United States of America
major macro economic indicators
|2020||2021||2022 (e)||2023 (p)|
|GDP growth (%)*||-2.8||5.9||1.9||0.8|
|Inflation (yearly average, %)||1.2||4.7||8.0||4.3|
|Budget balance (% GDP)*||-14.9||-12.3||-5.5||-5.0|
|Current account balance (% GDP)||-2.9||-3.5||-3.7||-3.3|
|Public debt (% GDP)||131.7||127.0||122.7||121.9|
(e): Estimate (f): Forecast *Federal government. Fiscal year from October 1st to September 30th. 2023 data: 2022/23
- Flexible labour market
- Full employment is one of the Federal Reserve’s objectives
- The dollar’s predominant role in the global economy
- 70% of public debt held by residents
- Strong attractiveness: leader in research & innovation, huge market, two ocean fronts and privileged tourist destination
- Favourable corporate taxation
- Leading producer of oil & gas, agricultural power and significant mineral resources
- Low labour market participation
- High household debt
- Polarised political landscape
- Decrease in fertility rate
- Outdated infrastructure
- Growing income and wealth inequalities overlapping with territorial and racial inequalities
- Trade conflict and technological competition with China
Inflation and monetary tightening dampen activity
After a strong recovery in growth, activity decelerated in 2022, hampered by inflation and high interest rates. In 2023, growth will weaken further as these factors continue to weigh. Inflation is expected to continue the easing trend observed in the second half of last year, but it is expected to remain above the Federal Reserve's target of 2%. The Fed, after raising its policy rate by 425 basis points in 2022, will, in the first quarter, continue a cycle of monetary tightening unseen in over 40 years. The Fed's target rate range could be raised by another 75 basis points to 5.00% - 5.25%. Rates are expected to remain at these restrictive levels through 2023. As a result, household consumption (68% of GDP) will moderate. The allocation of spending should continue to shift towards services at the expense of goods, which had benefited from the pandemic. The manufacturing industry could therefore suffer. However, the easing of inflation, increased credit card balances and dissaving could help keep household expenditures afloat, thus (narrowly) avoiding a recession. The unemployment rate is nonetheless expected to rise from its low 3.7% at the end of 2022, which could lead to increased cautiousness. Furthermore, investment will also be constrained by the high interest rate environment. Despite a durably comfortable cash position at the end of 2022, business capital spending plans will be curtailed. Residential investment should continue to contract. The fall in the real estate market will result in weaker construction activity in 2023. The investment programs (infrastructure, energy transition, semiconductor production) adopted by the administration will, unlike in 2022, allow a (modest) positive contribution from government spending. In addition, a strong dollar and the sluggish global economic environment will limit the contribution of net exports.
Debt burden is rising
Spending cuts in response to the COVID-19 crisis and higher tax revenues have contributed to a large reduction in the federal budget deficit in 2021-22. While it is expected to continue to decline, the deficit should remain high after the next fiscal year. A divided Congress and high inflation could encourage some fiscal restraint. In this context, government spending will be driven by the execution of the investment programmes adopted by President Joe Biden's administration in late 2021 and 2022. The debt burden (1.8% of GDP in 2021-22) is also expected to continue to rise, as US Treasury yields have already increased in response to the Fed's interest rate hikes. However, the authorities are not expected to face difficulties in servicing the debt, as the country has unparalleled financing flexibility due to its status as a USD issuer, the USD being the world's main reserve currency. The debt ceiling will likely have to be raised by Congress in the first half of 2023. The risk of a default exists if an agreement is not reached, but it is very limited.
In 2023, the current account deficit will remain large, mainly driven by the structural deficit in the goods balance (4.7% of GDP in 2022). However, it is expected to moderate as merchandise imports slow in line with domestic demand. Exports of liquefied natural gas to Europe will remain strong, but foreign sales are expected to suffer from the strong dollar and the global economic environment. The normalisation of international transport should result in a slight improvement in the surplus on the services account (0.9% of GDP). The positive primary income balance (0.7% of GDP) is expected to improve slightly, as receipts from interest and deposits on US assets abroad increase. The transfers deficit will remain stable at around 0.6% of GDP. The attractiveness of US assets and the USD are generating portfolio investments (Treasuries, stocks, etc.) to finance the deficit.
A divided Congress will limit the Biden administration's policymaking until 2024
Democrat Joe Biden became President in January 2021 after a tumultuous transition marked by the 6 January assault on the Capitol by supporters of his predecessor, Republican Donald Trump. After a massive stimulus package dubbed the American Rescue Plan (March 2021), the President was able to have his priorities endorsed by Congress through an infrastructure plan (Infrastructure Investment and Jobs Act), measures to boost the energy transition (Inflation Reduction Act) and support for semiconductor production (CHIPS Act). However, his administration’s room for manoeuvre should be limited in the second half of his term. Although the Democrats have retained a narrow majority in the Senate (51 out of 100 seats), control of the House of Representatives has shifted to the Republicans (222 of 435 seats) following the November 2022 mid-term elections. As the political environment remains highly polarised, opportunities for bipartisan legislation will be limited. As the 2024 elections approach, starting with the Presidential election, party infighting is also likely to intensify. Donald Trump has officially declared his bid for the Republican nomination, but he might encounter some challenges. He is subject to several criminal investigations. In addition, the competition from Florida Governor Ron DeSantis has strengthened following the mid-term elections. On the Democratic side, doubts over a second term bid remains for Joe Biden due to his age (82 in 2024). However, despite his lacklustre approval ratings, the results of the 2022 elections have strengthened his bid.
On the foreign policy front, the focus has turned to Russia following its invasion of Ukraine. The United States has coordinated its sanctions against Russia with its Western and NATO partners, particularly in Europe. These actions are part of the Biden administration's effort to return to a multilateral approach and re-engage with traditional partners. At the same time, tensions with China remain high, particularly over the contentious issues of Chinese trade practices and intellectual property protection. In addition, technological competition has intensified, as evidenced by restrictions on exports of technology associated with the semiconductor industry.
Last updated: February 2023
Exporters should pay close attention to sales contract clauses on the respective obligations of the parties and determine payment terms best suited to the context, particularly where credit payment obligations are involved. In this regard, cheques and bills of exchange are very basic payment devices that do not allow creditors to bring actions for recovery in respect of “exchange law” (droit cambiaire) as is possible in other signatory countries of the 1930 and 1931 Geneva Conventions on uniform legal treatment of bills of exchange and cheques.
Cheques are widely used but, as they are not required to be covered at their issue, offer relatively limited guarantees. Account holders may stop payment on a cheque by submitting a written request to the bank within 14 days of the cheque’s issue. Moreover, in the event of default, payees must still provide proof of claim. Certified checks offer greater security to suppliers, as the bank certifying the cheque thereby confirms the presence of sufficient funds in the account and makes a commitment to pay it. Although more difficult to obtain and therefore less commonplace, cashier’s checks – cheques drawn directly on a bank’s own account – provide complete security as they constitute a direct undertaking to pay from the bank.
Bills of exchange and promissory notes are less commonly used and offer no specific proof of debt. The open account system is only justified after a continuing business relationship has been established.
Transfers are used frequently – especially via the SWIFT electronic network, to which most American banks are connected, and which provides speedy and low-cost processing of international payments. SWIFT transfers are particularly suitable where real trust exists between the contracting parties, since the seller is dependent on the buyer acting in good faith and effectively initiating the transfer order.
For large amounts, major American companies also use two other highly automated interbank transfer systems – the Clearing House Interbank Payments System (CHIPS), operated by private financial institutions, and the Fedwire Funds Service System, operated by the Federal Reserve.
Since the American legal system is complex and costly (especially regarding lawyers’ fees), it is advisable to negotiate and settle out of court with customers wherever possible, or otherwise hire a collection agency.
The judicial system comprises two basic types of court: the federal District Courts with at least one such court in each state and the Circuit or County Courts under the jurisdiction of each state.
If the debt is certain and undisputed, US law provides for a “summary judgment” procedure, where a motion for summary judgment is based upon a claim by one party that all necessary factual issues are settled or that no trial is necessary. This is appropriate when the court determines there are no factual issues remaining to be tried, and therefore a cause of action or all causes of action in the complaint can be decided without a trial. If the judge decides that there are facts in dispute, the court will deny the motion for summary judgment and order a trial.
The vast majority of proceedings are heard by state courts, which apply state and federal law to disputes falling within their jurisdictions (i.e. legal actions concerning persons domiciled or resident in the state).
Federal courts, on the other hand, rule on disputes involving state governments, cases involving interpretations of the constitution or federal treaties, and claims above USD 75,000 between citizens of different American states or between an American citizen and a foreign national or foreign state body or, in some cases, between plaintiffs and defendants from foreign countries.
A key feature of the American judicial system is the pre-trial “discovery” phase, whereby each party may demand evidence and testimonies relating to the dispute from the adversary before the court hears the case. During the trial itself, judges give plaintiffs and their lawyers a considerable leeway to produce pertinent documents at any time and conduct the trial in general. This is an adversarial procedure, where the judge has more the role of an arbitrator, ensuring compliance with the procedural rules, although more and more practices enhances the role of the judge in the running of the case. The discovery phase can last several months, even years. It can entail high costs due to each adversary’s insistence on constantly providing pertinent evidence (argued by each party), and involve various means – such as investigations, requests for supporting documents, witness testimony, and detective reports – which are then submitted for court approval during the final phase of the proceedings.
In civil cases, the jury determines whether the demand is justified and also determines the penalty to impose on the offender. For especially complex, lengthy, or expensive litigations, such as insolvency cases, courts have been known to allow creditors to hold as liable the professionals (e.g. auditors) who have counselled the defaulting party, where such advisors have demonstrably acted improperly.
Enforcement of a Legal Decision
Domestic judgments in the United States give the creditors additional rights, such as the seizure and selling of the debtor’s assets or the garnishment of their bank account. As a federal state, decisions rendered in one of the country’s states may be executed in another state’s court, provided that the enforcing court considers that it is competent to enforce any judgement.
For foreign awards, each state has its own legislation. Nevertheless, they must be first recognised as domestic judgments. If a reciprocal recognition treaty exists, the requirement is fulfilled. However, in the absence of one, exequatur proceedings aim at ensuring enforcement in domestic court, after verifying the judgment meets certain criteria provided by the state law.
Out-of court proceedings
Different state laws can propose out-of court proceedings in order to avoid any formal judicial proceedings, such as the Assignment for the benefit of creditors in the state of California, where a company turns over all of its assets to an independent third party, who liquidates and distributes them to all creditors in an equitable fashion.
Chapter 11 of the American Bankruptcy Code provides a distressed entity with the opportunity to preserve its business as a going concern while implementing an operation of financial restructuring. The debtor can seek to adjust its debt by reduction the amount owed or extending repayment terms. The debtor entity and its management continue to operate the business as the debtor-in-possession. The Bankruptcy Court supervises the proceedings.
According to Chapter 7 of the American Bankruptcy Code, the purpose of these proceedings is to implement an orderly liquidation of the distressed entity. The court-supervised process involves a trustee selling assets and distributing the proceeds to creditors in accordance with the statutory priorities provided in the Bankruptcy Code as well as pursuing available causes of action. The US Trustee appoints an independent interim trustee to administer the case. The interim trustee holds a meeting of creditors after the petition is filed. He is responsible for liquidating the estate’s assets and distributing the proceeds to the creditors. The court supervises the proceedings. State law can also provide different mechanism for liquidation of a debtor’s assets such as receivership.