Why the U.S. Economy Continues to Outperform Amid Global Challenges

As developed economies worldwide face unprecedented headwinds, the United States economy has maintained steady growth while many peers struggle. The contrast is symbolized by Volkswagen's closure of its iconic Dresden factory in eastern Germany last year, while BMW operates its largest global plant in Spartanburg, South Carolina. This divergence raises a critical question economists have long debated: why does the American economy continue to outperform despite facing identical global shocks?

Over the past years, advanced economies have endured a cascade of disruptions. Donald Trump's sweeping tariffs have roiled global trade. Large-scale immigration enforcement has reshaped labor markets. And Middle East conflicts have created volatile oil prices. Many economists predicted these pressures would severely impact the U.S. economy. Instead, the economy has expanded at a steady rate of approximately 2% annually. While inflation has proven stubborn at times, the feared scenario of weak growth paired with persistent price increases has not materialized.

According to Joe Brusuelas, chief economist at RSM, the trade tensions themselves demonstrate American economic resilience. Rather than accepting lower profit margins in response to tariffs on foreign components, U.S. businesses increased capital investment—currently representing 13.9% of GDP. This investment surge has been largely offset by significant productivity gains. The energy sector provides another crucial explanation. The shale gas revolution fundamentally transformed America's vulnerability to energy shocks. Over the past 20 years, the U.S. has become one of the world's largest oil and natural gas producers, with corporations steadily reducing petroleum dependence. As Brusuelas notes, hydraulic fracturing technology development since the early 2000s, combined with alternative fuels, has reduced oil's GDP contribution by half over five decades.

The contrast with Europe is stark. While the U.S. embraced flexibility, shale production, and market-based pricing, Europe relied on long-term contracts and interconnected supply networks for energy security. When Russia cut gas supplies following the Ukraine invasion, this approach exposed many nations to severe risk—vulnerability that persists amid current Middle East tensions. Rebecca Christie, senior researcher at Brussels-based think tank Bruegel, argues this divide reflects not merely policy choices but differing cultural attitudes toward risk. "Americans are very problem-solving oriented and willing to accept short-term risks for long-term gains," she explains, "while European culture tends toward risk avoidance." Structural differences in corporate financing and pension systems reinforce this gap: European companies heavily depend on bank loans while employees' pensions are typically tied to guaranteed insurance contracts limiting losses and gains. American companies access capital through investors and stock markets, providing greater flexibility despite volatility.

Yet Christie cautions that macroeconomic resilience may mask underlying pain. The U.S. exhibits high inequality levels; those living paycheck-to-paycheck face severe hardship due to limited job growth, rising prices, and housing crises in many cities. Her deeper concern is that inequality could reach a critical point where even a strong dollar and stable banking system prove insufficient if a genuine employment crisis emerges. Currently, evidence of this scenario remains minimal—U.S. employers added 172,000 jobs in May, exceeding expectations. However, recent inflation data reveals consumer prices rising at their fastest pace in three years, with May prices 4.2% higher than a year earlier, up from 3.8% in April, suggesting American resilience may be approaching its limits.

The U.S. economy's current strength compared to many competitors does not guarantee immunity from shocks. Higher energy prices, persistent inflation, and widening inequality all pose risks that could undermine its advantages. Nevertheless, compared with other developed economies, America appears robust. Its combination of flexible markets, rapid investment, abundant energy resources, and cultural tolerance for risk has enabled it to weather disruptions that severely stress other nations. As Brusuelas colorfully puts it: "In a washing machine full of very dirty clothes, it's the cleanest item."