The U.S. economy has continued expanding at an annualised rate of roughly 2% through a period that economists expected to cause a sharp slowdown. President Donald Trump’s sweeping tariffs on foreign goods, a campaign of mass deportations that has tightened the labour market, and the Middle East conflict that pushed oil prices higher all weighed on activity — yet the economy kept growing.
“CapEx (capital expenditure) right now is 13.9% of US GDP,” Joe Brusuelas, chief economist at RSM, told BBC News. “That should be slowing, given the mix of supply and demand shocks the economy is absorbing, and it’s not.” Instead of accepting lower margins, Brusuelas said, U.S. corporations invested more heavily, and a notable rise in productivity offset much of the pressure.
Energy policy has been a key differentiator from Europe, which has struggled since Russian gas supplies were cut after the Ukraine invasion. The shale revolution, combined with alternative fuels, has reduced oil’s contribution to U.S. GDP per unit by half over the past 50 years, Brusuelas said. The U.S. is now one of the world’s largest oil and gas producers, while businesses have steadily reduced their reliance on petroleum. The contrast is visible in the auto industry: in Dresden, Germany, Volkswagen closed its flagship “Transparent Factory” last year, while in Spartanburg, South Carolina, BMW is running its largest plant in the world.
Cultural attitudes toward risk also play a role, according to Rebecca Christie, a senior fellow at the Brussels think tank Bruegel. “Americans are very solutions-oriented and much more comfortable with taking a short-term risk in service of a long-term advantage,” Christie told BBC News. “Europe as a culture is risk-averse.” She recalled hearing the EU’s own commissioner for financial services say that people in Europe do not talk enough about the risk of not taking risk. The structure of business finance reinforces the gap: U.S. companies can raise money through stock markets and venture capital, giving them flexibility that European firms relying on bank loans often lack, Christie said.
The labour market has held up better than many forecasters predicted. U.S. employers added 172,000 jobs in May, smashing expectations, according to the Labor Department. New inflation data this week showed consumer prices rising 4.2% in May from a year earlier, up from 3.8% in April — the fastest pace in three years.
Despite the headline strength, Christie cautioned that resilience at the macro level masks deep inequality. “The US is a land of very high inequality,” she said. “If you’re struggling, you are really going to have a hard time because the labour market is not adding piles of new jobs, things are getting more expensive, many cities have housing crises.” Her deeper worry is that inequality could reach a tipping point: “Even then having the dollar and fairly stable banks won’t help if you have a real jobs crisis in the real economy.”
Brusuelas argued that 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 said.
So far, there is little evidence of a jobs crisis. But the May inflation reading suggests the limits of resilience may be approaching. Higher energy prices, stubborn inflation and widening inequality all pose risks that could erode the country’s current advantage.
As Brusuelas put it: “It’s the cleanest shirt in a very filthy laundry.”