The Art of the Deal, 2.0: A Thought Experiment
On a Knife-edge
The global economy is teetering on a knife-edge, and the stakes could not be higher. Residual inflationary pressures, yawning deficits, the spectre of a global trade war, and escalating geopolitical tensions are converging to create an era of unprecedented uncertainty. Yet, despite the gravity of these challenges, meaningful dialogue between major global powers often feels as distant as the stars.
Federal Reserve Chair Jerome Powell recently remarked on the need for “an adult conversation” about the trajectory of US government debt, underscoring the urgency of economic reform. Meanwhile, China, with one of the world’s highest savings rates, grapples with the challenge of stimulating domestic demand. The question arises: despite their differences, do China and the US have significant mutual benefit from working together?
Enter an audacious thought experiment: President Xi Jinping and President Donald Trump convening a high-stakes economic summit at none other than Mar-a-Lago.
The Economic Realities Facing the US and China
To understand the need for such a meeting, one must first grapple with the enormity of the problems at hand.
The United States, with its ballooning budget deficits and rising interest costs, faces fiscal pressures unseen since the Second World War. Government debt is projected to exceed 100% of GDP by 2025, with debt servicing costs recently surpassing defence spending to become the third-largest item in the federal budget. Meanwhile, an ageing population is placing ever-greater demands on Social Security and Medicare, both of which are struggling under the weight of demographic realities. Without reform, the United States risks sliding into economic stagnation, social unrest, or both.
Across the Pacific, China’s economic trajectory is far from assured. Once defined by explosive growth, its economy has slowed. While China continues to run a trade surplus of approximately $1 trillion, this surplus has increasingly become a point of contention with the United States and its allies. At the heart of this tension lies the renminbi, China’s tightly managed currency. Critics argue that its undervaluation distorts the playing field, while defenders point to its role in maintaining domestic stability within a developing economy.
The stakes for both nations—and, by extension, the global economy—are profound. Persistent trade imbalances, fiscal recklessness, and currency distortions threaten to destabilise international markets. Addressing these issues will require bold and coordinated action.
Why Mar-a-Lago? The Power of Symbolism
In such turbulent times, the symbolism of diplomacy matters. Just as the Plaza Hotel became the site of the historic 1985 Plaza Accord, Mar-a-Lago could provide an audacious and fitting venue for a modern-day grand bargain.
Mar-a-Lago, with its opulent architecture and aura of power, embodies a uniquely American blend of ambition and spectacle. Imagine President Xi Jinping, reluctantly but strategically, walking through the resort’s lavish halls to meet Trump. For Trump, the setting would be perfect—a stage where he could claim credit for “the greatest trade deal, maybe ever.” For Xi, it would signal a willingness to engage on equal terms, with the venue itself underscoring the importance of dialogue amidst profound differences.
The Grand Bargain: A Bold Proposal
At the heart of the meeting would be a daring proposition:
The United States would agree to lift tariffs on Chinese goods, reducing costs for American consumers and businesses.
In return, China would allow the renminbi to appreciate, perhaps significantly.
A stronger renminbi would make Chinese exports more expensive, naturally narrowing the US trade deficit without the need for protectionist tariffs. Simultaneously, it would make US exports more competitive in China, providing a much-needed boost to American industry. For China, this move would reduce global criticism of its trade policies and advance its long-term goal of global financial integration, enabling Chinese investors to diversify internationally at more favourable rates.
Potential Challenges and Opposition
Such a bold agreement would not come without fierce opposition. Powell might caution that currency adjustments alone cannot resolve the structural imbalances at play. The United States would still need to address its fiscal deficit, reduce reliance on debt, and invest in productivity-enhancing reforms.
Meanwhile, Xi’s advisers would likely fret over the domestic fallout of a stronger renminbi. Exporters, already struggling with a slowing economy, would face new pressures, risking social unrest. Moreover, allowing greater currency flexibility could challenge Beijing’s tight control over its financial system.
These concerns are valid, but the broader logic remains compelling. The intertwined destinies of the United States and China demand bold action, and the symbolism of such a meeting could itself be transformative.
The Role of Spectacle in Diplomacy
Critics would undoubtedly decry the theatrics of a Mar-a-Lago summit. Yet history teaches us that symbolism and spectacle can pave the way for substantive change. The Plaza Accord succeeded not only because of the policies it implemented but because it signalled a collective commitment to addressing global imbalances.
If a Mar-a-Lago summit produced even the outline of a framework for greater stability—tariffs replaced by mutually beneficial exchange rate adjustments, structural reforms agreed upon—it could mark the beginning of a new era of economic cooperation. Such an outcome would transform Mar-a-Lago from a symbol of excess into the cornerstone of 21st-century diplomacy. Jerome Powell is right: the world needs an adult conversation about these challenges. But perhaps a touch of audacity, a blend of pragmatism and spectacle, is exactly what’s required to get us there.
Let the summit begin!
