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Part 2/2 of my recent @ProSyn oped https://t.co/kM46XIElLb The AI-driven investment boom also implies that, with or without high tariffs, the US current-account deficit will remain high and on an upward trajectory (reflecting the difference between sluggish savings and booming investment). But since America’s exceptional growth will survive Trump, portfolio inflows will continue despite the trade-policy noise. Although fixed-income investors may pull out of US assets and the dollar, equity investors will remain overweight on US assets, perhaps even doubling down. Any substantial weakening of the dollar will be gradual, and the greenback will not suddenly lose its role as the global reservecurrency. Over time, higher growth, combined with existing redistribution policies, will weaken populist forces in the US. Meanwhile, Europe will continue to face the headwinds of demographic aging, energy dependence, an overreliance on Chinese markets, weak domestic innovation, and stagnant growth hovering around 1%. The 50-year innovation gap between America and Europe will only widen as AI-driven growth moves from logarithmic to exponential (see the attached chart). In this context, hard-right populist parties may well take over in most of Europe, as they already have done in some countries. With the US apparently drifting toward illiberalism, Europe might currently look like the world’s last bastion of liberal democracy; but this narrative could be flipped over the medium term. Such an inversion becomes more likely if Europeans continue to ignore the recommendations by former Italian Prime Ministers Enrico Letta and Mario Draghi. In his report on European competitiveness last year, Draghi pointed out that inter-EU tariffs on goods and services are much higher than the ones Trump has threatened. One silver lining to Trump’s bullying is that it could force Europe to wake up. To be sure, US inflation will surge above 4% this year. Trade deals with most countries will limit the tariff rate to an undesirable but manageable 10-15% level, and a likely de-escalation with China will leave that rate at around 60%, on average, driving a gradual decoupling of the two economies. The ensuing shock to real (inflation-adjusted) disposable incomes will stall growth by the fourth quarter of this year, perhaps leading to a shallow US recession that will last for a couple of quarters. But a Fed that remains credibly committed to anchoring inflation expectations will be able to cut rates once growth stalls, and a modest rise in the unemployment rate will weaken inflation. By the middle of 2026, US growth will be experiencing a strong recovery, but Trump will have been damaged politically, auguring a loss for his party in the midterm elections. Fears of the US descending into autocracy will be alleviated. American democracy will survive the Trump shock, and, after an initial period of pain, the US economy will thrive.