US-China Trade War: A Replay of Japan's Plaza Accord Mistake?
The US is repeating Japan's Plaza Accord mistake by blaming China for its economic woes.
In the early 1980s, the Reagan Administration struggled to control the trade deficit without success, and it blamed the appreciation of the US dollar and strong performance of trade partners like Japan. This led to the Plaza Accord, which resulted in a stronger yen that impacted Japanese competitiveness, leading to inflation and a real estate bubble.
The situation is eerily similar today as the US engages in a trade war with China, which has been a major beneficiary of the situation. However, literature suggests that trade wars have badly impacted the US, with companies losing at least $1.7 trillion in stock value due to the first trade war.
The current trade deficit decreased by only a fraction, from $903 billion to $901 billion, and it has increased the household tax burden by $840, which continues to increase. The US wants China to support its economy, but this attitude is worsening the situation and is not sustainable.