Fixed Income : Plaza Accord 2.0? US–China Tensions Mount over Potential RMB Rise

From Nixon’s Shock to a New Plaza Accord

In August 1971, President Richard Nixon unilaterally ended the dollar’s convertibility to gold, effectively collapsing the post-war Bretton Woods system of fixed exchange rates. The “Nixon shock” ushered in a new era of currency volatility. A decade and a half later, in 1985, Washington again intervened in currency markets – this time via diplomacy. At New York’s Plaza Hotel, finance ministers of the United States, Japan, West Germany, France and the UK forged the Plaza Accord to intentionally devalue the soaring US dollar. In the five years prior, the dollar had nearly doubled in value, undermining US exports and widening trade deficits. The Plaza deal succeeded: the US dollar fell sharply against the Japanese yen and German mark, helping to curb America’s trade gap. But it also left a controversial legacy – Japan’s yen appreciated so brutally that it contributed to the bursting of Tokyo’s late-1980s asset bubble and the country’s “lost decades” of stagnation. That painful memory looms large in Beijing today, where leaders view the Plaza Accord’s aftermath as a cautionary tale of economic “Japanification” to avoid.

Fast forward to 2025, and talk of a “Plaza Accord Mark 2” is in the air – only this time the focus is on China’s renminbi (RMB). In Palm Beach, Florida – at Donald Trump’s Mar-a-Lago resort – US officials are openly musing about a new grand bargain to devalue the dollar and rebalance global trade. Stephen Miran, Trump’s top economic adviser and chairman of the Council of Economic Advisers, has explicitly floated the idea of a “Mar-a-Lago Accord,” modelled on Plaza. Miran argues that the US dollar is persistently overvalued – the “root of economic discontent” – and that America’s trading partners should help weaken it. The goal: reduce US trade deficits and revive domestic manufacturing by making American exports cheaper abroad. Miran outlined this framework in a detailed report before entering government, and the concept has gained traction within the Trump administration. Even Treasury Secretary Scott Bessent has said he’s interested in “some kind of global economic reordering,” hinting at Bretton Woods-style currency realignments.

Three decades after the original Plaza deal, Washington is once again exploring coordinated intervention in foreign exchange markets – only now the economic landscape is far more complex. In the 1980s, US allies like Japan and Germany were willing partners in revaluing their currencies upward. Today’s equation features a far larger and more assertive China, whose export-led economy has long depended on a managed, relatively weak RMB. Getting Beijing on board – or working around its resistance – is the thorniest challenge in any Plaza Accord 2.0. As one Atlantic Council analysis notes, China is wary, viewing Japan’s post-Plaza stagnation as a fate to avoid, and is sceptical that tariffs alone can coerce it into a currency deal. Yet the United States is ramping up pressure to force exactly that outcome.

Tariff Escalation and US–China Economic Showdown

The backdrop to this brewing currency accord is an escalating US–China trade war that has reached unprecedented intensity. In recent weeks, Washington stunned markets by slapping a punitive 145% tariff on virtually all Chinese imports – an extraordinary escalation of Trump’s protectionist agenda. Beijing swiftly hit back with 125% retaliatory tariffs on US goods, in what amounts to a full-fledged economic war. Such tariff levels – far above those seen even in the earlier 2018–2019 trade clashes – have sent shockwaves through global supply chains. Prices of stocks, bonds, oil, gold and currencies are whipsawing with each new salvo. “There are no winners in a trade war,” China’s Ministry of Commerce warned, decrying Washington’s “unilateral bullying” and vowing to “fight to the end” if needed.

President Trump’s team, however, is convinced the US holds the upper hand. Miran bluntly frames the strategy as an economic game of chicken – and he believes Beijing will blink first. In an April 7 speech, Miran argued that countries running big trade surpluses (like China) are “inflexible – they can’t find other sources of demand to substitute for America’s,” whereas the US “has plenty of substitution options”. In other words, the White House believes China needs access to the US consumer market more than the US needs Chinese imports. By this logic, tariffs hurt China more, so Beijing will eventually capitulate. Indeed, tariffs have rocketed skyward under this strategy: Trump had already hit China with 20% duties earlier in the year, and when that didn’t bring China to heel, he doubled down to the current 145%. Average Americans are already feeling the pinch – inflation on Chinese-made consumer goods has spiked, squeezing household budgets – but the Trump administration appears willing to tolerate short-term pain for long-term strategic gain.

The “Mar-a-Lago Accord” Emerges

The carrot to Trump’s stick is the proposed Mar-a-Lago Accord. Administration officials increasingly hint that if major trading partners agree to strengthen their currencies against the dollar, the US could roll back some tariffs and stabilise the situation. Instead of negotiating directly with Beijing, which remains politically unpalatable, Washington is courting US allies and partners to do the heavy lifting. Miran’s vision entails America’s allies voluntarily revaluing their currencies upward – effectively a US-led dollar devaluation akin to the Plaza Accord. The hoped-for result is a coordinated weakening of the dollar across the board, including against the Chinese yuan (RMB), even if China itself refuses to formally join the agreement.

In practical terms, this strategy has led the White House to focus first on Japan and Europe – key US partners whose currencies, the yen and euro, are major components of China’s own currency basket. If Washington can persuade Tokyo and European capitals to accept stronger currencies, it could indirectly force a passive appreciation of the RMB. This approach is now unfolding on the diplomatic stage. Treasury Secretary Scott Bessent is slated to visit Japan for high-level talks aimed at both trade and currency issues, an unusually prominent role for a Treasury chief in trade negotiations. The fact that Bessent – rather than the US Trade Representative – is leading these talks signals that dollar–yen exchange rates will be on the table alongside tariffs. In a recent phone call, President Trump personally urged Japanese Prime Minister Shigeru Ishiba to cooperate on “economic discussions,” and the two agreed to appoint special ministers for trade negotiations. Shortly after, Bessent confirmed on social media that he’s been asked to “open negotiations” with Japan focusing on “tariffs, non-tariff barriers, currency issues, and subsidies”. The stage is set for a dramatic showdown – or breakthrough – reminiscent of the US-Japan currency negotiations of the 1980s.

Japan’s response so far has been intriguing. Rather than reflexively resisting US pressure, some influential voices in Tokyo appear open to a stronger yen – for their own reasons. Itsunori Onodera, policy chief of Japan’s ruling Liberal Democratic Party, remarked recently that the weak yen is actually hurting Japan by driving up import prices and the cost of living. “The weak yen has been among the factors pushing up prices,” Onodera noted, suggesting that “to strengthen the yen, it’s important to strengthen Japanese companies.” His comments, coming just ahead of the US talks, signal that Tokyo may be willing to let the yen appreciate if it helps curb inflation at home. This marks a notable shift: historically, Japan tried to prevent the yen from rising “too much” to protect its exporters. But after the yen’s slide to nearly 160 per dollar last year – a three-decade low – and a recent bout of imported inflation, sentiment is changing. Japan even intervened to prop up the yen in 2022 when the dollar’s surge became untenable. Now, with the dollar already off its highs (falling to ~143 yen recently amid global dollar weakness), Japanese officials appear less inclined to fight appreciation. If Washington calls on Tokyo to “lean in” to a stronger yen as part of a broader deal, Japan might agree, not just to placate its ally but to address domestic economic concerns.

Across the Atlantic, Europe’s role in a Plaza Accord 2.0 is also pivotal. The euro is the second-largest component of the RMB’s reference basket, accounting for about 18% of the China Foreign Exchange Trade System (CFETS) currency index. A concerted rise in the euro’s value versus the dollar – whether through market forces or coordinated policy – would similarly put upward pressure on the RMB. While European officials have been quieter publicly, they share some US grievances about China’s trade practices and might tacitly support a rebalancing if it helps their own exporters compete fairly. The European Central Bank (ECB), dealing with high inflation in the eurozone, may also welcome a slightly stronger euro as a tool to reduce import costs (though a too-rapid rise could hurt European exports). In any case, if the US, Japan, and the eurozone all move in tandem to weaken the dollar, China would find itself increasingly isolated if it tried to maintain a weaker currency.

Could Beijing Embrace a Stronger RMB?

Conventional wisdom holds that China would fiercely resist an accord that causes its currency to appreciate. A cheap RMB has long been seen as vital to China’s export competitiveness, and the ruling Communist Party prizes economic stability – which, in the past, meant tightly controlling the yuan’s value. Indeed, Chinese leaders have repeatedly stressed they “will never yield” to a Plaza-style agreement imposed from abroad. However, we argue that contrary to old assumptions, China might benefit from a stronger RMB in the current context. The structure of China’s economy and its strategic priorities have evolved significantly in the past decade. As Beijing grapples with slowing growth and aims to escape the “middle-income trap,” a modestly, or even significantly, stronger currency could advance several of China’s goals:

Higher-value Exports and Tech Leadership: China is no longer just a producer of cheap toys and textiles – it’s a powerhouse in high-tech and electric vehicle (EV) manufacturing. Chinese companies today compete on technology and scale, not just low wages. In fact, China has become the world’s largest auto exporter, thanks in large part to an explosion in EV shipments. In 2023, China exported over 4 million vehicles, of which 1.2 million were electric cars – 80% more EVs than the previous year. This rapid ascent up the value chain has reduced the reliance of Chinese exports on a weak currency. Chinese EVs, solar panels, and electronics are often competitive even without a price advantage, due to technological edge or strong domestic supply chains. A stronger RMB that raises export prices might not derail these industries – Chinese firms could absorb some margin compression, or consumers abroad might pay a bit more for sought-after products like BYD electric cars or Huawei gadgets. Meanwhile, a firmer currency would encourage Chinese manufacturers to keep moving upmarket, focusing on quality and innovation rather than cost-cutting. This aligns with President Xi Jinping’s vision of an innovation-driven economy.

Indeed, the data underscore China’s shifting export mix. Electric vehicle exports have skyrocketed in recent years: up 1,016% from 2018 to 2023, reaching nearly 1.6 million EVs shipped last year. That makes China by far the world’s largest EV exporter. In 2021 alone – a break-out year – China’s battery-electric vehicle exports jumped 155% to over 500,000 units and growth has continued. This boom is underpinned by improved technology and scale. Chinese EVs have dramatically increased in quality and price – the average unit value of exported EVs climbed from just $2,000 in 2018 to over $23,000 in 2023. In other words, China is exporting far more EVs, and at much higher prices, than just a few years ago. Such trends suggest currency appreciation might not knock China off its stride. When you’re selling cutting-edge electric cars or advanced electronics, a 10–20% price shift from currency is less critical than it would be for low-margin commodities. China’s rising technological competitiveness provides a buffer against currency effects.

Vast Household Savings and Consumption Potential: Chinese households have accumulated an astonishing wall of savings, which a stronger RMB would make more valuable in real terms. By the end of 2023, Chinese households had stashed away ¥140 trillion in bank deposits – roughly $19.13 trillion USD – a record high. This reflects years of high savings rates and, more recently, precautionary saving during the pandemic and losses on domestic investments. Such a reservoir of savings represents pent-up purchasing power. A stronger renminbi boosts Chinese consumers’ global purchasing power, effectively making imports, overseas education, travel, and luxury goods cheaper for them. It could encourage consumers to spend a bit more freely (something Beijing has been trying to stimulate, albeit with limited success). While a stronger currency alone won’t transform cautious savers into big spenders, it improves living standards by enabling households to afford more with their money. It also helps Chinese companies buy foreign inputs and technology at lower cost. Notably, a firmer RMB can reduce import-price inflation – significant for a country that imports vast quantities of energy, raw materials, and food. Cheaper imports mean lower costs for businesses and more disposable income for families, aiding China’s rebalancing toward consumption-led growth.

Global Investment and Belt-and-Road Ambitions: China’s strategic economic plans involve investing trillions abroad – from securing raw materials in Africa and Latin America, to financing infrastructure across Eurasia via the Belt and Road Initiative (BRI), to acquiring high-tech companies or stakes overseas. A stronger RMB would greatly facilitate these ambitions. It would allow Chinese firms and funds to snap up foreign assets at more favourable exchange rates, essentially making overseas investments “cheaper” in RMB terms. China’s state-owned investment funds and private conglomerates would have enhanced firepower to expand globally. Furthermore, RMB internationalisation – a long-term goal for Beijing – could get a boost. If the RMB is seen as a stable or appreciating currency, foreigners are more likely to hold it or accept it in trade. Beijing has slowly been pushing for the RMB’s use in international settlements (from oil deals with the Middle East to BRI loans). An accord that lifts the RMB could accelerate its credibility as a global currency, inching it closer to reserve-currency status over time. Beijing ultimately seeks greater financial autonomy from the US-led system, and a stronger, more widely used RMB is part of that vision.

Innovation-Led Growth and the Middle-Income Transition: China is at a crossroads, trying to transition from middle-income to high-income status without falling into stagnation. We, along with many economists argue this requires shifting away from the old playbook of cheap labour and export quantity, toward higher productivity, innovation, and domestic demand. Allowing the RMB to appreciate could serve as a catalyst for this transition. It would naturally wean some low-end export industries off currency support – forcing upgrades or consolidation – while rewarding companies that have moved up the value chain. This echoes how Japan and South Korea eventually let their currencies rise as their industries matured (notwithstanding Japan’s over-shoot). Moreover, a richer consumer base with a strong currency can help foster the domestic consumption that China needs for sustainable growth. Chinese tourists, for example, would find their money goes further abroad – and Chinese buyers could more readily import advanced equipment or foreign services, injecting new ideas and competition into the economy. All these effects could support Beijing’s long-term objectives of an innovative, consumption-driven economy. As one Chinese economist quipped recently, “We cannot become Germany or Japan with a perpetually weak currency; at some point the yuan must reflect our economic strength.”

Of course, these potential benefits don’t mean China will eagerly embrace a sharp, externally dictated revaluation. Beijing’s priority is stability and control. Policymakers fear the loss of export jobs, and they worry that a rapid RMB rise could spur capital inflows if investors speculate on the currency. Memories of 2015’s messy devaluation (when a minor exchange rate tweak sparked market panic) are also still fresh. A volatile exchange rate is not what China desires. Any RMB appreciation, from China’s perspective, would ideally be tightly managed and gradual. Face is also a major factor – the Communist Party does not want to be seen domestically as capitulating to US pressure. That’s where the indirect Plaza Accord strategy could prove ingenious: if global market forces push the RMB up, China can claim it is simply a bystander maintaining a “stable” yuan relative to a basket of currencies.

How a US-Led Dollar Devaluation Could Lift the RMB

China today manages the RMB’s value against a basket of currencies more than strictly against the dollar. The CFETS RMB Index, run by the central bank, tracks the yuan against 25 key currencies, reflecting China’s diverse trade ties. As of this year, the US dollar comprises only about 19% of that basket, while the euro makes up roughly 18% and the Japanese yen about 8.6%. (Other currencies like the Korean won and Australian dollar also have sizeable weights.) This means that if the euro and yen strengthen significantly against the dollar, the RMB’s basket index will rise unless China actively weakens the yuan against those currencies to compensate. In practice, Chinese authorities have allowed the yuan to gradually appreciate against the basket in previous years – the CFETS index climbed to a record high of 104 in early 2022 – even while sometimes letting it weaken versus the dollar. They periodically adjust the basket weights (in January 2025 they slightly reduced the dollar, euro, and yen weights), but the basket framework remains.

What this means for a Plaza Accord Mark 2 is that if Washington succeeds in orchestrating a broad dollar decline – particularly against the yen and euro – the RMB will likely appreciate somewhat “passively.” Imagine the yen surges (as it did after Plaza in 1985) from the current ~140 per dollar to, say, ¥100/USD, and the euro jumps from roughly $1.10 to $1.40. Those are big moves, but not implausible if multiple central banks or governments coordinate. In that scenario, the CFETS basket would shift dramatically. For China to keep the RMB stable relative to the basket, it would have to allow the yuan to strengthen against the dollar (otherwise the basket index would fall, reflecting an undervalued yuan vs others). Beijing could still intervene to smooth the pace, but the direction would be clear. In effect, the market (influenced by other governments) would be revaluing the RMB, not a unilateral Chinese policy decision.

Such an outcome might be palatable to Chinese leaders because it provides diplomatic cover. They could tell domestic audiences that China did not bow to the US; instead, it is maintaining currency stability as others adjust. Chinese state media would likely emphasise that any RMB rise was a natural market response to US dollar weakness, and not a concession in the face of tariffs. This face-saving distinction could create an off-ramp in the conflict. If the RMB rises by, say, 10–20% against the dollar over a year due to global forces, Trump could claim victory – arguing his hardball tariffs and deal-making forced China’s currency higher – while Xi Jinping could claim prudence and sovereignty – noting China never agreed to a Plaza Accord and simply kept the yuan broadly stable. Both sides save face even as the core US demand (a stronger RMB) is essentially met.

For China, an added incentive to allow this would be the prospect of tariff relief. If a de facto Plaza Accord takes shape – with the yen, euro (and perhaps the British pound, Korean won, etc.) all appreciating – the US would likely come under pressure to lift some of those crushing 145% tariffs in return. Already, whispers in Washington suggest that if currency realignment occurs, Trump may dial back the most extreme duties to “lock in” the gains. A hypothetical “Mar-a-Lago Accord” signing (even if China isn’t at the table) could be accompanied by a staged rollback of tariffs on allies and eventually on China, easing the trade war that is weighing on global growth. For Beijing, this offers a way out: accept a stronger currency (which might be happening anyway) and get relief from tariffs, without appearing to capitulate or sign an accord it politically detests.

There are signs Beijing might tolerate a stronger yuan under these conditions. China’s central bank has in the past allowed periods of RMB appreciation when external pressure was high, as long as it was gradual. For instance, from 2005 to 2013, the RMB climbed steadily (about 30% against the dollar over 8 years) as China joined the WTO and sought to quell criticism of its trade surplus. Those moves were carefully managed and paused when needed. Similarly now, we could see the People’s Bank of China (PBoC) quietly guide the yuan upward in small increments, shadowing the yen/euro rises, while using its $3.24 trillion foreign exchange reserves as a cushion against excessive volatility. Notably, China’s current account surplus – once a gargantuan 10% of GDP in the mid-2000s – is now relatively modest, projected to be about 1.6% of GDP in 2025 down from 2.5% in 2022. This suggests the RMB is not wildly undervalued at present. A moderate appreciation might be economically absorbable, especially if it helps reduce import costs and inflation. China’s forex war chest of over $3.2 trillion provides confidence that authorities can handle speculative attacks or smooth fluctuations if they choose to let the currency inch up.

A New Alignment: Risks and Opportunities

If a Plaza Accord redux does come to pass – effectively a US-led dollar devaluation and coordinated appreciation of other major currencies, RMB included – it would mark one of the most significant shifts in the international financial order in decades. The implications would be far-reaching:

Global Trade Imbalances: A weaker dollar and stronger RMB would, over time, likely shrink the US trade deficit with China, as American goods become cheaper for Chinese buyers and Chinese goods become pricier in the US market. The colossal bilateral imbalance (which has been a persistent ~$300 billion annual US deficit) could begin to narrow. However, consumers in the US might face higher prices on remaining Chinese imports until supply chains adjust – essentially a trade-off between US manufacturing jobs and consumer costs. China’s overall trade surplus might not vanish (its exports are competitive beyond just price), but it could decline as exports cool and imports rise with stronger domestic purchasing power. Other nations, from Germany to Mexico, would also see trade flows shift due to currency changes, potentially easing some Trump-era trade frictions.

Diplomatic Dynamics: For the US, getting Europe and Japan aboard a currency deal would represent a diplomatic coup and display of Western-aligned unity in economic containment of China. It could also mend some fences frayed by years of tariff threats against allies. On the flip side, if China perceives the move as a US-led “ganging up,” it could deepen Beijing’s mistrust and drive it closer to alternative partnerships (for instance, pushing harder on BRICS cooperation or regional trade pacts without the West). Ideally, the outcome would be a grand bargain: China quietly accepts a new currency reality and the US in turn scales back the trade war, cooling tensions and providing a more stable environment for everyone. Such an outcome could create a more workable US–China relationship, at least on the economic front, after years of escalation.

Market Reactions: Financial markets would have to adjust to a significantly different valuation of the world’s reserve currency. A dollar decline could boost US exporters and stock prices of manufacturing firms, while potentially hurting industries reliant on cheap imports (retailers, etc.). Emerging markets might breathe a sigh of relief if US interest rates and the dollar come down, easing pressure on their dollar-denominated debts. However, volatility could be high during the adjustment period – currencies might overshoot, and central banks would need careful coordination to avoid shocks. Gold and other commodities priced in dollars could spike initially as the dollar falls. China’s PBoC might intervene intermittently to prevent the RMB from overshooting too much and hurting confidence. The key will be clear communication – a lesson learned from Plaza, where officials gave reassurances to smooth the transition.

China’s Economic Trajectory: A successfully managed RMB appreciation could actually help steer China onto a more sustainable path, reinforcing reforms. It would accelerate moves to develop the service sector and high-tech industries (already priorities in China’s 14th Five-Year Plan) as low-end export margins get squeezed. Companies that survive and thrive would be those investing in productivity and brand value – exactly what China wants more of. Over the longer term, a stronger RMB could support China’s consumers to play a bigger role in growth, addressing the chronic imbalance of low consumption as a share of GDP. Boosting consumption could also boost inflation, important as China battles bouts of deflationary pressure at home (consumer prices have occasionally dipped below zero, reflecting weak domestic demand). Nevertheless, Beijing will be vigilant: if the currency rises too fast and growth falters, authorities could reverse course. The political imperative of the Communist Party is to maintain growth and employment, so any currency accord would be calibrated to not jeopardise that.

US Politics and Policy: For President Trump, securing what his advisers call a “Mar-a-Lago Accord” would be a signature achievement to tout: proof that his iconoclastic trade policies could rewrite the rules of global finance in America’s favour. Trump’s camp argues it would address the “legacy of dollar overvaluation” that they say hollowed out US industry. Sceptics, however, caution that such a deal is no panacea – America’s competitiveness issues run deeper than the currency, and a cheaper dollar could spur inflation by raising import prices. Fed officials would have a tricky task if a dollar devaluation pushes up prices while growth is still cooling. There’s also the question of enforcement: unlike Plaza (where all parties formally agreed), here China’s “agreement” would be tacit. If global conditions change, the informal accord could fray. Nonetheless, Trump’s economic advisors like Miran and Bessent seem prepared to leverage every tool – tariffs, diplomacy, even novel ideas like taxing foreign holders of US debt – to rebalance trade.

As negotiations and manoeuvring continue, all eyes are on the value of the RMB. It has become a barometer for the state of US–China relations and the success of Washington’s gambit. Currency traders report that speculation of a “new Plaza Accord” is already partially priced into some non-RMB currencies, with the dollar dipping in recent weeks on rumours of progress. In public, Beijing maintains a defiant tone – insisting it will “never again be humiliated” by unequal treaties and that its currency policy will serve domestic needs. But behind closed doors, economists in Zhongnanhai (China’s leadership compound) are surely crunching scenarios for various appreciation paths and their impacts on employment and debt.

Outlook: Toward an Uneasy Truce or New Flashpoint?

The coming months will reveal whether a Plaza Accord Mark 2 truly takes shape or if the idea falls apart. Several indicators to watch include: Japanese yen movements (a sustained strengthening would indicate coordination), any signals from the ECB about the euro, and of course the RMB’s daily trading band that China’s central bank sets. Also crucial will be the status of tariffs – if Washington starts lifting some of the 145% tariffs or Beijing reduces its 125% counter-tariffs, it could signal confidence that a currency realignment understanding has been reached. Note the symmetry here; a 20% revaluation of the US dollar is exactly the gap between the tariffs on either side.

One wildcard is the role of other economies. For instance, South Korea and Taiwan – major exporters often accused of currency suppression – might be pressured to let their currencies rise too. The Korean won, which is also in the RMB basket (~8% weight), has been relatively weak; any accord might involve tacit agreements from Seoul. Similarly, the British pound and Canadian dollar (large RMB basket components) could strengthen if commodity prices jump on a weaker USD. A truly global dollar decline would touch virtually every market – which is why coordination and communication among G20 finance chiefs would be paramount to prevent chaos.

For China, a lot rides on framing and timing. If the RMB appreciates slowly and in line with improving economic fundamentals (for example, if China’s growth picks up due to a post-Covid consumer rebound or strong high-tech exports), the effect will feel more natural and manageable. It would differ markedly from the shock therapy forced on Japan in 1985. Some Chinese commentators suggest that if an appreciation is inevitable, better it happen when Chinese export industries are relatively robust – as they are now, with EVs and electronics in high demand – rather than during a downturn. In that sense, ironically, China’s current strengths give it more leeway to allow currency gains. Strong export order books and huge foreign exchange reserves act as buffers. There is also domestic political calculus: Xi Jinping has consolidated power and could weather a slight export hit more easily now than a few years ago, especially if it comes packaged as a win for China’s global status (a more valuable yuan).

Still, pitfalls abound. Mistrust between Washington and Beijing is deep, and either side could miscalculate. If China drags its feet and is seen to undermine the process – for instance, by heavily intervening to devalue the yuan while others are revaluing – the US could respond with even more drastic measures (some Trump advisors have floated tariffs up to 200% or outright import bans). Conversely, if the US pushes too hard or prematurely declares victory, markets could overshoot, and China might panic and re-impose a hard peg, torpedoing the accord. The choreography needs to be delicately balanced.

What is clear is that the stakes are enormous. At issue is not just the US–China trade balance, but the broader question of whether the international monetary system can be reset through negotiation rather than conflict. The original Plaza Accord required an unprecedented degree of cooperation among erstwhile rivals. A second accord in today’s polarised world would be no less historic. It could either become a cornerstone of a more stable US–China economic coexistence or, if it fails, lead to an even more fragmented global economy with rival blocs.

As of now, cautious optimism is emerging in some quarters that a deal of sorts can be struck. “We may be on the cusp of generational change in the international trade and financial systems,” Stephen Miran wrote in late 2024, suggesting the post-Plaza “non-system” has run its course. If a Mar-a-Lago Accord is indeed that generational change, it will redefine US–China relations and potentially give China an unexpected opportunity: the chance to transition to the next stage of development with a stronger currency and greater global clout, rather than against it.

One thing is certain – the world will be watching the value of the RMB as a sign of what comes next. A rising renminbi could herald a delicate truce in the trade war and a new alignment of economic power. A faltering deal or a plunge in the RMB, on the other hand, would spell escalation and peril. The ghost of the Plaza Accord hangs over these decisions, but history doesn’t repeat exactly: in this 21st-century version, China’s choices will be as decisive as America’s. The coming negotiations – from Washington to Tokyo to possibly behind closed doors in Beijing – will determine if 2025 goes down as the year a new Plaza Accord sparked a revaluation not just of currencies, but of the global economic order.

 

Disclaimer:

This document is for informational purposes only and does not constitute legal, tax, or investment advice. Prospective investors are strongly encouraged to consult their own professional advisers regarding the legal, tax, financial, or other consequences of investing in any products or services described herein