The outbreak and spread of the coronavirus have impacted the global economy and the U.S, in particular, has been hit hard. Findings conducted by the Economist Intelligence Unit stated that the US economy is likely to experience moderate growth.
Trouble had been brewing in the US economy and the coronavirus infections, which keep rising every day only acted to make matters worse. A study published by Bankrate.com stated that 43% of all Americans considered heightened political tensions in Washington as the biggest threat to the US economy.
Here are the 7 biggest threats to the US economy:
1. Political Tensions in the Us
Washington DC has been experiencing political upheaval which could worsen over the coming months. If the trade wars continues, investors are likely to look for more stable countries to put in their money especially if president Trump continues implementing trade tariffs on China.
The Congress is also split with the Senate being led by a Republican which means Trump will face an uphill task in implementing his policies
2. A Decrease in Consumer Spending
With investment slowing down, the fate of the US economy is dependent on consumer spending. It’s estimated that US citizens’ spending accounts for two-thirds of the economic growth. Despite the economy hitting the country hard, consumers continue spending especially on essential items such as groceries which has helped keep the economy alive.
There’s no way of telling when the coronavirus will end and consumers are worried that the economy could do worse which often leads to a decrease in spending in favor of saving for a rainy day.
3.Strained Relationship With China
President trump’s strained relationship with China has affected importers who manufacture their goods in China and farmers with the uncertainty of what the future holds. Such businesses have reduced their investment in these ventures which in turn, reduces the government’s revenue.
President Trump’s administration imposed a 10% tariff on imports from China which led to China retaliating. The biggest casualties are businesses that depend on China for cheap labor.
4. A Global Slowdown
China, Germany, the United States, the United Kingdom, and Italy have experienced reduced growth in the past few years in what could turn out to be another global recession. In 2019, the IMF reduced the global growth forecast by 3.2%, which is the lowest since 2009. It’s reduced 2020’s growth forecast to 3.5%.
IMF warned that growth could be impeded further by escalating trade wars between countries such as what is going on between the US and China. World banks have been responding by cutting the interest rates to ward off an economic shutdown.
5. Low Inflation Rates
This may come as good news to people who are servicing loans because it means they’ll be able to pay their loans at the same interest but spells doom to the economy.
Low inflation is a sign of an economy that’s performing poorly because they have negative implications on interest rates which can save the economy in case of a recession. Low inflation in other countries pushes energy prices down which will benefit the US economy.
6. Brexit- the Big Unknown
Britain prime minister Boris Johnson stated that the UK was going to leave the European Union, with or without a deal with strained negotiations in the already complicated matter. Brexit has created concerns over food and medicine shortages and how trade will be impacted in the EU. The prime minister’s decision to leave the EU without a deal could act as a catalyst to an economic slowdown.
7. The US-Iran Conflict
President Trump ordered a drone strike in Iran that killed General Qassim Suleiman, who was the head of the countries’ security and intelligence. The situation hasn’t spiraled into a full-blown war but has increased tensions between the two countries and communication has been strained. There’s also fear that Iran could attack against countries where the US has vested interest.
If a war was to break out between the US and Iran, it could have serious consequences on the global economy. Strait of Hormuz accounts for 20% of the global oil supplies, which means operations, will be halted for a long time. All countries depend on oil to drive the various sectors of their economies. If Strait of Hormuz was closed down due to an outbreak of war, the global oil prices would spike which in turn, would increase the price of doing business, price of goods and services, and many companies would be face closure.
The Threat of Cyber Crime
Cyber-attacks have also increased over the years. Millions of dollars are lost each year when hackers get a hold of private and public data. It’s predicted that it will cost the world billions of dollars in the coming years to identify and mitigate cyber-attacks. Cybercrime accounts for more money than a combination of illegal drugs and global trade.