August 1st
It’s not the same as the Plaza Accord. Coordinated exchange rate policies among 185 countries are realistically almost impossible.
Why is such global coordination difficult?
- Monetary sovereignty: Each country has its own currency policy to maintain economic stability and control inflation. Changing it due to external pressures is politically difficult.
- Differences in economic structure: Each country has a different dependency on trade and sensitivity to exchange rate fluctuations (e.g. export-oriented countries vs. consumption-driven economies).
- Scale and liquidity of the currency market: Even if a single country intervenes in the market, there are limits to influencing the flow of global capital.
- Political conflicts of interest: Even among major powers like the U.S. and China, exchange rate policy is a source of tension. Coordinating among 185 countries is simply unfeasible.
The Plaza Accord was an agreement among just five countries—the U.S., Japan, West Germany, the U.K., and France. Even so, it had a huge impact on currency markets. But the scale and circumstances today are drastically different.
The Trump administration’s shift from exchange rate coordination to the more direct tool of tariffs to address trade deficits reflects precisely this challenge of global monetary coordination.
It seems that negotiations may be futile.