April 4, 2025 | The Mar-a-Lago Accord Initiative is Already in Trouble

base because they were expecting a more gentle and nuanced approach.

Could Trump’s tariff war produce good results?

Source: Bloomberg, Bloomberg Chat

On Thursday we learned that the stock market had not priced assets to fully reflect the impact of a new round of almost universal tariffs.

But Trump and his advisors did not care that Wall Street would be upset. They want tariffs!

One of the foundations of the love affair with tariffs is a 2024 paper by Stephen Miran, the newly confirmed Chair of the Council of Economic Advisors with the Trump administration.

The paper is called, “A User’s Guide to Restructuring the Global Trading System”.

Source: Stephen Miran

Miran says, “The desire to reform the global trading system and put American industry on a fairer ground vis-à-vis the rest of the world has been a consistent theme for President Trump for decades.”

He goes on, “The root of the economic imbalances lies in the persistent dollar overvaluation that prevents the balancing of international trade.” Miran believes that the dominant role of the US dollar in global trade has made U.S. exports less competitive and has eroded US manufacturing.

“There is a path by which these policies can be implemented without material adverse consequences, but it is narrow and will require currency offsets for tariffs and either gradualism or coordination with allies or the Federal Reserve on the dollar.”

The challenge is to lower the dollar’s value while preserving benefits that come with its role as a reserve currency. In other words, the U.S. would love to have its cake and eat it too.

So, what are the chances for success?

Miran states that the “potential for unwelcome economic and market volatility is substantial.” Emphasis added.

Economic volatility is a recession. Unemployment is 4 percent, and a severe recession would push it to 8-10 percent, causing politicians to get tossed out of office. As the House of Representatives stands for re-election in November 2026 this “volatility” could have serious repercussions.

“Market volatility” is a stock market crash, as in 2020 when markets declined 38 percent and 2009 when they declined about 50 percent.

There is a high probability of both a recession and market crash in the next year because of Trump’s aggressive tariff policy.

If others see the Trump administration in deep trouble politically there will be no willingness to cooperate with the proposed restructuring which has been dubbed the “Mar-a-Lago Accord”.

In the Financial Times Steven Kamin and Mark Sobel Mar-a-Lago Accord, Schmar-a-Lago Accord, state that such an accord would be “pointless, ineffectual, destabilizing, and only lead to the erosion of the dollar’s preeminent role in the global financial system.”

And Trump could get a better result by cutting spending, raising taxes and reducing the federal deficit, the authors say.

This tariff war will only provoke retaliation from other countries and yield mostly disastrous results.

Hilliard MacBeth

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Hilliard MacBeth April 4th, 2025

Posted In: Hilliard's Weekend Notebook

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