Is this really how American exceptionalism ends?

The American economy really is exceptional. It is richer, more innovative, and continues to expand at a high rate compared to most of the developed world. It has been extra special the last 15 years, with its equity market outperforming any other country as growth prospects for China and Europe dimmed.

But it seems exceptionalism might be ephemeral. Uncertainty around trade and the future strength of the dollar has led some big European investors to retreat from American stocks. And the problem may go deeper. Less than 100 days into a second Trump administration, commentators are already discussing the coming end of American exceptionalism.

Many things make the American economy exceptional. For one, it houses the deepest and most liquid capital markets, which help channel money to its more productive uses. But what makes it truly extraordinary is its dynamism, which underpins innovation and productivity, attracting talent from around the world.

To figure out if our best days are behind us, it is necessary to separate short-term exceptionalism based on current financial conditions and longer-term structural exceptionalism that has been a feature of the American economy for the last century. The short-term boom may indeed be fading, but exceptionalism should endure over the longer term because it is more durable than whatever damage any one president can do in a few months.

The short-term exceptionalism was never sustainable. The global financial crisis led investors around the world to pile into the perceived safety and better growth prospects of US assets that persists to this day. American companies now account for 57% of global stock market. The dollar is the world's primary reserve currency and US Treasuries are considered risk-free assets. In recent weeks and months, though, President Donald Trump's desire to rework trading relationships, hobble the economy with tariffs and reduce international dependence on the dollar have made both domestic and international investors wary. The Bloomberg Dollar Spot Index has dropped as much as 4.41% since mid-January, and US equities have declined in 2025 as those in the rest of the world have soared.

Sure, US stocks and the greenback may have been over-valued and due for a pullback. And Trump's policies may beaccelerating the reversal. But exceptional does not exempt financial assets from market swings. The world still depends on American exceptionalism and its superior growth prospects. And while the dollar may weaken and diminish the attractiveness of US markets, it has no rival as the world's primary reserve currency.

Whatever happens to the dollar, where the American economy truly stands out is in its long history of innovation. In the 2024 Global Innovation Index report, it had the best scores in categories such as research and development, business startups, intangible assets, the quality of universities, software spending and intellectual property. This feeds dynamism, which historically involved household mobility and higher rates of entrepreneurship.

American exceptionalism is a risk mindset supported by strong institutions that is extremely hard for any one president to undermine. Americans tend to be more open to risk and are less dependent on the state, which is distinct from other rich countries, where citizens prefer more certainty. America rewards risk-taking with relatively tax rates, bankruptcy laws that ensure failure is forgiven, the corporate structures.

Nothing is forever. Our rising debt load may crowd out capital earmarked for riskier ventures. Even before Trump, dynamism has been wobbling, in part because of policy choices that have made it harder to move, change jobs or form a business. And while many of Trump's policies are causing uncertainty, he is attempting to address some real problems: The size of government; the politicization of science; a dollar that may too strong.

More concerning is a peppy speech delivered by Vice President JD Vance this month that supposedly celebrated American dynamism but instead illustrated what could actually threaten it. He is correct that innovation and risk taking in Silicon Valley is our future and indicative of the most dynamic economy in the world. But where he falters is arguing that this can coexist with populist policies. What he described sounded like a new version of universal basic income, with money and productivity for rich innovators, and guaranteed (or heavily subsidized and protected) jobs for everyone else.

What makes America exceptional is healthy risk and opportunity for everyone, rich and poor, and an economy that can compete without heavy government intervention that picks winners and losers and gives handouts to the best connected.

(COMMENT, BELOW)

Allison Schrager, a Bloomberg columnist, is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.

Previously:
• The free-market conservative is a vanishing breed
• Shareholder capitalism is back
• Europe's risk aversion comes with consequences
• The Oxford curriculum that American universities need
• Private equity won't diversify your portfolio
• The era of declining interest rates may have come to an end, and many investors don't seem to realize it
• This one weird trick could save the U.S. economy
• The Fed's damage to the housing market may last years
• The future of unions looks very different
• To bring back the office, bring back lunch
• Does it really matter who gets into Harvard?
• Our pensions shouldn't be used to juice the economy
• A soft landing won't mean the economy is safe
• The 30-year mortgage is saving the U.S. economy … or is it?
• The one true secret to successful investing
• Less work, more burn-out
• When did risk become a bad word in the U.S.?
• AI-proofing your career starts in college
• Biden has to learn the same lesson as SVB
• Say it with Rubio: Changing clocks is stupid
• Sure, we'll return to the office in 2023 but not to stores
• How to manage the biggest risk of all: Uncertainty
• If you think U.S. pensions are safe, just wait
• Harry and Meghan and the perils of superstar culture
• Norman Rockwell's economy is never coming back
• Burned by crypto? Don't learn the wrong lesson
• Quiet Quitters are looking in the wrong place for meaningful work
• America's MBAs are the latest skeptics of capitalism
• Generation Z is getting a harsh lesson in stock risk
• The biggest threat to the U.S. economy is policymakers
• Buck up, boomers. You're still better off than your parents
• How to manage the biggest risk of all: uncertainty
• Startup boom is the kind of risk-taking Americans need
• Gen Z is too compliant to achieve greatness
• A bigger child tax credit isn't the poverty solution we need
• Finding your power in a higher-priced world
• The Biden administration's plans to double the tax rate on capital gains will prove costly to all Americans, not just the wealthy
• WARNING: Feel Good Now --- Pay Later: Stimulus is crammed with goodies but makes no economic sense
• The 'Stakeholder' Fallacy: Joe Biden's vision of capitalism is a recipe for failure