What 1985 tells us about a US China trade war
Back then, the US had felt similarly threatened by Japanbut Donald Trump will find it difficult to emulate Ronald Reagan's tactical success
In 1985, Ronald Reagan pulled off a coup. The Japanese bogeyman loomed large on America’s economic horizon. The US trade deficit with Japan was substantial. And the roughly 60% appreciation in the real value of the dollar between 1979 and 1985 created a conducive environment for imposing quotas, tariffs and voluntary export restraints. By 1985, the US congress had begun to consider protectionist legislation. This spurred Reagan, then US president, to bring the US’ main trade partners to the negotiating table to work out a multilateral pact. The pact entailed coordinated interventions in currency markets in order to depreciate the dollar with regard to the Japanese yen and German deutsche mark. And so, the Plaza Accord was born.
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