--- title: "Why a New 'Plaza Accord' to Weaken the Dollar Wouldn't Work" description: "In 1985, five governments met at New York's Plaza Hotel and agreed to drive down an overvalued dollar — and it worked. With the dollar strong and US trade deficits wide, the idea of a sequel is circulating again. The trouble is that the world that made the Plaza Accord possible no longer exists." category: "Economy" category_url: https://boursel.com/category/economy author: "Olivia Chen" published: 2026-06-30T21:43:40.000Z updated: 2026-06-30T21:43:40.000Z canonical: https://boursel.com/article/why-a-new-plaza-accord-to-weaken-the-dollar-wouldn-t-work tags: ["dollar", "currencies", "trade", "de-dollarization", "economy"] --- # Why a New 'Plaza Accord' to Weaken the Dollar Wouldn't Work In 1985, five governments met at New York's Plaza Hotel and agreed to drive down an overvalued dollar — and it worked. With the dollar strong and US trade deficits wide, the idea of a sequel is circulating again. The trouble is that the world that made the Plaza Accord possible no longer exists. This is an explainer and analysis, not a market forecast. ## The deal that worked On September 22, 1985, finance ministers from the **United States, Japan, West Germany, France and the United Kingdom** gathered at New York's **Plaza Hotel** and agreed to act together to **weaken an overvalued US dollar**, which had surged in the early 1980s and was hammering American exporters. It worked: the dollar fell sharply over the following two years — roughly **40% against the Japanese yen**, [as the Japan Times recounts](https://www.japantimes.co.jp/business/2025/09/21/economy/40-years-plaza-accord/). No currency summit before or since has moved markets so decisively. ## Why the idea is back The conditions rhyme with today: a **strong dollar** and **wide US trade deficits.** That has revived talk in some policy circles of a modern equivalent — sometimes dubbed a **"Mar-a-Lago Accord"** in Washington debates — to coordinate the dollar lower and help US manufacturing. (These are **proposals and ideas**, not policy.) But most economists think a sequel would **fail.** As the **Atlantic Council** [put it](https://www.atlanticcouncil.org/blogs/econographics/dont-expect-a-plaza-accord-2-0-to-reverse-the-dollars-surge/), don't expect a "Plaza Accord 2.0" to reverse the dollar's strength. ## Why it wouldn't work now Four things have changed: - **Currency markets have outgrown governments.** In 1985, a few billion dollars of coordinated central-bank selling could shift the dollar. Today, **foreign-exchange trading runs to roughly $7.5 trillion a day** (per the Bank for International Settlements' latest survey) — a torrent that **dwarfs** what officials could realistically move. Markets, not summits, set the price. - **China wouldn't cooperate.** The 1985 deal worked because its members — especially **Japan** — were **security allies** with aligned interests. **China**, central to today's trade imbalances, is a **strategic rival**, not an ally, and has little incentive to deliberately strengthen its currency to suit Washington. Without Beijing, a grand bargain on global imbalances is hollow. - **It clashes with the inflation fight.** Deliberately **weakening** the dollar is, in effect, **loosening** policy — which would cut against the **Federal Reserve's** battle to bring inflation down under new Chair **Kevin Warsh**, and could **rattle confidence** in the dollar just as questions about its dominance are already live. - **The real problem is fiscal.** Economists note that today's imbalances stem largely from the **US fiscal deficit** and structural saving-and-spending patterns. **Pushing the exchange rate down** without addressing those doesn't fix trade — it just adds currency instability. ## The dollar is under pressure anyway Here's the irony: the dollar's grip is **slipping on its own**, without any accord. Its share of global reserves has eased from about **71% in 2000 to the high-50s%** recently, by the **IMF's** reserve data, and **central banks** have been **buying gold** at a historic pace — around **1,037 tonnes in 2024**, a third straight year above 1,000 tonnes, [the World Gold Council reports](https://www.gold.org/goldhub/research/gold-demand-trends) — the **de-dollarization** trend Boursel has tracked. That drift is driven by **structural** forces — US debt, geopolitical mistrust, a fragmenting financial order — not by any coordinated campaign, and arguably can't be engineered by one either. ## Why it matters For **markets and policymakers**, the lesson is that the **1985 playbook doesn't fit 2026.** Governments can still act **unilaterally** — through tariffs, bilateral deals or jawboning — but the dream of a **smooth, coordinated** currency realignment belongs to a smaller, more aligned world. The dollar's path will be set by the **Fed's credibility, US fiscal policy and geopolitics** — not by a handshake at a hotel. Boursel offers no view on where the dollar goes next; the takeaway is that the tool that worked in 1985 has been **overtaken by the size and politics of modern finance.** ## Sources - [Don't expect a Plaza Accord 2.0 to reverse the dollar's surge](https://www.atlanticcouncil.org/blogs/econographics/dont-expect-a-plaza-accord-2-0-to-reverse-the-dollars-surge/) - [40 years after the Plaza Accord](https://www.japantimes.co.jp/business/2025/09/21/economy/40-years-plaza-accord/)