American exceptionalism might have suffered irreparable harm

It won't be easy to turn the clock back now that Trump has undermined the very institutions that made the US so successful

- BARRY EICHENGREEN

American exceptionalism has had a long and successful run. Gauged by the growth of GDP per capita and other statistical measures, the US economy has outpaced its advanced-economy rivals since the turn of the century. America is home to the world's leading high-tech firms. It is at the forefront of artificial intelligence (AI). And investors have cashed in on that outperformance: as of late 2024, US large-cap markets had yielded an average annual return of 13% over the preceding ten years, compared to just 6% for European markets.

The question is whether US President Donald Trump's destructive policies have now brought this economic exceptionalism to an end. That prospect was reflected in the stock market in April, when the S&P 500 fell more than 17% from its record high after Trump's inauguration. While the market has since recovered most of those losses, volatility remains high.

Important voices, not only in the administration, insist that this is just one of those market disturbances that happen from time to time. The wellsprings of American economic excellence—high-tech dominance, a business-friendly environment, deep and liquid financial markets, and a culture of entrepreneurship—remain intact. Just give it time, say the optimists, and Trump's aberrant policies will be reined in by the bond market, mid-term US elections and the courts.