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See below the full text of my new @ProSyn Part 1/2 https://t.co/kM46XIElLb America’s Economic Tailwinds Will Override Trump and His Tariffs By @Nouriel Roubini NEW YORK – Last December, I argued that while some of US President Donald Trump’s policies would be stagflationary (reducing growth and raising inflation), such effects would ultimately be mitigated by four factors: market discipline, an independent US Federal Reserve, the president’s own advisers, and the Republicans’ thin majorities in Congress. The script has played out as predicted. The reaction from stock, bond, credit, and currency markets forced Trump not only to back down from his “reciprocal” tariffs against most of America’s trading partners, but also to beg China to sit down and negotiate. In the game of chicken between Trump and Chinese President Xi Jinping, Trump lost. Market traders trumped the tariffs, and bond vigilantes proved more powerful even than the US president – just as the political strategist James Carville argued a quarter-century ago. Then came the game of chicken with Fed Chair Jerome Powell. Again, Trump was the first to blink – at least for now. Markets swooned when he suggested that he would fire Powell, and he soon backpedaled, declaring that he has “no intention” of doing so. Meanwhile, Powell has made clear that the president has no lawful authority to remove him. Similarly, while lunatics like Peter Navarro, Trump’s main trade adviser, initially gained the upper hand – appealing to Trump’s self-image as “Tariff Man” – this did not last. Once markets stumbled, those advocating an “escalate to de-escalate” tariff strategy, such as Treasury Secretary Scott Bessent and Stephen Miran, the chair of the Council of Economic Advisers (a former business colleague of mine) seemed to prevail. Finally, some congressional Republicans have come out in support of legislation to limit the president’s authority to impose tariffs, and many other political players – from state governors and attorneys general to business groups – are suing the administration for what they describe as an unlawful overreach. Beyond these four guardrails, there is also the technology factor. The US economy’s potential growth will approach 4% by 2030, far above the International Monetary Fund’s recent estimate of 1.8%. The reason is obvious: America is the world leader in 12 industries that will define the future, with China leading in only electric vehicles and other green tech. US growth averaged 2.8% in 2023-24, and productivity growth has averaged 1.9% since 2019, despite the pandemic-era dip. Since the launch of ChatGPT in late 2022 – something I predicted in my 2022 book, Megathreats – AI-related investments have driven a US capital-expenditures boom. Even tariffs and the resulting uncertainty have not fundamentally changed the guidance from most big tech firms, AI hyper-scalers, and others. Many are even doubling down on AI investments. If growth goes from 2% to 4% because of technology, that is a 200-basis-point boost to potential growth. Yet even draconian trade protections and migration restrictions would reduce potential growth by only 50 bps at most. That is a four-to-one ratio between positives and negatives; technology would Trump the tariffs over the medium term. As I recently argued elsewhere, even if Mickey Mouse were president, the US would still be on the way to 4% growth, because US private-sector innovation promises to offset bad policies and erratic policymaking. Part 1/2