Reports on the U.S. economy are still looking rosy, as the number of jobs in May increased to 138,000 and the unemployment rate dropped to 4.2 percent. Although a lot of economists and businessmen feared negative repercussions from the policies of President Donald Trump, especially regarding relations with global economic blocs such as the European Union, the path of the U.S. economy looks promising.
Since entering the presidency, Trump has begun a trend of provoking traditional U.S. allies, whether that’s NATO or the European Union or trade partners like China and Germany. While it may be that Trump’s positions may not have a major effect on trade or economic relations as a whole, they have to be generating concern on the part of many working in trade, investment and financial or money markets.
The U.S. economy remains the most important segment of the global economy and other key economies rely on the health of this economy for their own conditions to improve. It is known that the U.S. is the greatest consumer market in the world, and U.S rates of consumption of goods and services are considered the highest in the world.
The U.S. gross domestic product exceeds $18 trillion, and the annual per capita income is estimated to be close to $56,000. The high salary rates in the U.S. must also be pointed out, the minimum wage reaching $7.25 per hour, meaning high prospects for consumer spending.
Economists see a promising horizon for the U.S. economy. It’s possible that average annual growth may range between 2 and 3 percent, and the unemployment rate may remain at acceptable levels, between 4 and 5 percent. As for inflation, it doesn’t seem that there is anything to speak of, as in reports from previous months and years.
President Trump wants to raise the economic growth rate to 4 percent, although officials in the administration, particularly officials in the Federal Reserve, do not agree with him on this issue, as they see that any rise in the growth rate above 3 percent may cause inflation, leading to extensive reviews of monetary policy.
Inflation, as indicated above, remains modest, and by some estimates the rate of inflation is expected to reach 1.9 percent throughout this year, possibly rising to 2 percent in 2018. This rate of inflation may not push the Federal Reserve to change the discount rate, which currently remains low and was raised to .75 percent in December 2016.
It is known that in past years and decades, the U.S. continued to face stiff competition in the field of manufacturing industries, after countries in Europe and Asia grew their main industries and invaded the U.S. market with their advanced products. The costs of production in those countries also remained lower than in the U.S.
There is now an expectation that manufacturing industries in the U.S. will be able to overcome their structural problems and reduce costs. In that case, the manufacturing industries sector would be able to achieve faster growth than the rest of the economy, approaching 3 percent this year, and 2.8 percent in 2018.
Without a doubt, the decrease in the cost of oil contributed to the improved performance of multiple economic sectors in the U.S. The costs of transportation, food and raw materials decreased, enabling institutions to increase profits. It must also be pointed out that the ingenuity and creativity of companies and institutions remain important, just as educational institutions, including universities and research centers, contribute to companies and business institutions in research, increasing productivity in various sectors. Naturally, research and development depends on funding from the federal government — so will President Trump decide to decrease this funding throughout the years of his governance, or will he support it?
The isolationism and hostility toward international trade organizations which characterized Trump’s campaign were not compelling or beneficial, and if applied could spell major damage to U.S. economic institutions.
However, the adoption of effective policies to implement his electoral promises may not be possible in a number of fields. If the president complained of a deficit in the trade budget with countries like Germany or China, dealing with it would not mean restricting imports, but rather developing production capabilities in the U.S. and competing with the global trade markets. No matter what, the U.S. economy will remain vital, despite the inclinations of the president.
About this publication