Arancha González Laya
At the beginning of this year, many were hailing a triumphant American economy buoyed by the prospect of tax cuts, deregulation, cheap energy, and massive investments in artificial intelligence. In January, the World Economic Forum in Davos celebrated the unleashing of the “animal spirit” in the U.S. economy. U.S. companies’ stock valuations—in particular digital firms—seemed as though they could not get any higher. In panel discussions, roundtables, and closed-door meetings, analysts exalted the virtues of the United States as an investment destination and excoriated Europe as overregulated, uncompetitive, and incapable of innovating. Questions about the overheating of the American economy were brushed aside as impertinent. Concerns about the combined impact of potential tariff hikes and deportations on inflation were met with skepticism.
Almost four months later, the contrast could not be more stark. The Trump administration’s chaotic trade policy, the retaliation it has provoked, and the uncertainty generated by the U.S. president and his advisers’ contradictory statements are taking a toll on the U.S. economy. Markets and businesses overestimated the solidity of the administration’s economic plans. Even worse, Trump’s attacks on the rule of law and the judiciary, universities, law firms, and scientific institutions are undermining the foundations of what makes the United States so attractive for investment and gives it such great weight on the world stage. Neighbors and allies, threatened with territorial demands or with questions related to their defense partnerships, have lost trust in Washington.
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