World’s largest economy
The United States is a country located mainly in North America, consisting of 50 states, a federal district, and other territories, with a population of 333.3 million people. The United States is the third largest country in the world by area and population. The United States is an economic, political, and military superpower heavily influencing global politics. The United States co-founded several important international organizations, including the United Nations, the World Bank, the International Monetary Fund, and NATO.
The United States is the world’s largest economy, accounting for about one-quarter of global GDP. In 2022, the GDP was $25.5 trillion ($76,398 per capita). In the GDP structure, industry accounts for 17.9%, services for 77.6%, and agriculture for 1%. As for the business environment, micro, small, and medium-sized enterprises (SMEs) account for 99.9% (33.2 million) of all enterprises. A diversified economy, robust middle class, emphasis on innovation, focus on exports, and a proactive foreign policy have been driving the American economy for decades.
The United States has the largest military budget in the world ($877 billion) and is the largest arms exporter. The United States also plays a crucial role in economic liberalization and globalization and is one of the main motors of the Fourth Industrial Revolution. It is fostered by, among other things, the United States’ leading role in global culture, as evidenced by the expansion of the entertainment industry (Hollywood), which is also used within the framework of soft power policy. One vital aspect is also the leading role of companies from the United States in the social media market (Facebook, Twitter).
Population of the United States
The United States is home to 333.3 million people. The largest ethnic groups are white (61.6%), African-American (12.4%), Asian (6%), Native American and Alaska Native (1.1%), Native Hawaiian, and other Pacific Islander (0.2%). Additionally, estimates are that 18.7% of the population is of Hispanic origin. The largest groups by ancestry are Americans of German, African-American, Mexican, Irish, and English descent.
In turn, the largest denominations are Protestantism (46.5%), Roman Catholicism (20.8%), Judaism (1.9%), the Church of Jesus Christ of Latter-day Saints (1.6%), Islam (0.9%), Jehovah’s Witnesses (0.8%), Buddhism (0.7%), and Hinduism (0.7%). In the United States, no language has official status, yet English is the de facto language. The labor force numbers 169.3 million people and is further bolstered by continued economic immigration. Currently, there are 28 million foreign workers in the United States (primarily from Latin America and Asia), accounting for 17% of the total labor force.
Compared to other developed countries, the United States population is considered relatively young, although the number of older people is increasing. People aged 65 or older constitute 16.8% of the population (55.8 million). According to estimates, this number will increase to 74 million people by 2030. The urbanization rate is 83.3%. The largest urban areas are New York-Newark (18.9 million), Los Angeles-Long Beach-Santa Ana (12.5 million), Chicago (8.9 million), Houston (6.7 million), Dallas-Fort Worth (6.5 million), and the capital, Washington (5.5 million).
Economy of the United States
The United States is an economic superpower. The US dollar is the most widely used currency for trade and is the main reserve currency for other countries (59% of the global share). Due to multiple connections, the state of the US economy significantly impacts the economic situation of other countries. The size of the US economy implies that economic growth in the US can be a growth stimulus for the global economy, while economic shocks in the US can negatively affect its condition.
US membership in bodies and organizations such as the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), the G7, and the G20 means that Washington wields significant influence in shaping international economic relations, for example, in terms of liberalization. An example of the US-promoted liberalization was the 1994 North American Free Trade Agreement (NAFTA), which was replaced in 2018 by the Agreement between the United States of America, the United Mexican States, and Canada (USMCA).
The United States economy is highly diversified and the most technologically developed economy. American manufacturers form the top of industries such as computers, pharmaceuticals and medical products, aeronautics, and defense. At the same time, efficient use of natural resources prevents the US from relying solely on imports. The United States is the largest producer of oil and natural gas. Proven oil reserves are 44.4 billion barrels, and natural gas reserves are 625.4 trillion cubic feet. The United States accounts for 20% of the global output.
The key sectors in the US economy are manufacturing, retail, real estate, healthcare, mining, energy, banking, financial services, insurance, construction, education, ICT, telecommunications, food industry, business services, science, automotive, defense, and agriculture. Each year, the contribution of these industries to GDP has been rising consistently. More recently, GDP growth has been driven by durable goods manufacturing, mining, business services, science, retail, healthcare, and ICT services. The US also allocates the largest budget to the space industry ($62 billion in 2022), significantly ahead of China and Japan.
The United States, the second-largest CO2 emitter after China (12.55% of the global share), has pledged to achieve zero emissions by 2050. The plan calls for a 65% reduction in CO2 emissions by 2030 and for the US power grid to be entirely powered by renewable energy by 2035. According to estimates, decarbonizing the power grid will cost $4.5 trillion over the next decade. The first steps will include expanding wind and solar power, energy storage system, and transmission lines.
International trade
The United States is the world’s largest economy by GDP, the world’s largest importer, and the second largest exporter after China. US exports are worth $1.75 trillion, and imports are worth $2.93 trillion. The United States’ main trading partners are Canada, Mexico, China, Japan, Germany, South Korea, Vietnam, the United Kingdom, the Netherlands, Brazil, and India.
Among the most frequently imported goods are industrial machinery (14.6%), electrical machinery (14.2%), motor vehicles and parts (9.65%), oil and mineral fuels (7.63%), pharmaceuticals (5.1%), precision instruments (3.62%), precious stones and metals (3.13%), plastics (2.81%), furniture (2.77%), organic chemicals (2.2%), clothing (1.78%), toys and sports equipment (1.77%). Other imported goods include iron and steel articles, rubber, wood, beverages, footwear, aircraft, fruits and nuts, seafood, textiles, paper, and cosmetics.
The group of most exported goods are oil and mineral fuels (13.7%), industrial machinery (11.9%), electrical machinery (10.6%), motor vehicles and parts (6.97%), precision instruments (5.23%), aircraft (5.08%), precious stones and metals (4.65%), medicines (4.45%), plastics (4.24%), organic chemicals (2.45%), and chemical products (2.11%). Following are oilseeds, cereals, meat, iron and steel articles, iron and steel, paper, fruits and nuts, cosmetics, and inorganic chemicals, among others.
Trade agreements
As the world’s largest economy, the United States has extensive trade relations, including via its membership in the World Trade Organization. The US has concluded Trade & Investment Framework Agreements (TIFAs) with 59 countries and Bilateral Investment Treaties (BITs) with 41 countries.
Washington has concluded free trade agreements with the following countries:
Australia
Bahrain
Canada
Chile
Colombia
Costa Rica
Dominican Republic
El Salvador
Guatemala
Honduras
Israel
Jordan
Mexico
Morocco
Nicaragua
Oman
Panama
Peru
Singapore
South Korea
The United States has also signed a free trade agreement on critical minerals (copper, lithium, nickel, cobalt, rare earth elements) with Japan. In 2020, talks began with the United Kingdom to conclude a free trade agreement.
Agreements with associations of countries:
Agreement between the United States of America, the United Mexican States, and Canada (USMCA)
Association of Southeast Asian Nations (ASEAN)
Asia-Pacific Economic Cooperation (APEC)
Gulf Cooperation Council (GCC)
Common Market for Eastern and Southern Africa (COMESA)
East African Community (EAC)
Economic Community of West African States (ECOWAS)
West African Economic and Monetary Union (WAEMU)
Caribbean Community and Common Market (CARICOM)
United States-European Union relations
Transatlantic relations hold a prominent role on a global scale. Diplomatic relations between the United States and the European Coal and Steel Community were established in 1953. Eight years later, the US mission to the European Communities (now to the European Union) was opened in Brussels. The United States and the European Union are strategic partners for each other in trade and global politics. Together they account for 42% of global GDP and trade. In 2021 the value of trade in goods reached a record 1.2 trillion euros, while trade in services reached more than 500 billion euros.
The bilateral economic relationship secures 16 million jobs on both sides of the Atlantic. The United States and the European Union are also the largest investors. In 2020, the value of EU countries’ investment in the US was €2.1 trillion, while US investment in the EU was €2.3 trillion. In June 2021, the two sides established the Trade and Technology Council (TTC). It is a forum for coordinating action on global economic and technological issues in five areas (exports, foreign investment, supply chains, new technologies, and trade challenges).
Despite extensive relations, the United States and the European Union have not concluded a free trade agreement. Negotiations started in 2013 but collapsed six years later. Sometimes there are political differences between the two sides in assessing the international situation, as with the Iraq war in 2003. Despite the disagreements, the US-EU partnership will continue to grow, as evidenced by the steps taken in 2021 to ease the Airbus-Boeing dispute and the steel and aluminum disagreement. However, it should be noted that such tensions affect only 2% of total transatlantic trade.
Opportunities and challenges
The United States will remain one of the top markets in the coming decades, despite the growing prominence of China and India. Due to its very high domestic diversification, both economically, geographically, and socio-culturally, the US is an appealing target market for many industries, offering the prospect of cooperation at the state or national level. Exporting to the United States is a challenging but potentially profitable venture. However, it is advisable to consult experts and analyze the market to minimize risks.
The import tax depends on the country from which the goods are imported. Goods worth more than $800 are subject to payment. US tariff rates range from 0-37.5%, with 3% being the most common. Zero rate or reduced rates are enjoyed by countries with which the US has signed free trade agreements, Canada and Mexico under the USMCA agreement, and some countries in sub-Saharan Africa, South America, the Caribbean, and the Middle East. One of the most significant impediments to trade with the United States is the differences in tax law between the states and the federal level.
While considering opportunities in the US market, foreign entrepreneurs should study the trends of industries recording the highest growth rates and prospective industries. Given the current market picture, opportunities exist primarily in high-tech, ICT, healthcare, industrial manufacturing, energy, automotive, defense, chemicals, food, and consumer goods. Demand for products and services in the scientific, advanced manufacturing, telecommunications, artificial intelligence, and biotechnology sectors is also growing steadily.