Why the US economy stays strong even when its policies shock the rest of the world

Posted on 13 July 2026 • Arts and social sciences, Society and politics

The US economy is continuing to grow faster and generate more new jobs than Europe. Annual national income growth over the past five years has averaged 3.3% in the US against 2.6% in the EU. In the first quarter of 2026, the EU’s GDP was just 0.7% higher than a year before, while that of the US was up 2.6% on comparable measures, says Alan Shipman, Senior Lecturer in Economics, The Open University.

These figures defy the widespread predictions that the US would lose its growth advantage after its government imposed a global trade tariff regime in 2025 and, one year later, started a war with Iran. Economists see several factors behind the resilience of the US economy.

The US runs consistently wider budget deficits than the EU, UK or China. By spending more than it collects in tax, the US government creates more income for the people it employs and the businesses it buys from. This extra income in theory boosts demand in the economy, pushing output growth higher and reducing unemployment.

Most European governments also run budget deficits. The average budget deficit of EU countries in 2025, for example, was 3.1% of GDP. But the US deficit, at 5.8% of GDP that same year, is giving a much stronger stimulus.

Full article available on The Conversation

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