Economist Mohamed El-Erian warns that recent U.S. economic actions, characterized by abrupt tariffs and policy volatility, are destabilizing both domestic and global markets, making the U.S. resemble a developing nation due to soaring deficits and inconsistent policies.

He outlines two potential futures for the U.S.: one where it resets economically like the Reagan-Thatcher era, and another where it faces stagflation similar to the 1970s, both scenarios carrying significant risks for global markets.

The U.S. Dollar Index has declined nearly 10% since the start of the year, trading at 97.986, the worst beginning since 1991, which is impacting global economies and travel costs for Americans.

El-Erian emphasizes that the dollar's status as the global reserve currency is under threat due to capital outflows and diminishing global confidence.

He has consistently warned of stagflation risks, a concern echoed by the Federal Reserve, highlighting the potential for high inflation combined with low economic growth.

El-Erian expresses concern that the U.S. is drifting away from the norms expected of the world's economic anchor, increasing the risk of global financial contagion.

He attributes this instability to high policy volatility from Washington, which, combined with geopolitical shocks and technological disruptions, leads to unpredictable changes in trade policy and dollar strength.

El-Erian advises decision-makers to be agile and resilient, warning against denial and half-measures that could worsen the situation, and emphasizes the importance of developing global resilience to U.S. economic shocks.

He contrasts the potential outcomes of U.S. economic management under different administrations, suggesting it could either lead to a thriving private sector with reduced government intervention or a repeat of high inflation and low growth.