Government officials used to equivocate about the value of a strong dollar. If it was too high, they would work very publicly to bring it down. In 1985, Treasury Secretary James Baker met at New York City’s Plaza Hotel with finance ministers from West Germany, Japan, France, and the United Kingdom to depreciate the dollar against those nations’ currencies. The trade deficit took a few years to shrink (hence the smashed Toshiba boom box in 1987), but eventually a weakened dollar did shrink it. The Plaza Accords were judged a great triumph for the Reagan administration. Hurrah! We made the dollar weaker!
There have been a few subsequent efforts to reduce the dollar’s value, but not a lot, and if you never heard about them that’s because they were done very sotto voce. Starting in the 1990s, all presidential administrations, Republican and Democratic, swore allegiance to the cult of the strong dollar. “A strong dollar will always be in the interest of the United States,” said Treasury Secretary Tim Geithner in 2011. In January 2018, Treasury Secretary Steve Mnuchin briefly stated that a weaker dollar would be good for U.S. trade, echoing his boss, President Donald Trump. But after that caused an immediate drop in the dollar’s value, Mnuchin assured CNBC that no, no, no—strong dollar good! and promised never to muck around in the currency markets (as Baker had done and as Trump wanted Mnuchin to do).
“To advocate a strong dollar sounds patriotic, even though it’s not good for your trade balance,” Steven R. Weisman, who covered the Reagan White House for The New York Times and is now vice president for communications at the nonprofit Peterson Institute, told me. “No one wants to come out and say, ‘I want a weak dollar,’ because it sounds weak.”
