Argues that the “exorbitant privilege” of the U.S. dollar will continue, supported by equity inflows and America’s long-term growth outlook.

Roubini argued that as long as American economic exceptionalism remains, the “exorbitant privilege” conferred by the dollar’s global primacy is unlikely to erode.

Despite higher tariffs, US external deficits will probably remain high, since investment as a share of GDP will rise on the back of a secular tech-driven boom, while the savings rate remains relatively stable. The resulting increase in the current-account deficit will be financed by equity inflows (both portfolio investment and foreign direct investment).

Therefore, according to Roubini the dollar’s role as global reserve currency is unlikely to be significantly challenged, even if there is some modest diversification out of dollar-denominated assets. Likewise, these structural equity inflows will limit downside exchange-rate risks, and they could even strengthen the dollar over the medium term.

In short, Roubini has an out-of-consensus view that the US is likely to do well over the rest of this decade, not thanks to Trump but in spite of him. There is no question that many of his policies are potentially stagflationary. But the US happens to be at the center of some of the most important technological innovations in human history. These will deliver a large positive aggregate supply shock that will increase growth and reduce inflation over time. This effect should be an order of magnitude larger than the damage that stagflationary policies can induce.

Of course, one should not be complacent about damaging policies; their negative impact could be serious. But Roubini argued that as long as markets and bond vigilantes do their job, Trump’s worst impulses will be constrained.

Roubini’s recent out-of-consensus optimism about the US economy is again proving to be correct.
After most of Wall Street started to predict a US recession because of Trump’s trade protectionist policies, the trade deals achieved with trading partners have now reduced the risk of an outright recession and most forecasters are now in the Roubini camp of a growth recession. Moreover, the initial market concerns about the end of American exceptionalism have proven wrong: after major equity indices showed a sharp correction and a near bear market, US equities have recovered their losses as trade deals have been achieved, corporate profits remain strong and the tailwinds of AI driven investments have sustained markets.

The muted bond market reaction to the One Big Beautiful Bill shows that markets for now remain only moderately concerned about the US fiscal deficits. Also, there is no sign yet of significant de-dollarization and the fall of the US dollar has been modest and orderly.