United States Economy Facts
The US economy is made up of several important sectors, is characterized by high flexibility and has been described as a “job machine” for its ability to create employment. The country is a leader in research and development in many areas and was at the forefront of much of the IT revolution. Often, the US economy has served as a locomotive for the rest of the world.
Over the course of several decades, the United States has evolved into an increasingly distinct service economy, although industry continues to play an important role. Many of the world’s largest and most successful companies have their domicile here. This is true in the IT sector, where Apple, Amazon, Facebook, Microsoft and Alphabet (which owns Google) are the dominant examples. The oil and gas company Exxon Mobile, the investment company Berkshire Hathaway, the banks JP Morgan Chase and Wells Fargo, the retail chain Walmart and the pharmaceutical company Johnson and Johnson are all world leaders in their fields.
- Countryaah.com: Major imports by United States, covering a full list of top products imported by the country and trade value for each product category.
However, the image of the United States as an economic superpower became a thorn in the wake of the financial crisis that occurred in the late 00s. A mortgage bubble that burst in the US caused a crisis in the global banking system and a worldwide recession (see below). Few were prepared for such a rapid decline, so suddenly. After state intervention, however, a recovery began soon, and from 2010, the US economy grew by an average of about 2 percent a year. The 2020 Corona crisis is a new shock to the US and the world economy. This has led to the launch of what is likely to be the largest federal intervention in the economy in US history. In the first quarter, the economy shrank by almost 5 percent and the figure is expected to be double-digit in the second quarter. Unemployment has exploded (seeLabor market).
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including USA which represents the country of United States. Check findjobdescriptions to learn more about United States.
After the last financial crisis, the recovery took time, but when Barack Obama’s presidential term expired in January 2017, federal spending and the budget deficit were back at roughly the same levels as before the crisis. The unemployment rate, which was close to 10 percent in 2010, had halved and the stock exchange went like a train. House prices had just returned to the same level as before the downturn.
The rate of wage growth that had been low had begun to rise – but the average income for an American family was still at the same level as 20 years earlier (adjusted for inflation). The gaps continued to grow, despite the government’s attempts to reduce them.
Large budget deficits due to stimulus measures in the wake of the financial crisis had more than doubled the central government debt, to just over $ 23 trillion (or $ 23,000) in 2019. Since 2012, the debt represents more than 100 percent of gross domestic product (GDP).
Under Obama’s successor Donald Trump, economic development continued to be favorable in the early years. However, the economy had started to slow down even before the corona crisis struck with full force in March 2020.
Concerns were already over the budget deficit, which has once again skyrocketed, approaching $ 1,000 billion by the end of 2019. This meant that it was back on the same level as 2012 when the country was on its way out of the deep weakness.
The budget deficit’s share of GDP fell to around 4.5 per cent for the fiscal year ending September 30, 2019. This is higher than at any other time when the country has not been in a recession. Trump’s large tax cuts (see Calendar) are the main reason for the sharp increase in the budget deficit. At the same time, central government spending has increased slightly, mainly due to larger defense funding and higher interest rates on the growing deficit.
The financial crisis 2008
Already at the end of 2006, warnings of problems in the property market came. Low-income borrowers who had been given cheap loans to acquire a home were no longer able to pay increased mortgage rates. Many families were forced to leave their homes. At the same time, house prices, which had risen sharply since the turn of the millennium, had begun to fall. Mortgage companies and financial institutions also had financial problems. The crisis quickly spread to the outside world as various forms of securities were created, including high-risk loans, which were sold on several levels to banks in other countries as well. The complicated arrangement resembles a pyramid scheme.
In 2007, banks and lending institutions tightened the conditions for granting loans while the Federal Reserve Federal Reserve had to pump in millions of dollars to ensure that the banks could continue with their lending. The Federal Reserve also implemented sharp interest rate cuts in an attempt to calm financial markets.
But the crisis deepened and in September 2008, the US state had to take over the major mortgage lenders Freddie Mac and Fannie Mae. Shortly thereafter, the investment bank Lehman Brothers reported on billion losses. However, the government chose not to intervene in rescue measures. The bank’s collapse sent shockwaves around the world. The insurance giant AIG also had financial problems, but the Federal Reserve went in with multi-billion loans in exchange for the state becoming the main owner. Stock prices dropped and it was clear that the crisis was the deepest since the 1930s.
President George W Bush’s administration presented a $ 700 billion rescue package to try to get the financial system on its feet. The Federal Reserve pledged up to $ 800 billion to buy “bad” securities linked to home loans and to accelerate lending to consumers. The crisis-hit car industry also received state aid for a short time (see Industry).
Following the change of power in January 2009, newly elected President Barack Obama expanded the efforts to stem the economic crisis. He got Congress to allocate $ 787 billion to a mix of tax cuts, social grants and infrastructure investments.
The financial crisis meant that the US was drawn into a deep recession. Domestic consumption, which had previously been an important driver of economic growth, fell and unemployment rose to record levels.
Some clearing began to be noticed from mid-2009. Signs of a recovery in the housing market came in 2010, with rising house prices. Federal Reserve’s continued purchase of government securities helped keep mortgage rates down and the situation had also improved in the financial sector. Many banks had repaid the government loans and new legislation had tightened the rules and supervision of banks and other financial institutions. Americans became more willing to open the wallet and consumption increased.
US foreign trade has long been the largest in the world, but now China is an even party and a major commodity exporter. A large part of US trade is with neighboring countries Canada and Mexico. The focus has been shifted from Europe to Asia.
Since the Second World War, the United States has followed a largely free-trade-friendly line, although it has been relatively common for domestic industries to be protected by various forms of trade barriers. However, President Donald Trump has staked out a drastic turnaround: he has suspended or torn down free trade agreements and unilaterally imposed tariffs on various goods. Trump has long pushed the line that the United States is unfairly disadvantaged in world trade. As a main reason, he states that the US has a trade deficit, ie that imports are larger than exports.
Just over a year after taking office, Trump announced that steel and aluminum duties would be imposed, at 25 and 10 percent, respectively. The EU, Canada and Mexico were temporarily exempted while negotiations were in progress, but no agreement could be reached and customs duties will apply from June 1, 2018. The counterparties have in turn introduced duties on US goods.
Standing war with China
Trump has even more blamed China for unscrupulous trade-related practices. As a result, in several rounds in 2018 and 2019, the United States imposed duties on thousands of goods from China. It involved duty rates of between 10 and 25 percent on everything from handbags to high-tech industrial goods, the equivalent of multibillion amounts. China countered similarly with tariffs on US goods, albeit at a lower value overall. Following negotiations on trade terms, the parties announced in December 2019 that they had reached a preliminary trade agreement, and the United States halted yet another set of duties that would just be activated. Trump has portrayed the deal as a huge success as China promised to buy more agricultural goods from the US and also to better protect intellectual property rights. In return, the United States will cut some tariffs. In January 2020, the parties signed what is known as the first phase of a trade agreement, which confirmed what was provisionally announced the month before. But negotiations continue and it is too early to blow the battle between the world’s two largest trading nations.
In addition, Trump’s policies have so far hardly had the intended effect: the trade deficit in relation to China continues to grow. The conflict is considered to have contributed to a slowdown in growth. The manufacturing industry and agriculture have been hit hard by the sharp decline in exports to China. To compensate the farmers, by the end of 2019, the government had paid a total of $ 28 billion in subsidies, which is more than twice as much as the car industry received during the crisis year 2009 (see also Agriculture and Fisheries and Industry).
Among the first decisions Trump made after taking office was also to withdraw the United States from the Trans-Pacific Partnership (TPP) Free Trade Agreement, which had not yet been ratified by the Senate. The agreement was signed in February 2016 by the United States and eleven other Pacific countries – including Japan, Australia and Canada, but not China. TPP would have become the largest free trade area in the world, the twelve original countries accounting for one third of world trade. Other TPP countries have made adjustments to the agreement in order to keep it between themselves.
Trump talked for a long time about completely tearing up the North American Free Trade Agreement (Nafta), with Canada and Mexico, which came into force in 1994. In August 2017, the partners began a renegotiation of the agreement, where the US’s main goal was to reduce its trade deficit. The talks went on over time, but in August and September 2018, agreements were first reached with Mexico and then Canada, to replace Nafta with the United States-Mexico-Canada-Agreement (USMCA). The new agreement will, among other things, give the United States better access to Canada’s dairy market, while Canada and Mexico will be entitled to a quota of 2.6 million cars that protect the automotive industry if the US imposes general duty on car imports. But the opposition was great at ratifying the agreement among Democrats in Congress, who wanted, among other things, stronger guarantees for labor law in Mexico.
Trump’s entry also meant a stalemate for the negotiations on a free trade agreement that had been going on for several years between the US and the EU, called the TTIP (Transatlantic Trade and Investment Partnership).
Since 2005, the United States has a multilateral free trade agreement with six countries in Central America and the Caribbean, Cafta-DR (Central American free trade agreement – Dominican Republic). During the 2000s, the United States has also signed bilateral free trade agreements with about ten individual countries in different parts of the world.
The US has long had a deficit in the trade balance, ie the country’s imports of goods are greater than exports. Deficits also prevail in the current account balance, which also includes trade in services and transfers and return on capital. The imbalance is particularly noticeable towards China, something that Donald Trump has highlighted as extra problematic. Both countries were already involved in various trade disputes concerning customs and regulations for different goods before his entry.
FACTS – FINANCE
GDP per person
US $ 62,641 (2018)
US $ 20,494,100 million (2018)
2.9 percent (2018)
Agriculture’s share of GDP
0.9 percent (2017)
Manufacturing industry’s share of GDP
11.2 percent (2017)
The service sector’s share of GDP
77.4 percent (2017)
1.8 percent (2019)
Government debt’s share of GDP
104.3 percent (2018)
US $ 1 674 330 million (2018)
US $ 2,561,666 million (2018)
– US $ 490 991 million (2018)
Commodity trade’s share of GDP
21 percent (2018)
Main export goods
machinery, transport equipment (aircraft, computers), chemical products, food, cereals
Largest trading partner
China, Canada, Mexico, Japan, Germany