Trumpxit & the Likely Undoing of American Exceptionalism
The fragile architecture of American-led economic and technological exceptionalistic prosperity faces its greatest test since its origins in the years after the American Civil War. Ricardo Hausmann reminds me of his & Federico Sturzenegger’s “dark matter” argument with respect to the true shape of the globalized value-chain economy. And I once again find him convincing—and so ramp up my estimates of the likely cost of the TRUMPXIT coming from chaos-monkey Trump and his grifter-sycophants. It is important to recognize that the tariffs imposed do not have to be high. They merely have to be uncertain. And everyone has to recognize that interdependence with the United States will be weaponized by Trump, and his likely Republican successors…
Trump’s erratic trade policies are much more than a political circus. They seriously and significantly do threaten to unravel the invisible networks that have powered American prosperity for decades. As the U.S. turns inward, it risks losing its role as the world’s economic hub and the benefits that come with it.
The case that TRUMPXIT—the chaos with respect to future trade barriers that Donald Trump’s on-again off-again on-again off-again tariffs impose on those planning the future of production networks in the world’s globalized value-chain economy—will make the United States markedly poorer over the next decade is very strong. It is this:
Start from Ricardo Hausmann’s estimation of the true situation:
Richardo Hausmann: Trump’s War on the “Dark [Economic] Matter” that Powers America <https://www.project-syndicate.org/commentary/hidden-forces-driving-us-prosperity-at-risk-under-trump-by-ricardo-hausmann>: ‘Traditional accounting… US… cumulative current-account deficit of $14.4 trillion between 2000 and 2024…. Net interest payments should have risen by $576 billion. But…[they] declined by only $19 billion…. The missing $557 billion?… A $295 billion surplus in cross-border services… [and] US subsidiaries abroad generated $2.1 trillion in sales, compared to $1.5 trillion by foreign subsidiaries… in the US… a net services surplus of $895 billion…
The math does not work out right, quite. But in fact we do not know what the right numbers are to plug into this calculation. We do know, however, that net US services exports are massively undercounted precisely because the net recorded deficit does not track the estimated net asset position, and the estimated net asset position does not track the net recorded income flows.
Donald Trump believes that the United States suffers from large trade deficits because of economic decline and foreign exploitation, and none of the grifter-sycophants who surround him dare say him nay. But:
The US’s true economic strength lies in exporting the economic products of its intangible assets of ideas, technology, and expertise. Those generate significant global income. Those substantially offset traditional trade deficits. Standard international-trade accounting misses the value of these intangible assets, which Federico Sturzenegger and Richado Hausmann call “dark matter”. In reality, it is indeed the case that the US earns very high returns from its knowledge-based investments abroad.
It is the stability and predictability of U.S. trade and investment policy have long been the bedrock upon which global firms have built their confidence in embedding themselves within American-led production networks. When the rules of the game are clear, consistent, and not subject to sudden, capricious change, multinational corporations can plan for the long term, allocate capital efficiently, and integrate their operations across borders with minimal risk. This environment, painstakingly constructed over decades, has enabled the United States to serve as the organizing center of the world’s most complex and productive value chains.
Trump’s tariffs and his consequent retreat from open markets threaten this system.
Trump’s chaos-monkey moves toward unpredictability for the sake of media highlights undermine this foundation, prompting firms to hedge their bets, diversify away from the U.S., or seek more reliable partners elsewhere. The cost of eroding this trust is not merely transactional; it is systemic, weakening the very architecture of global commerce that has underpinned American prosperity.
The so-called “rules-based international order” is mucch more than diplomatic boilerplate. It is a framework of agreed-upon norms, institutions, and dispute-resolution mechanisms that has allowed the United States to shape global commerce and innovation according to patterns that serve its interests. By championing open markets, secure property rights, and the free flow of goods, capital, and knowledge, the U.S. has not only fostered global prosperity but has also ensured that the world’s most dynamic and lucrative value chains are anchored in American law, finance, and technology. When the United States is seen as the guarantor and enforcer of these rules, it reaps the benefits of trust, centrality, and influence. It is its hub status that has conferred enormous economic, technological, and geopolitical advantages, allowing the U.S. to set standards, capture rents, and shape the direction of global progress. To willingly forfeit this position through self-imposed isolation would be to squander a uniquely valuable historical legacy.
As it abdicates this role, it will lose its lion’s share of the benefits from this system. As people wake up to chaos-monkey Trump’s abandonment of US leadership in the rules-based international order, the US achieves self-imposed strategic and commercial isolation. Allies and rivals alike adapt by strengthening ties elsewhere and reducing reliance on American markets, partners, security arrangements, and other institutions
Moreover, the U.S.’s true economic strength is also strongly rooted in its openness to people, capital, and ideas. Turning inward undermines research and talent inflows. Those erode the knowledge base that sustains its economic model.
Openness to people—especially immigrants—has always been the secret sauce of American economic dynamism, just as it was for the political-military-imperial dynamism of Rome during the mid- and late-Republican and early-Empire . The United States’ willingness to welcome talent, ambition, and ingenuity from around the globe has fueled waves of innovation and entrepreneurship, replenishing the nation’s stock of human capital and driving forward its technological frontier.
Immigrants have been tremendously overrepresented among America’s inventors, entrepreneurs, and scientific leaders, and their children have often risen to even greater heights. Closing the door to this flow, or even signaling that the welcome mat is being withdrawn, does not merely reduce the number of workers or students; it atrophies the nation’s capacity to renew itself, to adapt to shocks, and to remain at the cutting edge. The lesson from history is clear: societies that turn inward and stifle the inflow of new people and new ideas soon find themselves stagnating, outpaced by those that remain open.
Repeatedly, the United States has benefited from being the world’s “network hub” for talent, capital, and ideas. This centrality has not been automatic; it has been earned and maintained through openness, reliability, and a demonstrated capacity to absorb immigrants and diffuse innovation at scale. These network effects are powerful: the more the U.S. becomes the preferred destination for the world’s best and brightest, the more attractive it becomes for the next wave of talent, and the greater the returns to those already invested in its system.
As the United States withdraws from its traditional role, the rest of the world will not simply sit idle. Other countries and regions are already moving to construct their own globalized value-chain networksvwithout the United States. These alternative networks may never fully replicate the scale or dynamism of the American-led system, but they can be robust enough to ensure that much of the potential value is still realized—just not by the United States.
One lesson I draw from the 1870-2010 “long twentieth century” is that technological and institutional revolutions, when paired with openness, have the capacity to drive decades of shared prosperity. The great leaps forward in productivity, living standards, and knowledge that defined the era were not the product of insularity or protectionism, but of societies willing to embrace change, experiment with new forms of organization, and welcome the contributions of outsiders. These gains, however, are not guaranteed; they are fragile, contingent, and reversible. Periods of openness and growth have often been followed by backlashes, retrenchment, and decline when complacency or fear took hold.
History does not repeat itself, but it does rhyme. The collapse of Bismarck’s alliance system after 1890 and the rise of protectionism after World War I serve as cautionary tales. Both were instances in which complex, stabilizing international arrangements—painstakingly constructed and maintained—were dismantled rapidly, often through a combination of carelessness, hubris, and short-sightedness. The consequences were catastrophic: geopolitical instability, economic dislocation, and, ultimately, global conflict.
Institutions and networks that sustain prosperity and peace are far easier to destroy than to build.
And in a world of shifting alliances and rising powers, the opportunity costs of withdrawal are measured not only in lost economic output but also in diminished influence and relevance.
References:
Allen, Robert C. 2014. “American Exceptionalism as a Problem in Global History.” The Journal of Economic History 74, no. 2 (June): 309–350. https://doi.org/10.1017/S002205071400028X
Encyclopædia Britannica. n.d. “Otto von Bismarck.” https://www.britannica.com/biography/Otto-von-Bismarck/Chancellor-of-the-German-Empire
Hausmann, Ricardo. 2025. “Trump’s War on the Dark Matter that Powers America.” Project Syndicate, April 18. https://www.project-syndicate.org/commentary/hidden-forces-driving-us-prosperity-at-risk-under-trump-by-ricardo-hausmann-2025-04
Kennan, George F. 1979. The Decline of Bismarck’s European Order: Franco-Russian Relations, 1875–1890. Princeton, NJ: Princeton University Press. https://archive.org/details/declineofbismarc0000kenn
Keynes, John Maynard. 1919. The Economic Consequences of the Peace. London: Macmillan. https://www.gutenberg.org/ebooks/15776
Kindleberger, Charles P. 1973. The World in Depression, 1929-1939. Berkeley: University of California Press. https://archive.org/details/worldindepressio00kind
Sturzenegger, Federico, & Ricardo Hausmann. “The Mystery of the Missing Dark Matter.” Project Syndicate, January 20, 2006. https://www.project-syndicate.org/commentary/the-mystery-of-the-missing-dark-matter-by-ricardo-hausmann-and-federico-sturzenegger-2006-01
World Trade Organization. n.d. “The Uruguay Round.” https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm