Why the US economy keeps defying the odds
In Dresden, in east Germany late last year, the final car rolled off the assembly line at Volkswagen's "Transparent Factory", built to showcase the pinnacle of European industrial power. Thousands of miles away in Spartanburg, South Carolina, a different German giant, BMW, is run
In Dresden, in east Germany late last year, the final car rolled off the assembly line at Volkswagen's "Transparent Factory", built to showcase the pinnacle of European industrial power. Thousands of miles away in Spartanburg, South Carolina, a different German giant, BMW, is running its biggest plant in the world.
The contrast between the two plants helps explain a puzzle economists have been debating for a while: why has the American economy continued to outperform so many of its peers, despite facing the same global shocks?
Over the past few years, much of the developed world has buckled under a succession of shocks. Trump's sweeping tariffs have disrupted global trade. Mass deportations are changing labour markets. And conflict in the Middle East has sent oil prices lurching.
Many economists expected those pressures to weigh heavily on the US. Instead, the economy has continued to grow at a steady pace. Inflation has proved stubborn at times, but the combination of weak growth and persistently rising prices that many feared hasn't happened.
Joe Brusuelas, chief economist at RSM, argues the trade war itself became the strongest proof of American resilience.
"The own goals that the Trump administration has imposed on the US with respect to trade and immigration are probably the single best example of the underlying dynamism of the American economy," he says.
Faced with a sudden tax on foreign components, US corporations didn't accept lower margins, they invested harder.
"CapEx (capital expenditure) right now is 13.9% of US GDP," says Brusuelas. "That should be slowing, given the mix of supply and demand shocks the economy is absorbing, and it's not."
