After decades of US economic exceptionalism, driven by consumption, innovation, and financial dominance, cracks are appearing in the model. The return of inflation is constraining the Fed in its ability to sufficiently ease financial conditions in a downturn, and the US Treasury in its capacity to stimulate the economy without triggering a negative reaction from investors.

With fewer economic levers at its disposal, the US appears naturally headed for a slowdown, an outcome that may not necessarily be bad news for the rest of the world.

Meanwhile, China is asserting itself more strategically. Having already reduced its trade dependence on the U.S., it possesses the tools to transform its economy toward a model more focused on consumption rather than manufacturing.

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