United States

Slowing growth in 2019


LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

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GDP USD19390.604bn (World ranking 1, World Bank 2017)
Population 325.72mn (World ranking 3, World Bank 2017)
Form of state Federal Republic
Head of government Donald Trump (Republican)
Next elections 2020, presidential
  • World’s largest economy
  • Effective governmental checks and balances
  • High per capita GDP
  • Relatively low unit labor costs
  • High data transparency
  • Reserve currency
  • Large oil and gas reserves
  • Diverse GDP
  • Low interest rates and inflation
  • Strong dollar (lowers inflation, interest rates)
  • Political polarization, stagnation
  • Structural unemployment
  • Lack of skilled workers
  • Low productivity
  • High corporate debt
  • High public debt, persistent budget deficits
  • Weak housing market
  • Restrictive monetary policy
  • Soaring amount of, and defaults on, student loans
  • Trade conflicts
  • Strong dollar (widens persistent trade deficit)

2018 was as good as it’s going to get

The US economy grew 2.9% in 2018, tying for the best year of the recovery. The economy was boosted by tax reforms and tax cuts, de-regulation, a muscular labor market, and strong consumer and business confidence. That is probably as good as it is going to get given weak productivity growth, an aging population and a profound skills gap which has resulted in a record high level of job openings at 7.3 million while there are only 6.2 million unemployed. Employers can’t find the right people for the jobs.

Headwinds will make 2019 slower

Thus the outlook for 2019 is not as bright as 2018 was, and we expect the economy to grow at a slower pace of 2.5%. Many of the factors mentioned above are still in play, so we do expect 2019 to provide a reasonably solid performance for most of the year. However, the economy is facing a number of significant headwinds.

·         The Federal Reserve raised rates four times in 2018, very nearly inverting the yield curve, which would be an almost certain sign of a recession three to five quarters down the road.  Fortunately they are pausing, and may actually be finished the hiking cycle.

·         The fiscal stimulus of personal and corporate tax cuts will dry up by the end of the year.

·         The housing market has suffered from a combination of overly high prices and low supply, conditions which are likely to continue for some time.

·         Corporate debt levels relative to GDP recently reached a record high, another possible harbinger of a downturn. The high debt level itself would provide an extra risk in a downturn.

·         Government deficits will contribute to an increasing public debt with rising interest payments. There are no plans, and only a few suggestions as to how to control the vast majority of the budget which is entitlement spending.

·         The trade “feud” with China continues, creating some winners but more losers like the agriculture sector. Manufacturers who use steel and aluminum are also suffering from heightened input prices due to the metals tariffs.

·         The political situation is highly divisive, and President Trump will likely be under investigation for one thing another for the remainder of his presidency. An impeachment could damage consumer and business confidence.

·         The global economy is weakening. Several major economies have seen negative GDP growth recently. Italy is in an outright recession and the Chinese economy seems to have slowed significantly due to deteriorating trade.

Weakness at the beginning and end of 2019, solid performance in between

We expect the economy to put in a decent year, just not as good as last year.  And while the first quarter is off to a sluggish start, there are still positive forces acting on the economy which are likely to create a bounce back for much of the rest of the year. However significant headwinds bear watching as they could impose a slowdown late in the year or in the early part of 2020.

Trade structure by destination/origin

(% of total)

Exports Rank Imports
Canada 17%
21% China
Mexico 14%
14% Mexico
China 9%
13% Canada
Japan 5%
6% Japan
Germany 4%
6% Germany

Trade structure by product

(% of total)

Exports Rank Imports
Road vehicles 8%
13% Road vehicles
Electrical machinery, apparatus and appliances, n.e.s. 8%
8% Electrical machinery, apparatus and appliances, n.e.s.
Petroleum, petroleum products and related materials 5%
7% Telecommunication and sound recording apparatus
Miscellaneous manufactured articles, n.e.s. 5%
7% Petroleum, petroleum products and related materials
Other industrial machinery and parts 5%
5% Miscellaneous manufactured articles, n.e.s.

The payment culture of domestic companies is becoming increasingly uncertain and, in the absence of a harmonized framework on late payments, payment terms remain a mere contractual issue.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

The court system is complicated by a county, state and federal structure in which protection mechanisms are not recognized and where no simplified proceedings are available to settle the simplest files. As a result, significant delays and costs must be expected while enforcement may be difficult.

When the debtor becomes insolvent, collecting debt becomes a complex task. The bankruptcy system remains pro debtor and making a company insolvent is not a significant way to obtain payment. In practice, bankruptcy reorganization is resource-draining and rarely results in general unsecured creditors receiving any dividend.

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Collection complexity United States

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