played a role in Japan's own economic demise. And in fact, they had to follow up with another agreement, the Lurev Accord in 1987, to try and draw a line under that. So there's

There's history that these accords don't necessarily work according to plan. And then more practically, for American consumers, on the one hand right now, they have a strong currency. That means they can buy products from around the world at a competitive price. And of course, when they travel and go overseas, it's a good time to go on holidays. A weaker currency means they're going to be importing higher prices,

That means, of course, potentially higher inflation and that will erode their purchasing power. And if we did get to a point where the dollar was weakening sharply, it might lose some of its appeal for foreign investors who don't like volatility. They like strength and strong currencies. They like stability. They might look at maybe alternative assets.

maybe the euro, maybe elsewhere. That's if the US dollar was to get into a weakening spiral. Those are some of the downsides that could come out of an agreement like this. Thanks to our global economy correspondent, Enda Curran. For more explanations like this from our team of 3,000 journalists and analysts around the world, search for Quick Take on the Bloomberg website or Bloomberg Business app. I'm Caroline Hepker. This is Here's Why. We'll be back next week with more. Thanks for listening.

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