In fact, even without the damage inflicted recently by Mr. Trump’s policies, it’s possible that the dollar would be declining anyway, if only because it had reached historically elevated levels. Consider this performance:
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In 2024, the dollar rose more than 7 percent, measured by the Dollar Index, and 9 percent, using the Nominal Broad U.S. Dollar Index.
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Taking inflation into account by using the Fed’s Real Broad Trade-Weighted Index, the dollar rose almost 23 percent over the 20 years through March.
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Late last year, using this broad, inflation-adjusted index, the dollar was stronger than it had been since 1985.
The dollar’s high valuation had become a burden for many U.S. companies earning profits abroad, and it contributed to the U.S. trade deficit, making the dollar’s value a concern of the Trump administration.
The Mar-a-Lago Accord
What happened in 1985 resonates today.
In those days, Japan, not China, was widely viewed in Washington as the main culprit behind U.S. trade deficits. The strong dollar helped to make U.S. exports expensive — and Japanese goods like Toyotas, Hondas and the Sony Walkman extremely attractive. Labor costs and manufacturing quality had something to do with the growing preference among U.S. consumers for foreign goods, but it was easier for U.S. politicians to deal with the dollar.
So the Reagan administration used diplomacy — and the implicit threat of overwhelming military and political power — to persuade its allies to participate in the devaluation of the dollar. This culminated on Sept. 22, 1985, in an agreement that became known as the Plaza Accord, because it was signed at the grand New York City establishment, the Plaza Hotel.
A publicity-savvy real estate developer named Donald J. Trump bought the Plaza three years later. (Mr. Trump put his first wife, Ivana, in charge of renovating the old building, and he married his second wife, Marla Maples, at the hotel in December 1993, before selling it in 1995.)
Echoes of the Plaza Accord may be heard today. Well before Inauguration Day, with the dollar heading toward 1985 levels, the president-elect’s economic advisers discussed a hypothetical diplomatic agreement, calling this dream the “Mar-a-Lago Accord.” Pulling it off would have required subtlety and statesmanship. Instead Mr. Trump has been applying blunt force and bluster. And he has weakened the dollar.
#Dont #Count #Dollar