Author: Dr Lina Klesper - Legal Assistant at PKF Malta 
Published on Business Now on 12th September 2021

US Politics
The US political situation can still be viewed as highly polarised. The country was severely affected by the COVID-19 pandemic and is currently fighting its impact. So far, the US government has enacted temporary COVID-19 related trade measures and concluded an economic recovery plan of an estimated $2.3 trillion.

In midst of the COVID-19 crisis, presidential elections saw the victory of the Democrat Joe Biden who took office on 20th January 2021. The country still seems to face the backlash of the Presidency of Donald Trump, whose Government is being accused of not handling the crisis properly.

In January 2020 a partial trade agreement with China was signed, which however did not end the trade and diplomatic tensions between the two countries. Under President Biden, a milder tone could be taken on eventually, drawing an optimistic picture for the US economy.

US Economy and the COVID-19 Crisis
The US’s GDP growth rate has turned negative in 2020 after a decade of growth, exacerbated by rising inequalities and obsolete infrastructure. However, the US economy bounced back strongly in Q2 2020 by an annualized rate of 33.1 per cent GDP growth, which is forecasted to rebound and stabilize in the next year.

Even though the inflation rate decreased to 1.2 per cent in 2020, it is predicted to jump to 2.4 per cent in 2022. The US, however, can confidently rely on its financing flexibility as the issuer of the US dollar, the world’s main reserve currency.

Unemployment and Homelessness in the COVID-19 Crisis
The unemployment rate and monthly poverty rate raised drastically during the COVID-19 crisis. Current public health policies leading back to Trump’s Presidency tend to worsen income inequalities. The unemployment rate is nevertheless trending to go down with expected economic growth and recovery.

Before the pandemic rates of homelessness were at the highest in the United States in 20 years foreshadowing an even more downward spiralling trend during the pandemic which has left millions of people unable to pay rent and even evicted.

However, the pandemic has shed light on the situation of the homeless leading to funding and political promises raising hope for a change for the better.

The US and China’s race to become the world’s biggest economy
In economic terms, the unexpectedly fast US recovery from the COVID-19 shows its strength and potential under the Presidency of Joe Biden, whereas China’s politics and growth reports raise doubt about a pre-destined development to take over.

Both nations rely on expanding the workforce, upgrading the capital stock and innovation on technology. But the outcome of China and the US’s race depends on multiple factors. The COVID-19 crisis just shows how uncertain the outcome of the race and China’s take-over remains while also raising the question of whether it will happen at all.

Macroeconomic Shock and Outlook
Even though the COVID-19 crisis led to a macroeconomic meltdown and drove unemployment rates to levels comparable to those of the Great Depression, the US is not headed towards a new great depression or debt crisis as policy and politics are not pointing towards a path of a structural regime break.

The direction where the US is headed politically and economically depends widely on how Biden’s administration will handle the outcome of the pandemic as well as Trump’s backlash. An important figure to keep track of is the inflation rate indicating the economy’s wellbeing depends on the labour market which is dependent on the functioning of the economic recovery plan. Its success will most likely determine how strong the US will emerge from the global COVID-19 crisis in regards to economy, politics and social fabric.

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Author: Dr Lina Klesper - Legal Assistant at PKF Malta 
Published on Business Now on 12th September 2021
Get in touch: info@pkfmalta.com