Trump, the dollar and the trade war: Is this really the end of American exceptionalism?

The U.S. economy is really great. It is richer, more innovative and continues to expand at high speed than most developed countries. This has been particularly special in the past 15 years as its stock market outperforms any other country as the growth prospects for China and Europe are dim.

But it seems that the exception may be short-lived. Uncertainty in trade and the future strength of the dollar has led some European big investors to retreat from U.S. stocks. The problem may be deeper. Less than 100 days in the second Trump administration’s game, commentators have been discussing the end of American exceptionalism.

Many things make the U.S. economy abnormal. First, it has the deepest and most liquid capital markets that help transfer funds to their productivity uses. But what is truly extraordinary is its vitality, which constitutes innovation and productivity, attracting talents from all over the world.
To figure out whether our best days are behind us, it is necessary to separate short-term abnormalism based on current financial situations and long-term structural abnormalism, a characteristic of the American economy in the last century. The short-term boom may indeed be disappearing, but in the long run, abnormalism should be tolerated because it is more durable than any damage any president has done in a few months.

Short-term abnormalism has never been sustainable. The global financial crisis has caused global investors to accumulate growth prospects for U.S. assets that continue to this day. U.S. companies now account for 57% of the global stock market. The US dollar is the world’s major reserve currency, and U.S. Treasury bonds are considered risk-free assets. But in recent weeks and months, President Donald Trump’s desire to return to trading relations, with economic troubles with tariffs and reduce international dependence on the dollar has kept domestic and international investors on the alert. The Bloomberg Market Cap Index has fallen by as much as 4.41% since mid-January, while U.S. stocks have declined in 2025 as stocks soar in the rest of the world.

Of course, U.S. stocks and green stocks may have been too high and are about to fall back. Trump’s policy could revoke a reversal. However, anomalies do not exempt market volatility in financial assets. The world remains dependent on American exceptionalism and its superior growth prospects. Although the U.S. dollar may weaken and reduce the attractiveness of the U.S. market, it is not a competitor to the world’s major reserve currency.

Whatever happens to the dollar, what really stands out in the U.S. economy is its long history of innovation. In the 2024 Global Innovation Index report, it scored the highest in categories such as research and development, business startups, intangible assets, university quality, software expenditure and intellectual property. This feeds dynamics, historically involving household mobility and higher entrepreneurial rates.

American exceptionalism is a risky mentality that is backed by powerful institutions that can be hard to undermine any president. Americans tend to take risks more than rely too much on states, unlike other wealthy countries where citizens prefer certainty. The United States uses relative tax rates to reward risks, ensuring forgiveness of failed bankruptcy laws and corporate structures.

Nothing is forever. Our rising debt burden may squeeze out capital for riskier businesses. Even before Trump, dynamicism had been swaying, partly because policy choices made moving, changing jobs or setting up businesses more difficult. Although many of Trump’s policies have caused uncertainty, he is trying to solve some real problems: the size of the government; the politicization of science; the dollar may be too powerful.

What is even more worrying is a foolish speech delivered by Vice President JD Vance this month, which is said to celebrate the U.S. dynamics but illustrates what actually might threaten it. He is right that innovation and risk taking Silicon Valley is our future and shows the most dynamic economy in the world. But, he argues that this can coexist with populist policies. What he describes sounds like a new version of General Basic Income, with a wealth of innovators’ money and productivity and guarantees (or vigorously subsidized and protected) work for everyone else.

What makes America great is that it is a risk and opportunity for health for everyone, the rich and the poor, and an economy that can compete without serious government intervention, attracting winners and losers and providing handouts for the most suitable people.