On June 19, German Chancellor Friedrich Merz called for a “Plaza Accord"-style coordinated push to force a revaluation of China’s renminbi, claiming the currency is undervalued by 30%—nearly double the International Monetary Fund’s estimate of about 16%. Merz cited the 1985 Plaza Accord as his model, reported the South China Morning Post.
He may not have realized the irony inherent in his proposal: Under the 1985 Plaza Accord, Washington pressed Japan to drive up the yen to “correct” the U.S. trade deficit. The result, recounted by Daisuke Kotegawa—a former Japanese Finance Ministry official and IMF executive director for Japan—was a disaster: “The yen immediately doubled... labor costs in Japan doubled, and Japanese companies which could no longer compete internationally, moved their factories to Southeast Asia and China.” The bubble that followed collapsed into Japan’s “lost decades.” And after the Asian crisis hit the rest, Kotegawa notes, “Only China was able to survive... China has become the center of the world’s manufacturing industry, and the concern about the challenge of China has emerged in the United States,” Kotegawa told a 2022 Schiller Institute conference.