27 March 2025

Macro & Markets:

Lars Mouland

There has been much focus that Trump could force the US trading partners
into a “Mar-a-Lago Accord” to weaken the dollar. Here are some thought as to
what such a deal could entail.
The phrase “Mar-a-Lago Accord” was coined by US money market wizard and previous Credit Suisse
Strategist Zoltan Poszar back in June 2024 on an idea that the US could force countries to accept a weaker
dollar and lower interest rates on their US Treasury investments in order to still be protected by the US
security umbrella. The phrase is a spin-o of the 1985 “Plaza Accord” where France, Japan, West Germany
and the UK agreed with the US to jointly weaken the dollar. Replacing the Plaza hotel in NY (which Trump
owned from 1988 to 1995) with Trumps Mar-a-Lago club in Palm Beach, Florida as the venue of a potential
new deal seems fitting and makes for a catchy phrase.

The idea was picked up by then Hudson Capital’s strategist Stephen Miran and outlined in more detail in
November. Miran’s paper did not really catch the market’s attention before he ascended to Chairman of
Trump’s Council of Economic Advisors. The paper provides a sort of intellectual framework for much of what
Trump is currently doing with security and trade policies.

In Trump’s opinion the main reason for the demise of the American Dream is an artificially strong dollar which
has led to the dismantlement of US manufacturing and loss of “well-paying blue collar jobs”. The strong dollar
is a result of its status as reserve currency which amplifies investments into the US. With local manufacturing
uncompetitive, the US is then forced to increase imports leaving it dependent of foreign countries for a
number of goods. With other countries (China for instance) unfairly supporting their manufacturing sector,
the problem is amplified. Connected to this problem is also the US role of global police, leaving it with a large
military cost burden which again leads to public deficits and debts (easily financed because of the dollar’s
reserve status).

Trump sees the stronger dollar as the main reason for the falling share of US industrial jobs

corporate.nordea.com/article/98321/macro-markets-mar-a-lago-accord
 1
In order to bring the system more into a “fair” balance, the US should demand a weaker dollar and
disincentivize imports to rekindle domestic manufacturing. It should also make other countries pay a larger
share of the defense bill themselves and accept a lower payout on their US treasuries for paydown of past
security guarantees. Countries that do not agree to these terms should be left out in the cold.

The US is taking on a unproportiallly large share of defense spending, leading to increasing public
debt

2
Taris is in this regard seen as an important instrument. One the one hand, raising taris will heavily
incentivize foreign companies to move production capacity to the US and this creates domestic jobs.
Revenues from taris will help reduce the fiscal deficit and open up for tax cuts which again makes it more

corporate.nordea.com/article/98321/macro-markets-mar-a-lago-accord
attractive to invest in the US. The threat of taris is also seen as a bargaining tool to make other countries
bend to the will of the US in terms of military spending, immigration, drugs smuggling etc..

Trump himself has not openly advocated the idea of an Accord, but some of his policies could be seen as
working in this direction. The threat of an US retreat from NATO and closer ties with Russia has led to a
massive increase in European defense spending. Higher taris have led to several companies announcing
large investment plans in the US. The dollar has also weakened, mostly as a result of global investors
allocating away from American equities. So far, the more financially nuclear option of restructuring the
outstanding US debt, either by applying a tax on coupons, lowering coupons or terming the debt out to
100 years has so far not been seriously discussed. US treasuries is the backbone of large parts of the global
financial system and messing it up could have serious repercussions. Less than a third of US treasury
securities are held abroad, so in order to meaningfully reduce the overall public debt you could not spare
domestic investors.

Only restructuring the foreign owned US Treasuries would still leave a lot of debt

While we already are seeing parts of Miran’s Mar-a-Lago Accord in action, we doubt that we will see a
globally coordinated deal ala 1985s Plaza. Back then, most currencies were still administered by central
banks and the financial market had a much smaller role in the economies. Eectively controlling the level of
the dollar would be much harder right now. Defaulting on the US Treasury debt would surely lead to a much
weaker dollar, but it would come with a lot of unwanted side eects. If the Trump administration starts to float
such an idea, it could lead to a marked sello in US bond market.

corporate.nordea.com/article/98321/macro-markets-mar-a-lago-accord
A global reallocation out of the US would lead to a large hit on the dollar while defaulting on US
Treasuries would increase the yield risk premia markedly.

6
China has by far the largest trade surplus with the US and is heavily dependent on keeping its currency from
appreciating. They are not very likely to succumb to pressure from the US. China is also not dependent on
US security, on the contrary. We have also seen that much of the push from the US administration has led to
defiance rather than acceptance of US policies.

Regardless of a coordinated accord to weaken the dollar, we still expect the fallout of US policies to weaken
the dollar over time. A more isolationist US should lead to less foreign investments and lower growth rates
over time, as will a more restrictive fiscal policy. Higher European defense and infrastructure spending will
increase growth and reduce the economic gap to the US while also opening up for investment opportunities
outside of the US.

Lars Mouland
Chief Credit/Rates Strategist
lars.mouland@nordea.com
4793480881

corporate.nordea.com/article/98321/macro-markets-mar-a-lago-accord