Former PIMCO CEO and current Allianz’s chief economic adviser, Mohamed El-Erian, has suggested that the era of U.S. exceptionalism is on pause, not conclusively over, amid President Donald Trump‘s tariffs and economic uncertainty.

What Happened: El-Erian expressed his views on the current state of U.S. exceptionalism in a phone interview with MarketWatch on Monday. He believes it’s premature to conclude if the damage caused by tariff wars and economic uncertainty is permanent. However, he weighed in that the tariff wars and the resulting uncertainty must come to an end.

“It’s too early to say if the damage inflicted is irreversible, stated El-Erian.

Although he holds positions at the University of Cambridge, El-Erian isn't inherently opposed to tariffs. He believes limited tariffs, used for a limited period, can be beneficial if they help create a more equitable trading system.

El-Erian, however, criticized the multiple objectives of the trade wars, such as reducing taxes while protecting domestic industries. He pointed out the potential for these goals to clash and cause unintended harm. “Some of these objectives are contradictory…and “liable to inflict collateral damage,” cautioned the economist.

He also raised the possibility that other countries might impose tariffs on China or on one another, resulting in structurally higher prices worldwide.

El-Erian approached the recent departure of overseas investors from U.S. asset markets with caution in his assessment. He pointed out that the world was heavily invested in U.S. assets when tariff tensions started, largely due to beliefs in U.S. exceptionalism and innovation. He maintains that America's large economy and well-established institutions will always warrant a long-term positive outlook.

The economist also weighed in on Moody’s recent downgrade of the U.S. debt rating, calling it historic while anticipating that its impact on the market would probably be limited.

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Why It Matters: El-Erian’s comments come at a time when the U.S. economy is grappling with the impact of trade wars and economic uncertainty. Earlier this month, El-Erian highlighted potential "adverse implications" for domestic industries following a surprisingly strong surge in China's exports for April, despite a significant drop in sales to the U.S.

Furthermore, El-Erian recently drew parallels between chapters of economic history and Federal Reserve Chair Jerome Powell’s concerns about more frequent and potentially more persistent supply shocks. He noted that such shocks would pose a "difficult challenge for the economy and for central banks.”

These observations underscore the complexity and uncertainty surrounding the current economic landscape and the potential challenges that lie ahead for the U.S. economy. Notably, on Sunday, Treasury Secretary Scott Bessent warned that U.S. tariffs could quickly return to their "reciprocal" levels from "Liberation Day" if countries do not reach trade agreements within the existing 90-day timeframe.

The S&P 500 has made a historic turnaround, climbing 19.57% from its lows on April 8, while the NASDAQ surged 25.38%. Charlie Bilello, founder of Compound Capital Advisors, described it as "one of the biggest short-term comebacks in market history."

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.