The writer is Professor Emeritus at the Stern School of Business and senior economic strategist at Hudson Bay Capital

After the so-called “liberation day” tariffs announcement, the conventional wisdom about the US economy became very pessimistic. A new consensus was built on worries over tariffs, policies such as restrictions to migration, unfunded large fiscal deficits, threats to the independence of the Federal Reserve and the erosion of rule of law.

The argument was that American exceptionalism was over — the US economy was facing stagflation, the stock market was set for a slump or worse and the exorbitant privilege of the dollar as the major global reserve would erode. As the US weaponised its currency, the value of the dollar would start to fall rapidly over time.