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© 2018IHS Markit. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss,damage or expense incurred by reliance on information or any statement contained herein.

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Country Reports - United States

27 Apr 2018 Country Risk | Profile

Overview President Donald Trump's administration has had a major effect on the domestic political and violent risk operating environment. Trump has reversed many of former president Barack Obama's executive orders on immigration, business regulation and foreign policy. He has also taken steps in pursuing an "America First" foreign policy that features elements of trade protectionism as set out in his National Security Strategy. Although organised attack risks remain, radicalised Islamist and domestic (right and left wing) groups and individuals pose a more imminent threat, with prevention efforts less effective. Protests, particularly around police-related violence and right-wing extremism, are increasing. National security drives foreign policy, with Iran, North Korea, and Russia featuring prominently. The economy remains on a path of steady growth consistent with a moderate recovery.

Overall 1.2 MODERATE Political 1.7 Elevated Economic 0.2 Low Legal 0.9 Moderate Tax 1.5 Moderate Operational 1.2 Moderate Security 1.7 Elevated Note: 0.1 = minimum risk, 10.0 = maximum risk.

Medium Term Overall Rating / 100 0 AAA 0 HIGHEST QUALITY Note: 0 = minimum risk, 100 = maximum risk. Ratings form part of enhanced Economic and Sovereign Risk services.

Political The policies advanced by President Donald Trump have undone a number of Obama legacies, such as executive actions (including on immigration, gun control, the environment and Cuba) as well as his flagship health care policy, the Affordable Care Act. Although Republicans control a majority in both congressional houses, splits within the party have largely prevented the passage of any major legislation aside from a major tax regime overhaul. Major items for 2018 include an infrastructure package, immigration, and trade policy.

Economic Forecast summary

Solid growth with higher inflation out of the gate Fourth-quarter GDP growth was reported at 2.9% in Bureau of Economic Analysis' third estimate, revised up 0.4 percentage point from the second estimate, with notable upward revisions to personal consumption expenditures (PCE) and inventory investment. Over the final three quarters of last year, GDP rose at a robust 3.0% annual rate. While the economy surely had solid momentum heading into 2018, the incoming data point to a temporary slowdown in the first quarter. The main source of first-quarter weakness is PCE, which has slowed sharply early this year.

Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020 , lowering the unemployment rate to 3.6%. This growth is aided by recently legislated tax cuts and new federal spending, and not at all derailed by new tariffs on imports of steel and aluminum, since the growing list of exemptions from these tariffs has mitigated their effect.

Country Risk Ratings (Strategic Risk) - United States

Sovereign Risk Ratings - United States

Core PCE inflation is picking up. Over the six months ended in February, the core PCE price index rose at a 2.3% annual rate. By this measure, we have already surpassed the Federal Reserve’s 2.0% objective. We forecast core PCE inflation of 2.0% for this year, 2.2% over 2019, and 2.3% inflation over 2020. This prompts four Fed interest-rate hikes this year, followed by several more over 2019 and 2020.

Changes since last forecast

Changes since last forecast (April forecast, third estimate of fourth-quarter 2017 GDP)

Gross domestic product Lower

Consumer spending Lower

Business investment Higher Incoming data indicating a stronger start to 2018 than previously forecast

Residential investment Lower Marked decrease in population projections from the Census

Government spending Unchanged

Exports Unchanged

Imports Lower

Short-term interest rates Unchanged

Long-term interest rates Unchanged

Consumer Price Index (core) Higher Further tightening of labor markets

Unemployment rate Higher

United States: Key indicators and forecasts

Historical data edge 2014 2015 2016 2017 2018 2019 2020 2021

Real GDP (percent change) 2017 2.6 2.9 1.5 2.3 2.7 2.9 2.1 1.7

Nominal GDP (billion USD) 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 23,451

Nominal per-capita GDP (USD) 2017 54,601 56,372 57,542 59,496 61,897 64,819 67,494 69,923

Consumer price index (percent change) 2017 1.6 0.1 1.3 2.1 2.3 1.7 2.9 2.5

Exchange rate (year end, USD/EMU) 2017 1.21 1.09 1.05 1.20 1.21 1.23 1.25 1.27

Exchange rate (year end, JPN/USD) 2017 120.64 120.50 116.80 112.90 108.75 113.07 112.29 110.78

Source: IHS Markit

Business environment Strengths and weaknesses

Strengths Weaknesses

The legal system is clear, pro-business and generally transparent. Despite recent reductions, many businesses find taxes overly complicated.

The labour market is flexible and dynamic and the government bureaucracy is relatively efficient.

A recent wave of trade protectionism raises the possibility of policy uncertainty around existing trade agreements.

The United States has a well-developed, albeit ageing, infrastructure and can cope with disasters better than most countries.

The country is extremely litigious, particularly over the issues of equal opportunities and unfair dismissal.

Higher education produces a large number of skilled graduates. Violent crime, albeit decreasing, remains higher than in most wealthy countries and there exists a risk of cyber attacks on business.

Legal

The legal system is independent, clear, and pro-business, reducing contract alteration and contract enforcement risks. However, a recent wave of trade protectionism raises policy uncertainty around existing trade agreements. For example, in early 2018, President Donald Trump raised global tariffs on steel and aluminium by 25% and 15% respectively. Trump replaced deceased Supreme Court Justice Antonin Scalia with Neil Gorsuch, a conservative that maintains the court's right-leaning bent.

Tax

In December 2017, President Donald Trump signed what is viewed as the most significant tax overhaul in three decades. The Tax Cuts and Jobs Act reduced corporate taxes from 35% to 21%. The bill also moved away from a worldwide taxation system on earned income for domestic corporations, shifting to a territorial system. In addition, individual taxes will continue to be divided into seven income brackets, with some individuals across all brackets seeing their taxes reduced on a temporary basis.

Operational

Foreign investment is welcomed, although a recent trend towards trade protectionism increases uncertainty around existing trade agreements. President Donald Trump's immigration policy raises the likelihood of firms facing difficulties in securing visas for foreign employees. Corruption levels remain modest. Environmentalist movements have become more active recently, particularly around pipelines in western states. There have been limited labour strikes around minimum wage levels. Trump has indicated that he would look to make a significant investment in infrastructure and has lifted some barriers to certain energy projects on federal land and offshore.

Security War risks

The risk of war on US soil remains low. Yet, aside from the recently announced possible US-North Korea summit in late Spring 2018, the odds of a nuclear confrontation with North Korea has risen since 2015. Additionally, a number of ongoing military engagements abroad – in Afghanistan, Iraq, Somalia, Syria, and Yemen – have escalated under President Donald Trump's administration. Trump's continued animosity towards the Iranian nuclear agreement also raises the prospect of military, if only in association with escalating hostilities with Iran and US allies like Israel and/or Saudi Arabia.

Terrorism risks

Terrorist attacks inspired or directed by the Islamic State or al Qaeda pose a risk. Attacks would likely involve firearms or improvised explosive devices as seen in the 2016 mass shooting in Orlando and in the September 2016 bombings in New York. Attacks could also involve the use of vehicles, as seen in the 2016 and 2017 attacks in Columbus and New York City. Right-wing terrorists pose a threat to Jewish, Muslim, African American, and LGBT assets and individuals, in addition to government buildings and abortion clinics. Attacks carried out by environmental and animal rights activists exist, but remain relatively infrequent.

Social stability and unrest risks

The period immediately following the presidential election experienced a number of protests against the policies of President Donald Trump. Other demonstrations have involved individuals associated with white supremacist or other right-wing extremist organisations, which are frequently met with opposition anti-fascist (Antifa) protests, leading to violence and arrests. Although race relations and incidents of police brutality remain important issues, the number and intensity of Black Lives Matter protests have decreased since Trump's election. However, protesters will continue to organise when instances of police brutality occur and when police officers receive perceived light punishments in courts.

Political: Overview The policies advanced by President Donald Trump have undone a number of Obama legacies, such as executive actions (including on immigration, gun control, the environment and Cuba) as well as his flagship health care policy, the Affordable Care Act. Although Republicans control a majority in both congressional houses, splits within the party have largely prevented the passage of any major legislation aside from a major tax regime overhaul. Major items for 2018 include an infrastructure package, immigration, and trade policy.

Government stability With Republicans retaining control over both Congressional houses in the 2016 election and Donald Trump's presidential victory, the odds of co-operation between the legislative and executive branches appeared high. However, splits between the Republican Party's conservative and moderate wings have delayed major legislation from being passed, such as healthcare. For example, moderates in the Senate rejected proposals from conservative House Republicans that would have dismantled Obamacare.

Nonetheless, a Republican-controlled Congress has worked with Trump to lower corporate income taxes and decreased federal regulations on environmental and labour standards. There are also plans in 2018 to increase investment in the infrastructure, commodities, financial, and energy sectors. Trump has already begun the process of opening of large tracts of federally owned areas for extractive industries.

Although high deficits following the 2008 financial crisis have decreased, they are set to expand following the passage of tax reform in December 2017. Financial problems continue to surface with state and municipal governments. In July 2013, Detroit filed for the largest municipal bankruptcy in US history. Then, in 2015 and 2016, Puerto Rico defaulted on a portion of its debt obligations, setting up the need to create congressional committee to restructure its obligations.

Political summary

Presidential elections

Next contest: 2020 November; Last contest: 8 November 2016 (election of the electoral college, whose formal vote to select the president took place on 19 December).

Legislative elections

Next contest: 2018 November; Last contest: 8 November 2016 (House of Representatives and one-third of the seats in the Senate). Mid-term elections are scheduled for 6 November 2018.

Head of State Donald J. Trump (since 20 January 2017)

Vice President Mike Pence (since 20 January 2017)

Finance Steven T. Mnuchin (since 13 February 2017)

Defence/Security Kirstjen Nielsen (since 6 December 2017)

Defence/Security Gen. (Retd) James Mattis (since 20 January 2017)

Justice/Attorney General

Jeff Sessions (since 9 February 2017)

Labour Alexander Acosta (since 27 April 2017)

Interior/Home Affairs

Ryan Zinke (since 1 March 2017)

Policy direction and predictability With Republicans retaining a majority in both the House of Representatives and the Senate following the November 2016 presidential election, President Donald Trump has had a stronger hand to craft a pro-business agenda that has reduced federal government regulations and lowered corporate taxes.

The tax reform legislation passed by Congress in December 2017 represented the largest shift in tax policy since the 1980s.

Trump has also enacted new policies via executive orders without congressional authorisation, such as cancelling previous Obama executive actions on immigration, gun control and Cuban-American relations. He has also attempted to drive growth in the energy and mining sectors by removing restrictions put in place during the Obama administration including on the production of American energy reserves including shale, oil, natural gas and clean coal, and to certain energy infrastructure projects including the Keystone pipeline. However, other legislative and executive efforts have stalled, whether in health care, where moderate Senate Republicans balked at passing healthcare reform, or in immigration, where some federal courts have temporarily halted the administration's attempts to curtail immigration.

Trump filled the vacancy on the US Supreme Court caused by the death of former Justice Antonin Scalia by nominating Neil Gorsuch, a fellow judicial conservative, ensuring that the court remain socially conservative and in favour of efforts to reduce regulatory restrictions on business.

Opposition prospects and programme In the 2016 elections, Republicans maintained narrow majorities in Congress. Although the dominance of Republicans following the 2016 election left most Democratic policy objectives sidelined at least until 2019 (after the November 2018 midterm elections), they should enjoy slightly more power to craft policy in 2018 in areas like immigration, healthcare, and infrastructure negotiations, where their votes will be needed to pass critical bills in the Senate (where 60 votes are needed to break a filibuster) or where the House Republicans are split.

Parliament Summary

Party abbr. Party name Seats

House of Representatives (Lower chamber)

Rep Republican Party 241

Dem Democratic Party 194

Senate (Upper chamber)

Rep Republican Party 52

Dem Democratic Party 48

Data reflects seat distribution following last election Source: IHS and CIRCA People in Power

Economic Overview Country risk ratings for the United States remain exceptionally low.

In fiscal 2015, the federal budget deficit was the smallest share of GDP since 2007. The deficit is projected to average approximately 2.9% of GDP in fiscal 2016, compared with 1.1% in 2007 and a high of nearly 10% in 2009.

The political process of appropriations produced several successive years of threatened government shutdowns and debt-ceiling crises, but as a result of the Bipartisan Budget Act of 2015, the debt ceiling was suspended until March 2017 and the spending caps triggered by sequestration were lifted for fiscal 2016 and 2017. In addition, several more pieces of budgetary legislation, including a five-year highway spending bill, were successfully passed at the beginning of fiscal 2016. As a result of these laws, economic risk from fiscal policy is minimal.

The economy continues to grow at a measured pace consistent with a moderate recovery. The unemployment rate is easing into the level associated with full employment. The economy continues to grapple with several points; an inventories correction is ongoing and energy-sector capital spending is in a slump, while net exports weigh down growth, due to both a strong dollar and weak growth in the rest of the world. Nevertheless, the solid performance of domestic demand means that underlying growth remains sturdy.

Short-term outlook First-quarter GDP growth came in strong at 2.3%. The unexpected strength in first-quarter GDP growth was accounted for by larger-than-expected contributions from net exports, fixed investment, and government consumption and gross investment. Net exports rose $8 billion on the quarter, in contrast to our expectation of a decline, as exports were above expectations and imports were below. GDP growth slowed relative to the fourth quarter, accounted for by a slowdown in final sales to domestic purchasers, which was partially offset by increases in net exports and inventory investment. These two latter components jointly contributed 0.6 percentage point to first-quarter GDP growth, compared with a subtraction of 1.7 percentage points in the fourth quarter. Movements in inflation as measured in the National Income and Product Accounts were mixed in the first quarter. The GDP price index rose at a 2.0% rate in the first quarter, down from 2.3% in the fourth quarter. The core PCE index rose at a 2.5% rate in the first quarter, matching our estimate, and up from 1.9% in the fourth quarter .

Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020 , lowering the unemployment rate to 3.6%. This growth is aided by recently legislated tax cuts and new federal spending, and not at all derailed by new tariffs on imports of steel and aluminum, since the growing list of exemptions from these tariffs has mitigated their effect.

Assumptions

Fiscal policy: We have dampened the impact of fiscal stimulus in 2018 in this forecast, based on higher-than-expected levels of incoming personal tax data, as indicated by the monthly personal income and consumption reports.

Federal Reserve: The Fed raised the federal funds target range 25 basis points in March, and we expect three additional rate hikes in 2018, followed by three more in 2019.

Non-US GDP growth: Real GDP growth for the nation’s major-currency trading partners is assumed to average 1.8% annually from 2018 through 2028. For “other important” trading partners, growth averages 3.5% over the next 10 years, including a peak of 3.7% in 2021.

Energy: The Brent oil price is projected to dip from $62/barrel in the fourth quarter of 2017 to $60/barrel by the last quarter of 2018. Brent is expected to press down to $55/ barrel by the third quarter of 2019, before resuming a constant climb through the rest of the forecast interval.

Exchange rates: We assume the dollar will partially reverse its recent decline and nudge up slightly to a high in the third quarter of 2019, yet remain 3.4% below the 2017 average. This will be followed by a steady decline through the end of the forecast period, resulting in a 6.4% drop by the end of 2028.

Other key assumptions: We have incorporated new population projections from the Census Bureau. The total population, including armed forces overseas, is now expected to grow at an average rate of 2.3 million persons per year over the next 10 years, versus 2.5 million per year in the previous forecast.

Changes since last forecast

Changes since last forecast (April forecast, third estimate of fourth-quarter 2017 GDP)

Gross domestic product Lower

Consumer spending Lower

Business investment Higher Incoming data indicating a stronger start to 2018 than previously forecast

Residential investment Lower Marked decrease in population projections from the Census

Government spending Unchanged

Exports Unchanged

Imports Lower

Short-term interest rates Unchanged

Long-term interest rates Unchanged

Consumer Price Index (core) Higher Further tightening of labor markets

Unemployment rate Higher

Medium- and Long-term analysis Real GDP growth will average 2.2% per year during 2016–46. The outlook for inflation remains moderate. Consumer Price Index (CPI) inflation will average 2.4% per year over the forecast period. Core inflation will average 2.0%. Nonfarm business productivity growth averages 1.7% over the forecast period. The current-account deficit remains negative over the forecast period, averaging 3.3% of GDP. Real oil prices eventually stabilize at about $80–85 per barrel (2009 dollars). The labor market improves over the forecast period, with the unemployment rate eventually settling around 4.7%. The federal budget deficit remains in deficit through 2046.

Real GDP growth will average 2.2% per year in 2016–46. This is 0.4 percentage point slower than during the past 30 years. The economy's underlying growth will slow as baby boomers begin to retire, slowing labor-force growth. Potential output growth should hold up fairly well in the future, with greater business fixed investment and R&D spending offsetting the slowdown in labor force growth. Eventually, though, the effects of weaker labor-force growth become dominant and, in a sense, self-perpetuating. As output growth drops off, business fixed investment rises more slowly, limiting capital stock growth and thus future output gains.

The outlook for inflation remains moderate. Over the long run, inflation is a monetary phenomenon. Its future course will be determined by policies implemented by Janet Yellen, and her successors. Since we do not know who these successors will be, we assume the Federal Reserve will try to contain inflation over the forecast period. The Consumer Price Index (CPI) is expected to average 2.4% annual increases in 2016–46, somewhat less than the 2.7% average in 1985–2015. The broader-based GDP deflator will rise 2.1% per year.

Nonfarm business productivity growth averages 1.7% over the projection period. It has slowed sharply since the Great Recession, and its average growth rate for the past four years is 0.6%. In our latest forecast, productivity growth averages 1.7% over the next 30 years, just below its current 50-year average of 1.9%. A caveat: the recent historical productivity estimates are revised several times over several years before they solidify. The effective capital stock (in 2009 dollar terms) is projected to increase 3.4% annually, 0.` percentage point higher than recorded for 1985–2015.

The current-account deficit remains negative over the forecast period, averaging 3.3% of GDP. A decline in the dollar relative to industrialized-country-currencies, combined with modest unit labor cost growth, will stimulate US exports abroad and result in a steady improvement in the merchandise trade balance (as a share of GDP). IHS Economics projects that real exports will expand at a 4.2% average annual rate over the projection period. Real imports, meanwhile, will grow at a 3.9% average annual rate.

Real oil prices eventually stabilize at about $80–85 per barrel (2009 dollars). IHS expects the average acquisition price of foreign oil to remain high in the long run. In the end, scarcity tends to bid energy prices up, while new technologies tend to hold them down. The long-term trend was revised downward compared with the previous forecast based on a reassessment of the long-term outlook by IHS CERA.

The labor market improves over the forecast period, with the unemployment rate eventually settling at about 4.7%. Slower long-run increases in the labor force indicate more moderate long-run employment growth in the future. Total civilian employment will rise at an average annual rate of 0.7% from 2016 to 2046. Total establishment employment will rise from 142 million in 2016 to 179 million in 2046. Manufacturing's share of total employment will continue to decline over the forecast period, falling to 6.7% in 2046, from 8.6% in 2016. The broad service sector will generate an increasing share of employment growth in the forecast period, although the federal government's share of employment will decline during the forecast period.

The federal budget deficit remains in deficit through 2046. The federal deficit, which peaked at $1.4 trillion in fiscal year 2009 and dropped below $1.0 trillion after fiscal year 2012, gets smaller through 2016, but then starts to increase again. With the economy growing faster than the pace of government spending, the government sector's share of GDP will decline over the forecast period. The state and local government sector maintains the dominant share of total government purchases, growing from 62% in 2015 to 69% in 2046. At the federal level, the military accounted for 60% of federal purchases in 2015, and accounts for 61% in 2046.

Growth GDP

Fourth-quarter GDP growth was reported at 2.9% in Bureau of Economic Analysis’ third estimate, revised up 0.4 percentage point from the second estimate. Over the final three quarters of last year, GDP rose at a robust 3.0% annual rate.

Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020, lowering the unemployment rate to 3.6%. Consumer spending growth will continue to support the economic expansion, underpinned by lower personal tax rates and gains in employment, real disposable incomes, and home values. We forecast real consumer spending growth of 1.2% in the first quarter of 2018, 0.7 percentage point slower than in the previous forecast, but expect 2.5%-or-better growth rates for the rest of the year. Real personal disposable income growth is estimated at 4.3% in the first quarter and remains robust. We estimate that the new tariffs on steel and aluminum will raise less than $10 billion annually—a “rounding error” in our $20-trillion economy. Hence, by themselves, the tariffs have little impact on the federal budget or the macroeconomic outlook. Over the next two years, we forecast business fixed investment to grow 5.8% and 6.3%, respectively, and then slow to a still respectable 4.5% pace in 2020. Supportive provisions from the Tax Cuts and Jobs Act, an expected downward drift in in risk spreads, the newly enacted Bipartisan Act of 2018, and a broadly firming economy will raise demand enough to give businesses the confidence they need to expand capacity. Net exports are expected to cut 0.88 percentage point off first-quarter GDP growth, after slicing off 1.16 percentage points the previous quarter. The drag to growth is mostly coming from imports, particularly imports of consumer and capital goods. The Census Bureau released new population projections in March. We lowered the housing forecast as a result. Job growth is expected to build to a rough average of 250,000 per month over the second half of 2018, before gradually subsiding to around 90,000 per month in 2020. The Federal Open Market Committee (FOMC) raised the target for the federal funds rate by 0.25 percentage point to a range of 1.501.75% at its policy meeting that concluded on 21 March. We expect additional rate hikes this year in June, September, and December. Beyond 2018, more rate hikes should raise the upper end of the funds rate target range to 3.50% in 2020. The number of housing starts in 2018–28 is 2.3% lower than previously projected, 15.87 million versus 16.22 million; and the composition is more tilted toward the single-family category, 76% versus 73% previously, over the next 10 years. Employment gains are expected to be relatively solid through 2019, averaging roughly 215,000 per month, or about 2% per year. We have made no change to our forecast that the Federal Reserve will raise interest rates four times in 2018, with the first quarter-point rate hike occurring at the upcoming policy meeting on 21 March. Beyond 2018, we expect additional increases that raise the upper end of the target range for the federal funds rate to 3.5% in 2020.

Consumer demand

Consumer spending growth will continue to support the economic expansion, underpinned by lower personal tax rates and gains in employment, real disposable incomes, and home values. We forecast real consumer spending growth of 1.2% in the first quarter of 2018, 0.7 percentage point slower than in the previous forecast; real personal disposable income growth is forecast at 4.3% in the first quarter. Our real consumer spending growth outlook has been revised down by 0.2 percentage point to 2.5% for 2018, and remains at 2.7% for 2019. We expect growth of real disposable personal income to accelerate from 1.2% in 2017 to 2.6% in 2018 (0.4 percentage point less than the previous forecast) and then to ramp up to 3.6% in 2019. Issue to watch: Total individual tax refunds in 2018 are on track to surpass their previous high point. Based on incoming data, we expect a total of $301 billion to be disbursed to taxpayers through the end of June—nearly 1% more than last year.

Consumers took a breather in the first quarter after a raucous end to 2017, but will pick up the pace in the rest of the year. Our forecast for real consumer spending growth has been revised down by 0.2 percentage point to 2.5% in 2018, and remains at 2.7% in 2019 and 2.4% in 2020. We expect growth of real disposable personal income to accelerate from 1.2% in 2017 to 2.6% in 2018 and to 3.6% in 2019, before easing to 2.4% in 2020. In the pessimistic scenario (probability = 20%), the US economy suffers a crisis of confidence and enters a two-quarter recession; real consumer spending grows 2.6% in 2018, 1.5% in 2019, and 1.7% in 2020. In the optimistic scenario (probability = 15%), the improving economy causes renewed household formation and the housing market bounces back; real consumer spending grows 2.8% in 2018, 3.8% in 2019, and 3.9% in 2020.

Consumer markets outlook

(Percent change, annual rate) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 Real consumer spending 2.2 4.0 1.2 2.8 2.6 2.5 2.8 2.5 2.7 2.4

Durable goods 8.6 13.7 -1.1 6.2 4.3 3.9 6.7 5.6 4.4 3.5

Nondurable goods 2.3 4.8 -0.8 2.6 2.1 2.4 2.4 2.1 2.1 1.5

Services 1.1 2.3 2.2 2.4 2.6 2.4 2.2 2.2 2.6 2.5

Unit sales of new light vehicles (millions) 17.1 17.7 17.1 16.8 16.9 16.8 17.2 16.9 16.8 16.7

Real disposable income 0.7 1.1 4.3 2.5 3.1 3.7 1.2 2.6 3.6 2.4

Real household net worth 5.5 6.0 6.9 -3.6 2.2 2.2 6.0 1.9 1.3 1.8

Personal consumption deflator 1.5 2.7 2.8 1.4 1.9 1.6 1.7 2.0 1.8 2.4

Personal saving rate (% of disposable income) 3.4 2.6 3.3 3.3 3.4 3.6 3.4 3.4 4.2 4.1

Consumer Sentiment Index (Michigan, level) 95.1 98.4 98.9 99.3 99.6 99.8 96.8 99.4 98.9 97.3

Household obligations ratio (% of disposable income) 15.9 15.9 15.9 16.0 16.0 16.0 15.8 16.0 16.3 16.6

Capital investment

Real nonresidential fixed investment is starting out this year stronger than we estimated last month. Over the first half of 2018, we look for average annualized growth of 5.4%, up 2.0 percentage points from last month’s forecast. Following 4.7% growth last year, nonresidential fixed investment firms to growth of 5.8% this year and 6.3% next year. This firming trend mirrors accelerating nonfarm business sector output, from 2.9% last year to 3.3% this year and 3.5% next year. Solid investment spending is supported by more sanguine perceptions of risk, declining risk spreads, and easing lending conditions. Key provisions from the Tax Cuts and Jobs Act, as well as new fiscal stimulus from the Bipartisan Budget Act, also support business fixed investment in the forecast. Real fixed investment in structures grows at a healthy average rate of 5% per year through 2020, while real spending on intellectual property products grows at roughly a 4% rate.

Inventory investment was soft last year, even as final sales were strong. This lowered the inventory-to-sales ratio enough to set up inventory investment as a solid contributor to GDP growth in 2018.

The solid start to 2018, combined with favorable conditions for investment spending, will contribute to solid growth of nonresidential fixed investment over the next few years. A key factor supporting stronger investment spending is the Tax Cuts and Jobs Act (TCJA), which includes two key provisions that are expected to boost nonresidential fixed investment: a lower marginal tax rate on corporate income and expanded expensing of newly placed capital equipment. Rising borrowing costs in our forecast are partially mitigated by these provisions. Another key factor supporting investment spending is the Bipartisan Budget Act, the stimulus from which will give businesses confidence that demand will be sufficient to warrant expanded capacity. Moreover, continued broad economic improvement will lead to more favorable perceptions of risk. This, in turn, puts downward pressure on borrowing costs (as risk spreads narrow) and will lead to further easing of bank lending standards. Together, these conditions will help boost nonresidential fixed investment to growth of 5.8% this year and 6.3% next year.

Inventory investment is expected to firm this year. Strong growth of final sales last year—an average of 2.9% per quarter—and weak inventory investment led to declines in the aggregate inventory-to-sales ratio to a level that we think is suboptimal. To prevent further declines in the aggregate inventory-to-sales ratio, inventory investment is expected to jump from $15 billion last year to $65 billion this year and $80 billion in 2019. That is, inventory investment is expected to switch from a source of drag last year to a source of growth.

Business investment outlook

(Percent change, annual rate) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 Real gross private nonres. investment 4.7 6.8 5.4 5.4 6.4 6.6 4.7 5.8 6.3 4.5

Equipment 10.8 11.5 4.8 5.3 8.6 9.1 4.8 7.9 8.1 5.7

Information processing equipment 10.9 8.5 6.1 7.7 9.5 8.7 7.6 8.3 6.9 4.2

Industrial equipment 7.6 4.6 11.3 18.8 12.3 13.1 7.1 11.2 10.7 6.3

Transportation equipment 14.9 15.7 -1.3 -8.4 1.8 8.5 -0.3 3.3 3.8 1.0

Other equipment 9.2 18.3 4.1 6.5 11.7 6.4 5.3 9.4 12.0 11.9

Intellectual property products 5.2 0.8 5.1 4.1 3.9 4.1 3.9 3.8 3.9 2.9

Research & development 3.2 3.5 5.7 4.0 3.7 3.6 3.0 4.0 3.9 2.1

Software 8.2 -2.2 5.0 4.7 4.3 4.6 5.1 3.9 4.1 3.8

Entertainment, artistic, and literary originals 0.5 3.8 3.1 2.1 3.4 3.8 2.5 2.6 3.7 2.9

Nonresidential structures -7.0 6.3 7.0 7.3 5.5 5.2 5.6 4.8 5.9 4.3

Buildings & other -14.2 4.9 8.4 3.1 7.6 8.2 0.1 2.7 8.3 5.9

Power & communications -9.0 -2.2 -6.7 9.4 0.4 0.1 -5.9 -2.5 3.0 -4.1

Mining & petroleum 22.6 18.4 16.9 19.0 1.7 0.4 58.2 19.0 1.3 8.2

Source: IHS Markit

Labor markets February was a great month for job growth, but March was anemic. The average of the two was a solid gain. The unemployment rate held steady again, at 4.1%, with declines in both payrolls and the labor force after large February jumps. The outlook for 2018 job gains has been boosted by tax cuts and the budget deal, with solid growth expected in 2019 as well. However, demographics take over thereafter and job gains cool. Issue to watch: What slack there is in the labor markets will fade fast as the expected robust job gains of 2018 and 2019 materialize. The labor market must transition to boosting output with much slower payroll gains. So far, progress on boosting output per hour has been slow, although productivity remains in the black; it needs to improve soon unless labor-force growth improves.

With the weak March payroll growth and a 50,000-net downward revision to the January and February gains, the first-quarter monthly average fell short of the April forecast, but exceeded the March forecast. The first-quarter tally was 616,000—the best quarterly increase since the summer of 2016. With real GDP set to rise 2.8% this year (fourth quarter-to-fourth quarter basis), up from 2.6% last year, annual job growth should pick up from 2.2 million last year to 2.8 million this year, before the deceleration begins.

The labor market is telling the same story that we have been anticipating. With a 4.1% jobless rate, the United States is close to its full employment. There is still room for the labor-force participation rate to climb from the 62.9% recorded in March back toward 63.3%, but future labor-force growth depends on demographics, as well as a battle between falling participation rates by the young and rising rates by those over 65 years old.

The unemployment rate falls to 3.6% next year, but what the US economy really needs is for productivity gains to firm up. We expect that this improvement will materialize in the next three years; without this, something will have to give, like longer workweeks, higher participation rates, or reduced GDP growth. A portion of this improvement is from an "up-skilling" of workers, or better matches in people's job skills with available jobs in a full-employment job market, rather than one with legacy under-skilling (i.e., people overqualified for their jobs) left over from the recession. In short, the labor market is moving after nearly a decade from a buyers' market for to a sellers' market, and businesses will need to adapt. Nevertheless, payroll gains will need to cool.

Employment outlook

(Percent change, annual rate) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 Employment - total nonfarm payrolls 1.5 1.5 1.9 1.7 1.9 2.0 1.6 1.7 1.7 1.0

Average monthly change (thousands) 184 185 230 211 235 250 190 210 214 131

Employment - construction 1.7 4.3 7.6 3.6 2.3 3.5 3.4 4.2 4.2 4.4

Employment - manufacturing 1.1 2.3 2.8 2.0 2.7 1.7 0.7 2.1 1.4 0.8

Employment - private service providing 1.8 1.6 1.7 1.8 2.0 2.2 1.8 1.8 1.8 0.7

Unemployment rate (level) 4.3 4.1 4.1 4.0 3.9 3.8 4.4 3.9 3.6 3.6

Employment - household survey 1.8 0.4 2.4 1.2 1.9 2.1 1.3 1.6 1.6 1.0

Civilian labor force 1.7 -0.5 2.5 0.6 1.6 1.6 0.7 1.2 1.3 1.1

Manhours in private nonfarm establishments 1.5 2.1 2.1 2.1 2.6 2.7 1.8 2.2 2.2 1.0

Nonfarm productivity 2.6 -0.0 -0.4 1.4 1.2 1.0 1.2 0.8 1.2 1.3

Source: IHS Markit

Inflation

Inflation The consumer price index (CPI) fell 0.1 point in March, driven by a plunge in gasoline, while the core CPI rose 0.2%; 12-month growth of the core CPI jumped 0.2 point to 2.1% year on year (y/y). The producer price index (PPI) for final demand climbed 0.3% in March, and the core measure also increased 0.2 point, to 2.7% y/y; goods and services prices both advanced. The growth rate of the personal consumption expenditure (PCE) deflator increased by 0.1 point to 1.7% y/y in February, and growth of the core PCE inflation rate added 0.1 point to reach 1.6% y/y. Our forecast is for core PCE prices to rise at a 2.5% annual rate in the first quarter and 2.1% for each of the following four. Our forecast now calls for core PCE inflation to breach the Federal Reserve's 2% target on a sustained basis this year. Issue to watch: Although the March employment report was generally disappointing, the 12-month increase of average hourly earnings rose 0.1 percentage point to 2.7%. Combining this with private hours and factoring in our estimate of government wages and salaries, the report points to growth of wage-and-salary income in the first quarter of 6% or better.

Core personal consumption expenditure (PCE) inflation is picking up. We view consumer price inflation as largely determined by well-anchored inflation expectations, recent past inflation, relative changes in energy and nonenergy import prices, and economic slack. Further tightening in labor and product markets will contribute to additional firming in both wage and price inflation, including a modest overshoot of the Federal Reserve's explicit 2% inflation target. Our forecast is for core PCE prices to rise at a 2.5% annual rate in the first quarter—faster than the 2.0% objective due to residual seasonality and a one-off increase in healthcare costs—and to mark up a 2.1% gain for each of the following four quarters. In year-on-year terms, core PCE inflation breaches the 2% target in late second quarter and onward. Although it increased a tame 1.5% in 2017, we expect it to rise 2.0% in 2018, 2.2% in 2019, and 2.3% in 2020. The headline index, which includes food and energy, will rise 2.4% in 2020, boosted by projected double-digit gains in energy prices. The rise in the employment cost index is expected to pick up from 2.5% in 2017 to 3.3% in 2019 and then 3.7% by 2021.

Inflation outlook

(Percent change, annual rate) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 CPI 2.1 3.3 3.6 1.2 1.9 1.1 2.1 2.3 1.7 2.9

Core CPI 1.8 2.2 3.0 2.3 2.4 2.3 1.8 2.3 2.4 2.5

Core PCE deflator 1.3 1.9 2.5 2.1 2.1 2.1 1.5 2.0 2.2 2.3

PPI - finished goods 1.6 5.9 3.5 0.7 1.2 0.2 3.2 2.5 1.0 2.9

Brent crude (spot price, $/bbl) 52 62 67 64 64 60 55 64 57 66

ECI - compensation 3.1 1.9 3.3 2.6 3.1 3.3 2.5 2.8 3.3 3.5

Nonfarm compensation per hour 3.6 2.4 3.7 2.5 2.7 3.0 1.6 2.8 3.2 4.1

Nonfarm productivity 2.6 -0.0 -0.4 1.4 1.2 1.0 1.2 0.8 1.2 1.3

Unit labor costs 1.0 2.5 4.1 1.1 1.4 1.9 0.4 2.0 2.0 2.8

Source: IHS Markit

Exchange Rates In inflation-adjusted terms, the dollar nudges back up to a high in the third quarter of 2019, followed by a steady decline through the end of the forecast period.

We assume the dollar will partially reverse its recent decline and nudge up slightly to a high in the third quarter of 2019, yet remain 3.4% below the 2017 average. This will be followed by a steady decline through the end of the forecast period, resulting in a 6.4% drop by the end of 2028.

Selected average exchange rates

2017 2018 2019 2020 Brazilian reais per dollar 3.19 3.33 3.53 3.71

Canadian dollars per US dollar 1.30 1.25 1.25 1.23

Chinese yuan per dollar 6.76 6.37 6.49 6.70

Euros per dollar 0.89 0.82 0.83 0.81

UK pounds per dollar 0.78 0.71 0.71 0.69

Japanese yen per dollar 112.18 106.71 111.64 112.78

Mexican pesos per dollar 18.92 19.15 18.91 19.20

Exchange Rate and CPI Tables

Policy Monetary policy

We expect a total of four interest rate hikes by the Federal Reserve over 2018, with additional hikes in following years that bring the upper end of the funds rate target range to 3.5% by 2020. Federal Open Market Committee (FOMC) members recently revised up their forecasts, the median of which now shows the target funds rate rising to 3.5% in 2020, as in our forecast. Strong economic growth, tight labor markets, fiscal stimulus (from the recently enacted tax cut and Bipartisan Budget Act), and a soft dollar (that could result in upward pressure on prices) are consistent with our forecast for multiple Fed rate hikes over the next few years. Futures have priced in a lower path for the funds rate, suggesting more upward pressure on bond yields as the Fed continues to raise the funds rate gradually.

Our forecast for several rate hikes over the next few years is wholly consistent with our expectation for solid, above-trend GDP growth that pushes the unemployment rate down close to the mid-3% range in 2019, more than a percentage point below the Congressional Budget Office's estimate of the long-term unemployment rate consistent with full employment (the nonaccelerating inflation rate of unemployment) of 4.7%. Tight labor markets will generate gradually rising inflationary pressures, aided by stable long-run inflation expectations. Furthermore, recent increases in energy prices and a softer dollar that put upward pressure on nonenergy import prices also contribute to inflationary pressures in the forecast. As a result, we expect core personal consumption expenditure (PCE) inflation, which excludes the direct effects of movements in food and energy prices, to reach 2.0% this year and remain above 2.0% through 2020. This is above the Federal Open Market Committee's (FOMC) 2.0% inflation target. Tight labor markets and 2%-plus inflation are consistent with our expectation that the federal funds rate target will be pushed above its longer-run anchor within the next two years.

Trading in fixed-income markets suggest that investors have not fully priced in the tightening in short-term interest rates that we and the FOMC expect is likely to occur over the next few years. As markets respond to actual rate hikes and expectations of more to come, this will reinforce upward pressure on bond yields. Term premia will also be pushed up in response to higher inflation premia and balance-sheet shrinkage by the Federal Reserve. We expect the 10-year Treasury note yield, which was trading near 2.80% as this forecast was being prepared, will rise to about 3.70% in 2020.

There are risks to both sides of our forecast for interest rates. Equities suffered a bout of indigestion in early February. Although some of those declines have been reversed, volatility remains elevated, and the risk of another round of softening in equities lingers as bond yields continue to trend higher. However, major new fiscal stimulus (including from the Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act) will boost demand and reinforce increases in inflation and interest rates. The effects from these fiscal initiatives is estimated with significant uncertainty, so there is risk that they could be larger than currently anticipated.

Monetary policy outlook

(Percent) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 Federal funds rate 1.15 1.20 1.45 1.72 1.93 2.20 1.00 1.82 2.77 3.33

2-year Treasury note yield 1.36 1.70 2.16 2.40 2.67 2.94 1.40 2.54 3.37 3.69

10-year Treasury note yield 2.24 2.37 2.76 2.92 3.09 3.24 2.33 3.00 3.49 3.68

30-year fixed mortgage rate 3.89 3.92 4.27 4.50 4.64 4.77 3.99 4.54 5.04 5.30

Core PCE deflator (year-on-year percent change) 1.4 1.5 1.7 2.0 2.2 2.2 1.5 2.0 2.2 2.3

Core CPI (year-on-year percent change) 1.7 1.7 1.9 2.3 2.5 2.5 1.8 2.3 2.4 2.5

Real GDP (percent change, annual rate) 3.2 2.9 1.7 3.0 3.2 3.2 2.3 2.7 2.9 2.1

Unemployment rate (level) 4.3 4.1 4.1 4.0 3.9 3.8 4.4 3.9 3.6 3.6

Source: IHS Markit

Fiscal policy

On 23 March, the president enacted the Consolidated Appropriations Act of 2018 (CAA18). This was anticipated under the previously enacted Balanced Budget Act of 2018 (BBA18), and so had no impact on either our fiscal assumptions or the forecast. On 9 March the president announced tariffs on imports (25%) of steel and aluminum (10%), effective 23 March. These tariffs, which are included in the forecast, will raise only small amounts of revenue and have little impact on the macroeconomic outlook. The president is also threatening to impose tariffs on $150 billion of imports from China. These tariffs are not included in the forecast but would be a larger, more disruptive fiscal event. We assume the personal provisions of the Tax Cuts and Jobs Act (TCJA) and the fiscal year (FY) 2019 level of budget authority enacted under the BBA18 are extended . Under our assumptions, the taxing and spending policies of federal and state and local government add about 0.75 percentage point to real GDP growth averaged over 2018–19.

Since last fall, two major fiscal legislations have been enacted. First was the TCJA, costing $1.5 trillion over 10 years before economic effects. Second was the BBA18, costing nearly $400 billion over 10 years. Consequently, since the fall we have downgraded our projections for federal deficits and debt. We now see federal net saving, as measured in the National Income and Product Accounts, falling from -$0.7 trillion in FY 2017 (3.4% of GDP) to -$1 trillion by 2020 (4.5% of GDP). The next Budget and Economic Outlook from the Congressional Budget Office (CBO), due out 9 April, will be the first to reflect the TCJA and the BBA18. Although the CBO is required by law to assume provisions of the TCJA sunset as scheduled, and that a sequestration of budget authority occurs in 2020, we do expect the report to show fiscal projections qualitatively similar to ours, significantly worse than in CBO’s last report published in June 2017, and a powerful indication that current policies on taxes and spending are not indefinitely sustainable.

Government outlook

(Billions of dollars) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 Federal, fiscal year

Total receipts 807 770 740 1,008 848 820 3,315 3,365 3,498 3,706

Year-on-year percent change 1.1 3.9 1.0 -2.5 5.0 6.5 1.5 1.5 4.0 5.9

Budget outlays 950 994 1,033 1,004 1,069 1,077 3,981 4,101 4,386 4,610

Year-on-year percent change -3.5 4.6 -1.5 -2.6 12.5 8.3 3.3 3.0 7.0 5.1

Unified deficit -143 -225 -294 4 -221 -258 -666 -736 -888 -904

Percent of GDP -2.9 -4.6 -5.9 0.1 -4.3 -5.0 -3.5 -3.7 -4.2 -4.1

State and local, calendar year

Current receipts (annual rate) 2,503 2,548 2,561 2,586 2,616 2,645 2,490 2,602 2,714 2,842

Year-on-year percent change 2.6 3.6 3.9 5.7 4.5 3.8 3.1 4.5 4.3 4.7

Current expenditures (annual rate) 2,677 2,703 2,727 2,746 2,769 2,796 2,669 2,760 2,862 2,983

Year-on-year percent change 2.9 3.2 3.1 3.6 3.4 3.4 3.3 3.4 3.7 4.2

Net saving (annual rate) -174.8 -155.6 -166.6 -159.1 -153.3 -151.6 -178.8 -157.7 -147.7 -140.5

Percent of GDP -0.9 -0.8 -0.8 -0.8 -0.7 -0.7 -0.9 -0.8 -0.7 -0.6

Source: IHS Markit

External sector Net exports are expected to cut 0.88 percentage point off first-quarter GDP growth, after trimming 1.16 percentage points in the previous quarter. Tariff announcements by the United States and China increase the risk of escalating trade protectionism. That is not currently our forecast, given the mutual and entangled interests of the two countries.

After 3.2% growth in 2017, world real GDP growth is projected to increase 3.4% in both 2018 and 2019 before decelerating. This forecast is unchanged. Financing the projected deficits associated with the two recently passed bills will drive the exchange rate up this year, widening the current-account deficit through 2020. Issue to watch: A trade war remains a concern.

Net exports are expected to cut 0.88 percentage point off first-quarter GDP growth, after trimming 1.16 percentage points in the previous quarter. The real trade-weighted exchange rate has dropped 1.5% this year, after falling 6.5% in 2017. Financing the projected deficits associated with the two recently passed bills will drive it up this year, widening the current-account deficit through 2020. After 3.2% growth in 2017, world real GDP growth is projected to increase 3.4% in both 2018 and 2019 before decelerating. This forecast is unchanged. The Import price index increased at 5.9% annual rate in the first quarter, following a 6.6% fourth-quarter rise. The index that excludes fuel rose at a 3.2% annual rate (strongest gain since the second quarter of 2011), while the index for consumer imports edged up 1.1% (the strongest gain since the first quarter of 2014). In recent years, Fed policymakers have assumed that import prices, which declined from mid-2014 to early 2016 because of the strong dollar, would eventually play a role in bringing PCE inflation above 2.0%. These assumptions may prove to be true.

International trade outlook

(Percent change, annual rate) Quarterly Years

2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2017 2018 2019 2020 Real exports 2.1 7.0 1.7 4.7 6.7 6.8 3.4 4.3 6.3 6.1

Goods 1.8 11.6 2.9 5.8 6.1 5.6 4.5 5.4 5.2 5.3

Services 2.5 -1.4 -0.7 2.4 8.0 9.2 1.3 2.2 8.7 7.5

Real imports -0.7 14.1 6.8 5.1 6.6 6.3 4.0 6.5 6.8 6.7

Goods -0.2 17.3 7.1 6.4 7.0 6.7 4.3 7.4 7.4 7.5

Services -2.6 1.1 5.5 -0.8 4.5 4.7 2.5 2.1 3.9 3.0

Exchange rate - broad index of trading partners -12.8 3.3 -7.8 2.1 1.4 1.2 -0.3 -3.0 1.1 -0.1

Exchange rate - major currency trading partners -18.7 2.8 -11.9 1.2 0.0 1.8 -0.6 -5.2 0.9 -2.5

Exchange rate - other important trading partners -8.1 3.7 -4.8 2.8 2.3 0.8 -0.1 -1.4 1.3 1.6

Trade balance (billion dollars, annual rate) -541 -616 -693 -709 -697 -664 -568 -691 -618 -634

Current-account balance (billion dollars, annual rate) -406 -513 -591 -618 -619 -609 -466 -609 -610 -667

Percent of GDP -2.1 -2.6 -3.0 -3.1 -3.0 -2.9 -2.4 -3.0 -2.8 -3.0

Source: IHS Markit

Monthly Forecast Update Tables

Detailed Quarterly Forecast Tables

Monthly Economic Outlook PDF

Quarterly Economic Outlook PDF

Near-term outlook

Key indicators and forecasts

United States: Key indicators and forecasts

Historical data edge 2014 2015 2016 2017 2018 2019 2020 2021

Real GDP and its components (percent change)

Gross domestic product 2017 2.6 2.9 1.5 2.3 2.7 2.9 2.1 1.7

Domestic demand 2017 2.7 3.5 1.7 2.4 3.1 3.1 2.3 1.8

Exports of goods & nonfactor services 2017 4.3 0.4 -0.3 3.4 4.3 6.3 6.1 4.9

Imports of goods & nonfactor services 2017 4.5 5.0 1.3 4.0 6.5 6.8 6.7 5.0

Real per-capita GDP 2017 1.8 2.1 0.8 1.5 1.9 1.9 1.3 1.1

Nominal GDP (billions of current US dollars)

Gross domestic product 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 23,451

Domestic demand 2017 17,937 18,645 19,146 19,962 21,000 22,038 23,095 24,066

Exports of goods & nonfactor services 2017 2,374 2,265 2,215 2,344 2,517 2,710 2,927 3,134

Imports of goods & nonfactor services 2017 2,883 2,789 2,736 2,916 3,193 3,312 3,543 3,748

Nominal per-capita GDP 2017 54,601 56,372 57,542 59,496 61,897 64,819 67,494 69,923

Prices (percent change)

GDP deflator 2017 1.8 1.1 1.3 1.8 2.0 2.5 2.7 2.6

Consumer price index 2017 1.6 0.1 1.3 2.1 2.3 1.7 2.9 2.5

Wholesale price index 2017 0.9 -7.2 -2.6 4.4 3.7 0.7 2.6 1.7

Terms of trade 2016 0.3 3.1 1.3 -0.1 3.0 3.7 2.1 1.7

Other indicators

Industrial production (percent change) 2017 3.1 -1.0 -1.9 1.6 3.9 3.3 2.1 1.5

Retail sales (percent change) 2017 2.5 2.5 1.7 2.4 1.5 2.1 1.8 1.4

Unemployment rate (percent) 2017 6.2 5.3 4.9 4.4 3.9 3.6 3.6 3.7

Population (millions) 2017 319.2 321.5 323.7 325.9 328.3 330.7 333.1 335.4

Percent change 2017 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7

Exchange rate (year end, per USD) 2017 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Percent change 2017 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Broad money supply (percent change) 2017 5.8 5.7 7.3 4.8 2.7 2.7 2.5 3.0

Fiscal balance (percent of GDP) 2016 -3.8 -3.4 -4.0 -4.5 -4.9 -5.3 -5.2 -5.2

Policy interest rate (percent per annum) 2017 0.12 0.24 0.54 1.30 2.29 3.01 3.44 3.45

Short-term interest rate (percent per annum) 2016 0.03 0.05 0.32 0.93 1.83 2.58 3.07 3.17

Long-term interest rate (percent per annum) 2017 2.54 2.14 1.84 2.33 3.01 3.49 3.68 3.71

Source: IHS Markit

Forecast assumptions Global

Our US forecast incorporates the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018. We assume the level of appropriations is extended to prevent a sharp fiscal contraction in fiscal year 2020 and that personal tax cuts are made permanent rather than expiring in 2026. Our forecasts incorporate US import tariffs of 25% on steel and 10% on aluminum, but after allowing for exemptions their macroeconomic impacts are small. Announced tariffs between the United States and China that have not yet been implemented are not in the forecast. As the US unemployment rate falls below 4.0% and inflation picks up, interest rates will rise. The upper bound of the US federal funds rate target is expected to increase from 1.50% currently to a high of 3.50% in mid-2020. It subsequently retreats to its long-run equilibrium rate of 2.75% in the mid-2020s. IHS Markit expects the European Central Bank (ECB) to leave its policy rate at zero until December 2019 and then gradually raise it to a long-term equilibrium of 3.00% by the end of 2022. The Bank of England is expected to increase its policy rate to 0.75% in May and 1.00% in August; it reaches a long-run level of 3.50% in 2022. We expect a modest appreciation of the US dollar through mid-2019 as US bond yields rise and the tax changes attract capital inflows. Then, as other central banks withdraw monetary accommodation, the dollar will depreciate moderately in the medium term. The euro is expected to edge down to USD1.20 in spring 2019 before rising to USD1.30 by the end of 2024. Rapidly rising US shale oil production will lower the price of Dated Brent from USD64/barrel in 2018 to USD57 in 2019. The real price of Brent in 2017 US dollars is expected to stabilize at USD70/barrel in 2030. In the near term, slower industrial growth in China, adequate global supplies, and tightening financial markets should restrain prices of industrial materials. In the long run, we expect mild inflation in materials prices.

Brexit negotiations between the United Kingdom and European Union are expected to result in a free-trade agreement, alongside some industry-specific agreements on access to the single market. Since a comprehensive agreement is unlikely to be finalized by March 2019, there will be a multiyear transition period. With President Xi Jinping’s tenure potentially prolonged, China’s economic development strategy will remain a top-down, state-led one. The central government is expected to take a gradual approach to structural reforms. Japan will raise its consumption tax from 8% to 10% in October 2019. Buy-in-advance purchases give way to a pullback in spending in late 2019.

Global forecast assumptions

2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 Brent crude-oil price (USD/barrel) 50.94 52.17 61.57 66.91 63.67 64.33 60.33 57.00 56.00

US federal funds rate (percent) 111.06 111.01 112.95 108.20 105.13 105.88 107.68 109.59 111.26

ECB refinancing rate (percent) 0.25 0.25 0.50 0.50 0.75 1.00 1.00 1.00 1.25

US dollar per euro (quarter average) 1.10 1.17 1.18 1.23 1.23 1.22 1.21 1.21 1.20

Yen per US dollar (quarter average) 1.04 1.15 1.30 1.51 1.80 2.01 2.29 2.54 2.81

Source: IHS Markit

Medium- and long-term outlook

United States: National income accounts

Average level or Historical compound growth data edge 2014 2015 2016 2017 2018 2019 2020 2021-26 2021-47

Billions of current local currency units

Gross domestic product 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 25,984 41,374

Domestic demand 2017 17,937 18,645 19,146 19,962 21,000 22,038 23,095 26,571 42,270

Private consumption 2017 11,864 12,332 12,821 13,396 14,014 14,655 15,379 17,846 28,971

Government consumption 2017 2,563 2,611 2,658 2,732 2,846 2,964 3,076 3,455 5,025

Fixed capital formation 2017 3,433 3,590 3,632 3,819 4,068 4,329 4,567 5,217 8,183

Change in inventories 2017 -0.1 0.2 -0.4 -0.1 0.3 0.1 -0.1 0.0 0.0

Net exports 2017 -509.5 -524.0 -521.2 -571.6 -676.1 -602.1 -615.6 -587.7 -913.4

Exports of goods & nonfactor services 2017 2,374 2,265 2,215 2,344 2,517 2,710 2,927 3,637 6,218

Imports of goods & nonfactor services 2017 2,883 2,789 2,736 2,916 3,193 3,312 3,543 4,225 7,131

Percent change at constant prices

Gross domestic product 2017 2.6 2.9 1.5 2.3 2.7 2.9 2.1 1.7 1.9

Domestic demand 2017 2.7 3.5 1.7 2.4 3.1 3.1 2.3 1.6 1.9

Private consumption 2017 2.9 3.6 2.7 2.8 2.5 2.7 2.4 2.0 2.1

Government consumption 2017 -0.5 1.3 1.0 0.1 1.4 1.6 0.5 0.2 0.5

Fixed capital formation 2017 4.8 3.5 0.6 3.4 4.6 5.2 3.6 1.4 2.0

Change in inventories (contrib. to growth) 2017 -0.1 0.2 -0.4 -0.1 0.3 0.1 -0.1 0.0 0.0

Net exports 2017 -5.6 -27.5 -7.5 -6.1 -13.9 -8.2 -8.7 -0.3 -2.3

Exports of goods & nonfactor services 2017 4.3 0.4 -0.3 3.4 4.3 6.3 6.1 3.9 3.5

Imports of goods & nonfactor services 2017 4.5 5.0 1.3 4.0 6.5 6.8 6.7 3.1 3.2

Billions of current US dollars

Gross domestic product 2017 17,428 18,121 18,624 19,391 20,324 21,436 22,479 25,984 41,374

Domestic demand 2017 17,937 18,645 19,146 19,962 21,000 22,038 23,095 26,571 42,270

Private consumption 2017 11,864 12,332 12,821 13,396 14,014 14,655 15,379 17,846 28,971

Government consumption 2017 2,563 2,611 2,658 2,732 2,846 2,964 3,076 3,455 5,025

Fixed capital formation 2017 3,433 3,590 3,632 3,819 4,068 4,329 4,567 5,217 8,183

Change in inventories 2017 78.0 111.9 35.1 15.7 72.5 89.1 73.2 53.5 90.4

Net exports 2017 -509.5 -524.0 -521.2 -571.6 -676.1 -602.1 -615.6 -587.7 -913.4

Exports of goods & nonfactor services 2017 2,374 2,265 2,215 2,344 2,517 2,710 2,927 3,637 6,218

Imports of goods & nonfactor services 2017 2,883 2,789 2,736 2,916 3,193 3,312 3,543 4,225 7,131

Source: IHS Markit

United States: Inflation and financial indicators

Average level or Historical compound growth data edge 2014 2015 2016 2017 2018 2019 2020 2021-26 2021-47

Government finances (billions of LCU)

Revenues 2016 5,233 5,455 5,512 5,582 5,717 5,871 6,188 7,414 8,289

Percent change 2016 4.8 4.2 1.0 1.3 2.4 2.7 5.4 5.0 82.4

Expenditures 2016 5,890 6,079 6,261 6,446 6,706 7,015 7,349 8,694 13,879

Percent change 2016 2.5 3.2 3.0 2.9 4.0 4.6 4.8 4.8 4.1

Balance 2016 -656.6 -624.3 -749.1 -863.6 -989.4 -1,143.6 -1,161.2 -1,280.6 -1,391.5

Percent of GDP 2016 -3.8 -3.4 -4.0 -4.5 -4.9 -5.3 -5.2 -4.9 -3.8

Inflation indicators (percent change)

GDP deflator 2017 1.8 1.1 1.3 1.8 2.0 2.5 2.7 2.4 2.2

Consumer price index 2017 1.6 0.1 1.3 2.1 2.3 1.7 2.9 2.3 2.2

Wholesale price index 2017 0.9 -7.2 -2.6 4.4 3.7 0.7 2.6 1.9 1.6

Export prices 2017 0.0 -5.0 -1.9 2.4 2.9 1.3 1.8 1.9 1.3

Import prices 2017 -0.3 -7.8 -3.1 2.5 2.9 -2.8 0.2 1.6 1.4

Monetary indicators

M1 (billions of LCU) 2017 2,898 3,064 3,343 3,597 3,743 3,847 3,924 4,234 5,570

Percent change 2017 9.9 5.7 9.1 7.6 4.1 2.8 2.0 2.2 2.5

Broad money (billions of LCU) 2017 11,605 12,267 13,163 13,790 14,159 14,541 14,906 16,920 27,147

Percent change 2017 5.8 5.7 7.3 4.8 2.7 2.7 2.5 3.8 4.0

Policy interest rate (percent) 2017 0.12 0.24 0.54 1.30 2.29 3.01 3.44 3.12 2.79

Short-term interest rate (percent) 2016 0.03 0.05 0.32 0.93 1.83 2.58 3.07 2.91 2.57

Long-term interest rate (percent) 2017 2.54 2.14 1.84 2.33 3.01 3.49 3.68 3.66 3.65

Source: IHS Markit

United States: Balance of payments

Average level or Historical compound growth data edge 2014 2015 2016 2017 2018 2019 2020 2021-26 2021-47

Current account (billions of current US dollars)

Current-account balance 2016 -373.8 -434.6 -451.7 -459.4 -505.7 -495.8 -539.5 -490.7 -757.8

Balance on goods 2016 -751.5 -761.9 -752.5 -806.9 -848.4 -833.1 -889.5 -996.2 -1,649.4

Goods, credit (exports) 2016 1,634 1,511 1,456 1,561 1,725 1,821 1,941 2,315 3,933

Goods, debit (imports) 2016 2,385 2,273 2,208 2,368 2,574 2,654 2,830 3,312 5,634

Balance on services 2016 261.2 261.4 247.7 243.7 273.4 346.6 416.4 599.1 1,119.6

Services, credit (exports) 2016 741.9 753.2 752.4 777.6 831.0 926.7 1,021.0 1,298.7 2,441.1

Services, debit (imports) 2016 480.8 491.7 504.7 533.9 557.6 580.0 604.7 699.6 1,247.7

Balance on primary income 2016 210.8 181.0 173.2 217.1 196.7 123.3 72.1 62.7 -10.5

Primary income, credit 2016 817.3 783.0 814.0 918.5 972.8 988.4 1,014.3 1,208.2 1,928.8

Primary income, debit 2016 606.6 602.0 640.8 701.3 776.1 865.1 942.1 1,145.5 1,862.5

Current-account balance (% of GDP) 2016 -2.1 -2.4 -2.4 -2.4 -2.5 -2.3 -2.4 -1.9 -1.8

Capital account (billions of current US dollars)

Balance on capital account excl. reserves 376.5 449.8 491.0 444.1 453.5 548.8 646.0 866.0 1,607.8

Net direct investment 2016 -136.1 30.8 41.7 -33.2 -34.0 -1.6 39.6 108.0 305.0

Net incurrence of liabilities (inflow) 2016 207.4 379.4 333.8 251.4 280.9 321.3 359.3 414.3 575.7

Net acquisition of financial assets (outflow) 2016 343.4 348.6 292.1 284.6 314.9 322.9 319.7 306.3 270.7

Net portfolio investment 2016 119.2 97.0 339.4 596.3 557.8 546.0 525.1 558.2 786.1

Net incurrence of liabilities (inflow) 2016 701.9 250.9 402.3 648.7 684.0 730.0 750.9 776.2 918.5

Net acquisition of financial assets (outflow) 2016 582.7 154.0 62.9 52.5 126.2 184.0 225.8 218.0 132.4

Net other investment 2016 246.3 35.8 108.3 -118.9 -70.3 4.4 81.3 199.8 516.7

Net incurrence of liabilities (inflow) 2016 147.1 -235.1 381.6 193.3 221.9 261.2 301.4 373.1 621.0

Net acquisition of financial assets (outflow) 2016 -99.2 -270.9 273.4 312.2 292.1 256.8 220.1 173.3 104.3

Reserves, related items (change in reserves) -15.3 -13.1 5.2 1.3 1.1 1.2 1.2 1.2 0.5

Source: IHS Markit

Business environment: Legal: Overview

Contract enforcement The United States is a common-law jurisdiction based on precedent with contractual, tort, trust and land laws adapted from early English law, with the US Supreme Court as the ultimate arbiter. The court system also has a well-developed arbitration process, the cornerstone of which is the Federal Arbitration Act (FAA). The FAA ensures that agreements to arbitrate are enforced by requiring courts to compel arbitration if a party to an arbitration agreement refuses to arbitrate and to stay proceedings where a valid arbitration agreement exists. Confiscation and enforcement risks are not an issue, as the judiciary is independent and tends to be fair in settling contract disputes and enforcing its rulings. Statutory federal law will normally prevail over state and local rules, but often regulates the same subjects without conflict and therefore both sets of law apply. Crucially, state law may still have a significant effect on land, contractual, tax, and environmental issues and is therefore a major consideration when choosing a location for investment. Rarely, contracts will be altered or cancelled for reasons of national security or in response to anti-trust considerations.

Expropriation risks During former president Barack Obama's administration, some financial-service providers and auto manufacturers were essentially nationalised following the 2008 financial crisis, but this was to rescue them rather than to bring their assets under state control, and the government has since sold its shares. As in most developed countries, the federal government is empowered to acquire property for public use on a mandatory basis under the concept of eminent domain, but appropriate compensation must be furnished. President Donald Trump has not advocated for any major policy changes here.

Key indicators - regulation and contracts

Doing business indicators 2014 OECD avg.

Average time to clear customs* (days) NA NA

Trade facilitation, lead time (days)

Import 5.4 9.6

Export 6.0 10.5

Enforce a contract

Time required (days) 420.0 539.5

Number of procedures 33.6 31.5

Start a business

Time required (days) 5.6 9.2

Number of procedures 6.0 4.8

Registration of property

Time required (days) 15.2 9.6

Number of procedures 4.4 4.7

Time to resolve insolvency (years) 1.5 1.7

Taxation indicators

Highest marginal tax rate** (percent)

Corporate 40.0 NA

Individual 35.0 NA

Time to prepare and pay taxes (hours) 175.0 175.4

Tax payments, number 10.6 11.8

* Latest available: NA

** Latest available: 2009

Source: World Bank

Tax: Overview

Taxation risks Delivering on a major item on his policy agenda, in December 2017, President Donald Trump signed what is viewed as the most significant tax overhaul in three decades. The Tax Cuts and Jobs Act reduced corporate taxes from 35% to 21%. The bill moved away from a worldwide taxation system on earned income for domestic corporations, shifting to a territorial system. The bill encouraged repatriation of overseas capital by domestic firms, providing for a one-time tax of 15.5% on cash and liquid assets and 8% on illiquid assets. Republicans are hoping that cutting corporate taxes will drive job creation and boost economic growth ahead of the 2018 mid-term elections. After a slew of mergers between US and foreign companies to reduce their taxes, the Obama administration launched an effort to crack down on tax inversions via federal regulations from the Treasury Department. Individual tax rates continue to be divided into seven income brackets, with some individuals across all brackets seeing their taxes reduced on a temporary basis. The bill also raised the standard deduction for both individuals and couples.

Rates snap-shot

Tax s nap- s hot

Corporate % Notes

Corporate income tax rate

21 Flat rate. In addition, many states levy income or capital-based taxes. An alternative minimum tax (AMT) is imposed.

Capital gains tax rate

35 -

Branch rate tax 35 -

Withholding tax - -

dividends 30 Applicable to payments to non-residents.

Interest 30 -

Royalties from patents, know-how etc.

30 -

Branch remittance tax

30 This is the branch profits tax.

Net operating losses (years)

- -

Carry-back 2 Special rules apply to certain types of losses and entities.

Carry-forward 20 -

Personal income tax (2012bands)

% Notes

Top rate: earnings above USD388,350

35 Rates for single individuals

Earnings between USD178,650 andUSD388,350

33 -

Earnings between USD85,650 andUSD178,650

28 -

Earnings between USD35,350 andUSD85,650

25 -

Earnings between USD8,700 andUSD35,350

15 -

10 -

Earnings below USD8,700

Source: Ernst & Young, US Internal Revenue Service (IRS)

Operational: Overview Foreign investment is welcomed, although a recent trend towards trade protectionism increases uncertainty around existing trade agreements. President Donald Trump's immigration policy raises the likelihood of firms facing difficulties in securing visas for foreign employees. Corruption levels remain modest. Environmentalist movements have become more active recently, particularly around pipelines in western states. There have been limited labour strikes around minimum wage levels. Trump has indicated that he would look to make a significant investment in infrastructure and has lifted some barriers to certain energy projects on federal land and offshore.

Labour relations risks Unions and labour unrest are focused on a few industries such as the aviation, marine, and automotive industries. Union membership remains much higher among public-sector workers (34.4% in 2016) than in the private sector (6.4%). However, a Supreme Court case will be decided by June 2018 that will make it easier for public employees to refrain from paying union dues, which could diminish the existing gap. Strikes are relatively rare, and the president reserves special authority to delay the action if he believes it would be disruptive or against the public interest, most often when dealing with strikes involving logistics and transportation, such as ports or airlines. However , the fact that companies will usually provide alternative services in the event of an action, ensures that disruptions are normally not extensive for most industries. Employers can either voluntarily recognise unions, or be forced to do so by a majority of workers in a "bargaining unit". Employees can only be union members under one of these two scenarios. The government must also certify organisations as legitimate unions. Once a union has won the right to represent employees in a particular workplace it generally has sole authority to negotiate conditions of employment. In the public sector, regulation of unions varies by state. Most model their approaches on the National Labor Relations Act (NLRA), which guarantees the right to unionise, to collective bargaining, and to strike. Traditionally, the dominant union federation in the US has been the American Federation of Labor-Congress of Industrial Organizations (AFL-CIO). This umbrella organisation wields considerable political influence and campaigns for worker-favourable policies.

Corruption risks Allegations of political corruption abound in the United States, but primarily due to the dynamism of US investigative journalism, so such threats should be kept in perspective. The prevalence of interest groups, which lobby politicians and support political campaigns to gain the measures they desire, is an explicit feature of US political life and undoubtedly contributes to these accusations. However, in light of an easing of campaign finance regulation by the Supreme Court in its 2008 decision, Citizens United v FEC risks of high-level campaign corruption continue to rise. Corruption scandals highlighted in the press often concern high-level political politicians accepting gifts in exchange for minute changes in legislation that favour individual companies. The penalties for those caught can be severe. President Donald Trump originally proposed stricter lobbying rules, but many of these have been loosened since their initial creation.

Security: War risks: Overview

Interstate war

The risk of the US engaging in a war on its soil is highly unlikely, as is the risk of the US engaging in a conventional war with Russia or China. However, the US continues to be engaged abroad in multiple military deployments, which face potential escalation.

President Donald Trump has announced several plans that signal a likely escalation in foreign US military engagements, such as his decision to grant senior military officials greater freedom to plan and conduct military operations in active war zones. This has already affected ongoing military operations in Somalia and Yemen, as Trump has reportedly approved requests to designate parts of these countries as an 'area of active hostilities', thus granting local commanders increased authority and freedom to conduct raids and drone strikes. The Pentagon has authorised hundreds of additional soldiers to be sent to Iraq, Somalia, and Syria, and thousands more to Afghanistan. Sizeable strikes have been carried out by the US military in Syria, most notably in April 2017 by attacking the Syrian government's Shayrat air base with 59 Tomahawk missiles.

Meanwhile, the US is facing an increased risk of military engagement in Asia. Until recently, when President Donald Trump announced he would be willing to meeting North Korean leader Kim Jong-un, the US had been taking a strident rhetorical line in response to North Korea's continued ballistic missile and nuclear tests. Trump had previously claimed that the US would prevent North Korea from acquiring long-range intercontinental ballistic missiles. China's increased territorial assertiveness, particularly in the dispute over islands in the South China Sea, has also increased the risk of US involvement in armed conflict there. Trump's interest in maintaining access to the South China Sea for US military forces also contributes to the rising risk of conflict. Although the exact mechanism that the US would use to ensure US access remains unclear, it is important to note that the US Navy has continued to carry out its first freedom of navigations patrol under the Trump administration. Finally, Trump's continued animosity

towards the Iranian nuclear agreement also raises the prospect of military strikes against Iran, if only in association with escalating hostilities with that country and US allies like Israel and/or Saudi Arabia.

Terrorism risks: Overview

Hotspots and targets

The most frequent terrorist plots over the past few years have involved low-capability self-radicalised actors inspired by the Islamic State or al Qaeda. The majority of attacks carried out involved firearms – such as the June 2016 mass shooting in Orlando, Florida – or improvised explosive devices, as seen in the September 2016 attacks near New York. Islamist attacks will increasingly involve the use of vehicles as weapons, as seen in the 2016 attack in Columbus, Ohio and 2017 attacks in Charlottesville, Virginia, and New York City. As Islamic State militants have lost control of territory in Syria, the organisation has urged supporters to carry out attacks at home rather than traveling to its territory. Although the nature of recent attacks and plots do not represent increased capabilities, the wide availability of high-caliber firearms in the US significantly increases the odds of success. Social media technologies have also expanded the domestic threat by connecting home-grown jihadist sympathisers with militants abroad, and by making it difficult for local authorities to distinguish between viable and incredible threats. Finally, terrorist threats emanating from individuals returning from Syria/Iraq or Somalia in support of al-Shabaab will almost certainly increase.

The threat posed by right-wing terrorism has increased, with the Anti-Defamation League reporting an 86% increase in the number of anti-Semitic attacks in the first quarter of 2017 and an increase in the number of anti-Islamic hate groups. Reports indicate that white supremacist organisations have become more emboldened since the election of President Donald Trump, targeting members of and venues associated with the African American, Jewish, Muslim, and LGBT communities, as witnessed by the holding of their largest rally in many years in August 2017 in Charlottesville, Virginia. Law enforcement officers and government assets face a risk of attack from right-wing extremists, particularly from members of the patriot, anti-government, and sovereign citizen movements, as seen in the 41-day 2016 occupation of the Oregon Malheur National Wildlife Refuge.

The number of vandalism and arson attacks carried out by environmental and animal rights activists has decreased over the past decade, but these are likely to recur sporadically, particularly in West Coast areas. Following the election of Trump, there also is an increased risk of arson or vandalism against local Republican political sites like county headquarters.

Social stability and unrest risks: Overview

Protests and riots

Demonstrations by individuals associated with white supremacist or other right-wing extremist organisations have become increasingly common, as have counter protests organised by members of the anti-fascist movement. Since 2016, such opposing protests have been seen in Charlottesville (Virginia), Asheboro (North Carolina), Berkeley, Boston, Pikeville (Kentucky), and Sacramento. Participants in these opposing protests have engaged in violence on multiple occasions, including fist fights and stabbings. Police have also faced a risk of being injured during these rallies as they try to separate protesters. Anti-fascists (Antifa) have often been associated with anarchist movements and have developed a reputation for engaging in "direct action" protest tactics. These tactics often involve provoking physical confrontations and damaging property.

The period following the election and inauguration of President Donald Trump has continued to witness demonstrations by those protesting Trump's actions and policies. For instance, there have been protests throughout the US calling for Trump to release his tax returns and for his administration to address climate change. Protests surrounding major policy decisions are likely to continue throughout 2018 and, when held in urban centres, could cause limited property damage to retail outlets, government, and office buildings.

Race relations and police brutality have frequently sparked protests, civil unrest, and violence throughout the US. The Black Lives Matter (BLM) movement formed in 2012 and, over the following years, played a significant role in organising demonstrations protesting police brutality and advocating for improved race relations. However, the number and intensity of BLM movement protests have decreased since the election of Trump, with reports indicating the movement may be focusing instead on engaging in policy efforts and working with other minority groups. However, protests are likely to still form around instances of police brutality and the sentencing of any police officers involved. These protests have the potential to spark riots and to cause road blockages.

Environmental protests are likely at mountaintop coal-mining sites and facilities of mining companies operating in the mid-Atlantic/Appalachian region. Environmental protests against fracking, shale gas development, and major pipeline construction projects have also been on the rise. Protests also may be held in reaction to the Trump administration's environmental policies.

Anti-drone activists continue to hold protests on a regular basis at US Air Force bases across the country to protest the use of drones in military operations. Such protests have been held at Creech Air Force Base in Nevada, Beale Air Force Base in California, and Hancock Air Force Base in New York. Arrests are common during these protests as activists have been known to trespass onto the bases, block the base gates, or block traffic.

Key facts and demographics Area: Total 9,826,675 km ; land 9,161,966 km ; water: 664,709 km2 2 2

Language: English 82.1%, Spanish 10.7%, other Indo-European 3.8%, Asian and Pacific island 2.7%, other 0.7% (2000 census)

Religion: The state is constitutionally barred from favouring a particular religion. Protestant 51.3%, Roman Catholic 23.9%, Mormon 1.7%, other Christian 1.6%, Jewish 1.7%,

Buddhist 0.7%, Muslim 0.6%, other or unspecified 2.5%, unaffiliated 12.1%, none 4% (2007 est.)

Time Zone: GMT -5 to GMT -10

Population: 311,591,917 (US Census Bureau, 2011)

Neighbours

Canada, Mexico

Capital City

Washington, DC

Primary

Ports:

Houston (Texas), Long Beach (California), New York, South Louisiana, Valdez (Alaska)

Primary

Airports:

Dallas/Fort Worth International, Hartsfield Atlanta International (Georgia), JFK International (New York), Miami International, Newark Liberty International (New Jersey),

O'Hare International (Chicago), San Francisco International

Currency: US dollar (USD)

Political system and players Parties and key figures Major parties

The United States essentially has a two-party system. Both parties share a commitment to capitalism and constitutional democracy, and have always done so – a genuinely socialist or authoritarian political party has never won power in the US. A large section of the electorate has no degree of identification with either party, and members of Congress act with far greater independence from party control than they do in many other developed countries, especially those with parliamentary systems.

The Democratic Party

Political stance: The Democratic Party is a centre-left party that tends to be supportive of welfare expenditure and believes that the government has an obligation to provide social and economic programmes. Support base: Democrats tend to be supported by a cross-section of the population with liberal views, and includes significant support from minorities. Recent history: Democrat Barack Obama secured the presidency in 2008 and 2012. Potential future leaders: Corey Booker, Joe Biden, Elizabeth Warren

The Republican Party

Political stance: The Grand Old Party (GOP) is considered to be the more conservative of the two leading parties, with recent incarnations of the party have claimed to oppose big government and have emphasised individualism and private enterprise. Support base: Republican support cuts across the population with significant regional support in the South across the West of the country. Recent history: Donald Trump won the presidency in 2016 and the Republican Party regained control of the House of Representatives in the 2010 mid-term elections and the Senate in 2014. Potential future leaders: Mike Pence, Paul Ryan

Leadership

Title Name Appointed President Donald J. TRUMP 20 Jan 2017

Vice President Mike PENCE 20 Jan 2017

Secretary of the Treasury Steven T. MNUCHIN 13 Feb 2017

Secretary of Defense Gen. (retd) James MATTIS 20 Jan 2017

Secretary of Homeland Security Kirstjen NIELSEN 6 Dec 2017

Attorney General Jeff SESSIONS 9 Feb 2017

Secretary of Labor Alexander ACOSTA 27 Apr 2017

Secretary of the Interior Ryan ZINKE 1 Mar 2017

Secretary of Transportation Elaine L. CHAO 31 Jan 2017

Secretary of Energy James Richard PERRY 2 Mar 2017

Secretary of Health and Human Services Alex AZAR 29 Jan 2018

Secretary of Education Elisabeth (Betsy) Prince DeVOS 7 Feb 2017

Secretary of Commerce Wilbur L. ROSS Jr 28 Feb 2017

Secretary of Agriculture George Ervin 'Sonny' PERDUE III 25 Apr 2017

Secretary of Housing and Urban Development Benjamin S. CARSON Sr 2 Mar 2017

Secretary of Veterans' Affairs (nominated) Adm. Ronny L. Jackson 28 Mar 2018

Secretary of Veterans' Affairs (acting) Robert WILKIE 28 Mar 2018

Director of the Office of Management and Budget (OMB) Mick MULVANEY 16 Feb 2017

Ambassador to the United Nations Nikki R. HALEY 24 Jan 2017

Representative for Trade Negotiations Robert LIGHTHIZER 15 May 2017

Key figures

President Donald Trump

Donald Trump is the 45th president of the United States. The president is the nation's chief executive, responsible for carrying out congressional and federal law. Trump won election to the presidency on 8 November 2016, defeating Democratic challenger Hillary Clinton with 304 electoral-college votes to 227, despite losing the popular vote by two percentage points. He assumed the office on 20 January 2017. Trump is the first businessman elected to the White House without any previous government or military experience.

Trump was born and raised in New York City, the son of a wealthy real estate developer. Trump then pursued business of his own after university, constructing several buildings of his own, including Trump Tower in Manhattan and three casinos in Atlantic City. After a downturn in the 1980s that resulted in Trump losing many of his properties , he revitalised his company in the 1990s by marketing various brands using his name, with notable examples including steaks, water, a university, and various resorts. He also appeared on the popular television reality series The Apprentice.

In 2011, Trump gained attention by questioning whether former president Obama was born in the United States and therefore eligible to be president. In mid-2016, after toying with the idea for several elections, he announced his presidential candidacy. After a contentious primary, Trump emerged the victor from the Republican party, beating 16 opponents.

Vice-President Mike Pence

Mike Pence was sworn in as the 48th vice-president on 20 January 2017. The vice-president's specific constitutional role is to succeed the president in the event of the latter's death, resignation or incapacity, and to serve as president of the Senate. In the latter capacity the vice-president acts only to break tied votes in the chamber.

Pence was born in Columbus, Indiana, on 7 June 1959. He graduated from Hanover College in 1981 and gained a law degree from Indiana University in 1986.

Pence was an attorney for several years and lost two races for Congress in 1988 and 1990. Later, from 1993 to 1999, he gained notoriety by hosting The Mike Pence Show, a local Indiana radio programme. Pence won his first political race in 2000, winning the 2nd district congressional seat for Indiana. He served as a member of Congress until 2013. In 2012, Pence won the Indiana governor's race and served in that capacity until being selected by Trump to become his running mate in 2016.

Senate Majority Leader Mitch McConnell

The Senate majority leader is the chief strategist and spokesman for the party with the most seats in the Senate and is in charge of scheduling the chamber's business. Mitch McConnell was born on 20 February 1942 in Sheffield, Alabama, but was raised in Louisville, Kentucky. He gained his undergraduate degree from the College of Arts and Sciences at the University of Louisville, Kentucky, in 1964 and went on to complete a Juris Doctor degree at the University of Kentucky, Lexington, in 1967. He served on the staffs of Republican Senators John Sherman Cooper and Marlon Cook, as an intern and an assistant respectively before becoming a deputy assistant attorney general in the administration of Gerald Ford. Before running for elective office he served two terms as the chief executive, or Judge-Executive, of Jefferson County, Louisville from 1978.

In 1984, he defeated the incumbent Democratic Senator Walter Huddlestone by less than half a percentage point. His 1990 re-election, against former Louisville mayor Harvey Sloane, was a little more comfortable because McConnell was returned by 4%. In subsequent elections, McConnell has become embedded, winning 55% in 1996 and nearly 65% in 2002. He chaired the Senate Republican campaign committee in 1998 and 2000 before becoming chief whip, unopposed, after the 2004 elections. When Senate majority leader Bill Frist announced that he would not run for re-election in 2006, McConnell was the favourite to succeed him after the elections. He was duly elevated

to the post without challenge in November 2006 and won re-election in Kentucky for a further six-year term in 2008, and again in 2014. After a period of Democratic leadership in the Senate, he again became the majority leader following the 2014 Senate elections.

Senate Minority Leader Charles (Chuck) Schumer

The task of the minority leader is to develop strategies by which the minority (currently Democrat) caucus in the Senate can act in concert to work with or oppose the majority ( currently Republican) caucus. Schumer (born 23 November 1950) hails, like President Trump, from New York City, where he was born and raised. He graduated from Harvard University, first with his bachelors degree and then his law degree in 1974. After graduating, Schumer immediately began a career in politics, running first for the New York State Assembly, where he served until 1980, and then in the US Congress from 1980 to 1999. In 1998, Schumer ran for the Senate, beating Republican Al D'Amato. Since winning his first Senate race, he was re-elected in 2004, 2010, and 2016, each time rising in the Democratic Senate hierarchy. When former Senate Minority leader Harry Reid announced his retirement in 2016, it was announced that Schumer would serve as leader of the Democrats following the presidential election.

Speaker of the House of Representatives Paul Ryan

The speaker is the most powerful figure in the House of Representatives and is second in line to the presidency after the vice-president in the event of presidential death, resignation, or incapacity. Elected by a majority of the House membership, the speaker presides over House debate, appoints committee chairmen and the membership of select committees, and determines rulings affecting House business.

Paul Ryan took over from John Boehner as speaker in October 2015 after Boehner announced his mid-term resignation. Ryan has represented the 1st congressional district of Wisconsin since 1999. Before taking over as speaker, Ryan served as chairman of the House Ways and Means Committee and prior to that the House Budget Committee.

Minority Leader of the House of Representatives Nancy Pelosi

Nancy Pelosi lost the speakership and became the minority leader of the House in January 2011, following the severe defeat inflicted upon the Democrats in the mid-term elections of November 2010.

Pelosi was born in Baltimore, Maryland, on 26 March 1940. Her father, Thomas D'Alesandro Jr, served four terms in the House of Representatives from Baltimore (1939–47). He went on to become mayor of Baltimore. Pelosi was educated at Trinity College, Washington, DC, graduating in 1962. She settled in California, married and had five children. She worked as a Democratic Party activist, chairing the California Democratic Party and was a member of the Democratic National Committee from 1976 to 1996.

She first ran for elected office in a special election to succeed Democratic Representative Sala Burton who died in early 1987. Pelosi's district encompasses most of San Francisco, which is one of the most socially liberal cities in the US. It was the first city in California to elect, in 1978, an openly gay mayor. Since retaining the seat in 1988, Pelosi has rarely failed to gain 80% of the votes of the district. The nature of her district has led the Republicans to deride Pelosi as being out of touch with the mainstream American voter, who, they claim, has little in common with a 'San Francisco liberal'. However, this charge has, so far, failed to gain national traction. Pelosi was re-elected in 2008 with 72% of the vote, falling below 80% for the first time since 1990 due to the independent candidacy of anti-war activist Cindy Sheehan.

Pelosi was again re-elected in 2010 but lost the speakership as the Democrats suffered a major defeat in the House elections and the Republicans became the majority party. She is continues as the minority leader in Congress.

Civil society Major pressure groups

Interest groups engage in issue and agenda advocacy, citizen participation, formation of coalitions with other groups, and monitoring of government departments and policy. In order to influence legislation, interest groups are heavily involved in electioneering and raise money on behalf of candidates and parties who are sympathetic to their causes or who can be influenced by lobbying into supporting their agendas. Broadly, interest groups can be classified into the seven categories listed below with examples.

Agricultural: American Farm Bureau, National Farmers Union, and Association of Wheat Growers. Business and commercial: National Association of Manufacturers, Chamber of Commerce, American Business Conference. Collective: American Association of Retired Persons, National Association for the Advancement of Coloured People, National Organisation of Women. Ideological: Americans for Democratic Action, Americans Conservative Union, and American Civil Liberties Union. Professional: American Medical Association, American Bar Association, National Education Association. Specific issue: National Rifle Association, Greenpeace USA, National Right to Life Committee, Media Matters. Trade unions: American Federation of Labour-Congress of Industrial Organisations, United Auto Workers, United Mine Workers.

State institutions Constitution

The United States of America is a federal republic with a strong democratic tradition. The form of government is based on the constitution of 17 September 1787, and comprises three separate but equal branches: the executive, the legislature, and the judiciary. Congress, supported by a two-thirds majority of both houses, has the power to propose amendments to the constitution or to call a convention for proposing amendments if required to do so by the legislatures of two-thirds of all states. Any such amendment must then be ratified by three-quarters of the states. The Bill of Rights, consisting of the first 10 amendments, including the right to bear arms, was added on 15

December 1791. Other amendments include: the abolition of slavery in 1865; the 'due process' clause in 1868; equal voting rights regardless of race or colour in 1870; the election of senators in 1913; the prohibition of intoxicating liquors in 1919 and its later repeal in 1933; female suffrage in 1920; limiting the presidential tenure of office to two terms in 1951; and the right to vote for citizens aged 18 and over in 1970.

Executive

The executive branch of government is responsible for enforcing the laws of the land. Executive power is vested in the president, who appoints the cabinet and oversees the various federal government agencies and departments, and also serves as commander in chief of the armed forces. The president and vice-president stand for election together and are elected by voters from each state for a four-year term, which may be renewed only once.

The vice-president is president of the Senate and becomes president for the remainder of the term if the president is unable to serve. Cabinet ministers or department heads, who are chosen by the president and approved by the Senate, advise the president on policy issues and help execute those policies, while heads of independent agencies help execute policy and provide special services.

The president has extensive, but not unlimited, powers. He proposes legislation to Congress in the process of formulating national policy and may veto any bill passed by Congress. However, Congress can override a veto by a two-thirds majority in both houses. Much of the president's ability to succeed legislatively is dependent on whether his party controls Congress.

Legislature

The constitution established the legislative branch of government with the formation of a bicameral Congress comprising the House of Representatives and the Senate. As well as its primary duty of writing, debating, and passing bills subject to the president's approval, Congress also investigates pressing national issues and supervises the executive and judicial branches. Congress is also responsible for appropriating funds for all government activities, and can, therefore, promote or impinge on the executive's ability to follow through on its policy objectives. Congress also has the capacity to cease all non-essential government operations if it fails to pass budgetary legislation.

The House of Representatives comprises 435 members elected every two years. While each state is guaranteed one seat, members represent an area of a state, known as a congressional district, with the number of representatives based on the number of districts in a state. Specific actions that may only be performed by the House include instigating laws that make people pay taxes and impeachment, i.e. deciding if a government official, including the president, should be put on trial before the Senate for crimes against the United States.

The Senate has 100 members, with two senators elected for six-year terms from each of the 50 states, one-third of whom are elected every two years. Powers peculiar to the Senate include confirming or disapproving presidential executive appointments; recommending treaty ratification; and holding a trial and convicting any government official who commits a crime against the country.

Judiciary

The judicial branch of government was established under the 1787 constitution, with the creation of the Supreme Court comprising a number of justices determined by Congress. One of the Supreme Court's most important responsibilities is to decide cases that raise questions of constitutional interpretation. Known as judicial review, this enables the judiciary to provide checks and balances on the executive and legislative branches. Decisions of the Supreme Court in these matters can only be changed by another Supreme Court decision or by a constitutional amendment.

The Supreme Court also reviews cases from the lower federal courts, which were established by Congress using powers granted in the constitution. Appointees to the federal bench serve for life or until they voluntarily resign or retire. The Supreme Court exercises complete authority over the federal courts.

While also bound by the interpretation of federal laws and the constitution, the operations of state courts are not subject to the same supervision from the Supreme Court, which cannot interpret state law or issues arising under state constitutions.

The US accepts compulsory jurisdiction of the International Court of Justice, with reservations, but has not ratified the statute of the International Criminal Court.

Regional and local

The United States has a number of dependent areas: American Samoa, Baker Island, Guam, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, Midway Islands, Navassa Island, Northern Mariana Islands, Palmyra Atoll, Puerto Rico, US Virgin Islands, Wake Island. Palau, the Federated States of Micronesia and the Republic of the Marshall Islands have Compacts of Free Association with the US.

External relations Overview Following the end of the Cold War, the terrorist attacks on 11 September 2001 on the United States provided a new rallying point for US foreign policy. During the administration of George W Bush (2001–09), US policy concentrated on a war on terrorism. Bush declared that American foreign policy was now universal in scope, with the

government seeking to hunt down those responsible for the attacks and, furthermore, to defeat any terrorist networks with a global reach. Deep international mistrust of US foreign policy accompanied much of the rest of Bush's term, with this new enemy – terrorism inspired by Islamist extremism – frequently interpreted by Bush's critics as a wholesale onslaught on Islam itself.

A significant difference between the administration of former president Barack Obama and that of his predecessor was to be found in image and presentation. Obama's election was heralded positively worldwide, predicated on the belief that he would change the international posture of the United States substantially, away from the perceived unilateralism and aggression of the Bush years towards multilateralism and a newly pacific outlook.

President Donald Trump's external priorities represent a shift from Obama's. In particular, he has indicated a turn away from free trade by withdrawing from the Trans-Pacific Partnership (TPP), renegotiating the North American Free Trade Agreement (NAFTA), and threatening to raise tariffs on Chinese imports. Other areas where the administration adopted new policies included withdrawing from the Paris Accord on Climate Change and relocating the US embassy in Israel from Tel Aviv to Jerusalem.

However, in other areas, Trump has taken on a far more traditional foreign policy, one where the US continues to be engaged abroad in a number of military deployments with the potential for escalation. In 2017, Trump increased the number of troops deployed to both Afghanistan and Syria, much like the Obama administration before him. Although Trump's efforts have been largely successful in eradicating the Islamic State, any conflict between Syria, the Kurds (in Syria's north), and Turkey would obviously increase the potential of heavier US involvement. Similarly, in Afghanistan, the current administration has raised US involvement by placing additional troops on the group to counter territorial gains by the Taliban. Such deployments would likely only increase if it appeared that the Afghan government looked set to face severe setbacks and possibility of losing control of the capital. During Obama's term, relations between the US and former adversaries have improved, with a negotiated settlement on Iran's nuclear programme implemented in January 2016 and the normalisation of relations with Cuba. Trump has re-evaluted both relationships, placing new sanctions on both countries, and has threatened to upend the current nuclear deal via declining to renew sanctions waivers.

The US remains dominant in multilateral organisations. The US's membership is critical to the operation of key international organisations; if they have pretensions of reflecting a global consensus, it means little if the US is not on board. US financial and logistical contributions are required to sustain many of the organisations, including the UN, NATO, the International Monetary Fund, and the World Bank. Nonetheless, the US has had an awkward relationship with many of the bodies and has historically been very reluctant to accept others' jurisdiction. For example, the Trump administration has cut USD285 million to the UN's management and support budget and announced other proposed cuts to various humanitarian and peacekeeping operations. In addition to global organisations, the US is a key member of a number of regional groupings. Most significant among these are NAFTA and the Asia-Pacific Economic Co-operation (APEC).

Bilateral China

Current status and significance

China's relationship with the United States can most accurately be characterised as one of strategic distrust coupled with co-operation. Chinese assertiveness over claims in the East and South China seas is a significant point of tension, with Washington expressing concern over Beijing's aggressive land-reclamation projects at various Chinese-occupied islets in the South China Sea. Concerns over China's perceived indifference towards rigorous labour and environmental standards have been a major factor in US objections to China's efforts to expand its global influence, although such issues will likely receive reduced emphasis under the Trump administration. The trade imbalance between the two countries and frequent accusations of intellectual-property theft, currency manipulation, and protectionism are significant causes for concern in the US, and will likely remain major source of friction.

In June 2017, the US enacted unilateral sanctions on firms and individuals with ties to North Korean nuclear and missile weapons programmes. Despite US pressure, China is highly unlikely to change its strategy toward North Korea as indicated by Chinese regulatory actions against South Korean firms over their country's deployment of the Terminal High Altitude Area Defense (THAAD) missile defence system. China has also exerted pressure on the US in tying bilateral trade to North Korea. US sanctions against Chinese firms would likely result in less progress in cutting the USD347-billion trade deficit the US ran with China in 2016. Both sides remain highly likely to seek avoiding the risk of a trade war, but an increase of protectionist measures, in areas such as World Trade Organization (WTO) complaints, are likely. Indeed, on 21 June, the US decided to proceed with a previous WTO complaint against Chinese rice, wheat, and corn, which the previous Barack Obama administration had initiated.

Major issues in Sino-American economic and trade relations – 2000s to mid-2010s

Alleged Chinese manipulation of the renminbi was among the greatest irritants in US-China trade relations during this period. Between 2010 and 2015, the US Congress introduced at least four bills that proposed to impose punitive tariffs on any country that deliberately misaligned its currency, although none of these bills was made into law. Lobbies, such as the National Association of Manufacturers, have also pointed to China's "unfair" capacity to flood the US market. China's full entry to the WTO in 2006 led to strong anti-China rhetoric over the outsourcing of "American" jobs.

Major issues in Sino-American security relations – 2000s to mid-2010s

The US remained a major provider of Taiwan's defence needs. According to the 1979 Taiwan Relations Act, any threat to the security of Taiwan would be treated as a threat to US interests. Successive US administrations explicitly pledged US support in the event of Chinese military action against Taiwan, and every US president since Jimmy Carter had authorised major arms sales to the island. Cyber security was, and remains, a major issue. US cyber security experts traced various systematic attacks on US

government, corporate, and infrastructure computer systems to computers in China. In 2012, US lawmakers called for Chinese telecoms companies Huawei and ZTE to be banned from the US, citing cyber security concerns. In May 2014, a federal grand jury indicted five officers from the People's Liberation Army's Unit 61398 on charges of theft of confidential business information from US companies through cyber espionage.

Relations under former president Barack Obama

The issue of perceived unfair trade practices was contentious under the Obama administration. Within two days of Obama taking office, Timothy Geithner, then-secretary-designate of the Treasury, accused China in a written note to the Senate Finance Committee of "manipulating" its currency, a term the Bush administration avoided. China's disputes in the South and East China seas – in particular the dispute with Japan over the Senkaku/Diaoyu Islands and with the Philippines over the Scarborough Shoal – forced the US to reaffirm its traditional security alliances. China's establishment of an Air Defence Identification Zone in November 2013 elicited concern not only from Japan and South Korea, but also from the US. Shortly after the announcement, the US dispatched B-52 bombers through the zone to assert its freedom of navigation, which China did not interfere with. Since then, tension over the declaration of the zone largely receded. One of the most serious incidents in bilateral security relations under Obama's watch occurred on 8 March 2009, when five Chinese ships (two paramilitary and three civilian) jostled a US surveillance ship (the US NS Impeccable ) operating in international waters in the South China Sea. The incident clearly demonstrated the possibility for relatively minor incidents to escalate into more serious crises.

Relations under former president George W. Bush

Bush replaced his predecessor Bill Clinton's approach to China as a strategic partner with one that viewed China as a strategic competitor. The view was reinforced by the first major complication in bilateral relations under Bush's watch, when a US EP-3 surveillance aircraft on a routine reconnaissance mission collided with a Chinese J-8 fighter jet on 1 April 2001, resulting in the loss of the Chinese pilot. The 24-member US crew was detained after being forced to land on the Chinese island of Hainan. The two sides found a diplomatic solution, reflecting the importance both countries placed avoiding conflict escalation. Bilateral relations underwent something of a transformation following the 11 September 2001 attacks on the US. In October 2001, China and the US agreed to set up an anti-terrorism co-operative mechanism following high-level negotiations. However, despite offering its diplomatic support for a crackdown against all forms of international terrorism, China could not convince the US to recognise its claimed "terrorist " (or separatist) problem in Xinjiang beyond the US classification of the East Turkistan Islamic Movement as a terrorist organisation in August 2002. Nevertheless, events in the early years of the Bush administration did not derail ever-growing trade links between the two countries.

Americas

Canada

Canada's most important political, economic and security partner is the United States. The two countries enjoy a close relationship symbolised by the world's longest (8,892 km) undefended border, and their citizens share many political and social values and cultural traits. However, Canadians have long been ambivalent about their geographic proximity to the US, which brings not only economic opportunity, but also concerns over sovereignty and national identity, defined by a pride in Canadian cultural distinctiveness.

The election of Donald Trump strained relations between the countries, which under US President Barack Obama and Canadian Prime Minister Justin Trudeau had experienced a warm friendship driven by strong political and policy alignment. Although the center-left Liberal government has been careful to maintain cordial and respectful relations with the US administration, the countries have significant policy differences. On foreign affairs, Canada is a strong voice for multilateralism and trade liberalisation, while the US has taken a unilateralist and protectionist turn; on economic policy, Canada has made shifted the tax burden from middle income earners to the top 1% of incomes in the country, while Trump has attempted to sharply proposed to reduce estate tax and lower the corporate income tax rate, measures which would largely benefit the well-off; on social policy, Canada's focus on social inclusion for historically marginalised communities and open approach to refugees stands in sharp contrast to the Trump administration's strict approach to illegal migrants, as seen in the recent decision to appeal the Deferred Action for Childhood Arrivals Act. Their proximity also causes acute political difficulties, including on sensitive subjects such as immigration: changes to US migration policy have driven increasing flows of refugees from the US across the border into Canada, straining the resources of border communities and causing political friction within affected communities and between some local administrations and the federal government. More significantly, the Trump administration has initiated a renegotiation and modernisation of the North American Free Trade Agreement (NAFTA) between Canada, Mexico, and the US. NAFTA has tripled trade between the partners to USD1 trillion per year, and the countries' supply chains have become deeply integrated: 80% of all Canadian exports are bound for the US. This has strongly benefitted Canada, which is estimated to have received a boost to GDP growth of 2.5% per annum from trade liberalisation. Canada would experience significant economic shock at the termination or severe renegotiation of NAFTA, and the negotiations are top-of-mind for policymakers at all levels of government.

The Canadian government has made maintaining good relations with the US a top priority. Trudeau shuffled his cabinet in the wake of Trump's election, and established a dedicated unit within the prime minister's office, led by a senior government staff member, to co-ordinate a whole-of-government direction for these relations. The Trudeau and his staff have attempted to forge personal relationships with the Trump and his staff, and have adopted a deeply calm, measured approach to carefully nurturing and developing the relationship between the two countries. This defensive approach belies the administration's drive to defend Canadian interests, particularly in trade negotiations, and willingness to firmly, if politely, argue Canada's case on foreign and social policy issues when necessary, such as on the need to advance trade liberalisation and protect refugees.

Cuba

The normalisation of diplomatic relations between the United States and Cuba and the easing of previously existent restrictions, a process begun in 2014, moderately improved the business environment for tourism, travel, and food links with the US. Without providing specific details, President Donald Trump confirmed on 16 June that he

would reverse the restrictions lifted by the Obama administration, and new OFAC and Depart of Commerce regulations are expected to be issued and become effective from September onwards. Specifically, trade with Cuba's military and armed forces commercial wings is to be restricted. Ongoing business operations, particularly in the tourist sector, are unlikely to be affected significantly. However, new operations and travel from September onwards are likely to be constrained. The uncertainty regarding Trump's policies for Cuba will likely slow down investment over the next year, particularly because the Republican control of both houses in the US will diminish the probability of the US trade embargo being lifted. The bilateral relationship could potentially turn sour as the Castro administration has not committed to fully transitioning the country towards democracy, a vital demand of members of the US Republican Party. In December 2014, US president Barack Obama announced a move towards the normalisation of relations with Cuba. The announcement followed 18 months of secret talks in which the release of the US contractor Alan Gross, who had been held on espionage charges in Cuba, was negotiated in exchange for the release from US custody of the remaining members of the group known as the Cuban Five, Cuban agents who had been imprisoned in the US in 1998 for conspiracy offences.

A steady stream changes to policies which disadvantaged Cuba followed, culminating in Obama's historic visit to Cuba in March 2016. In the financial arena, US companies with commercial links to Cuba can now open a bank account in a financial institution on the island, and Cubans may open bank accounts in the US. Washington has also announced the suspension of one aspect of the Torricelli Act of 1992, which prohibits any foreign ship docking in Cuban ports to travel to the US within the following six months. The measure has permitted US cruise lines to begin operating in Cuba.

Cuba obligingly altered its travel restrictions to permit three rounds of formal negotiations, two in Havana and one in Washington, which took place between January and March 2015, aimed at restoring embassies in the respective capitals. In addition, a round of discussions on the topic of human rights took place and the two presidents had a face-to-face talk on the fringes of the seventh OAS Summit of the Americas in Panama in April 2015. Shortly afterwards, Obama announced that he would be removing Cuba from the US list of state sponsors of terrorism. This was a widely anticipated move which lifted a barrier to agreeing the exchange of embassies and significantly eased the restraints on Cuba's international banking arrangements. This made foreign direct investment in Cuba less risky and resulted in a surge in investment in the island, mainly in the tourist sector, between 2015 and 2016.

Major trade sanctions against Cuba and the US embargo on Cuba are likely to be maintained in the three-year outlook and thereafter, until Cuba sends firm indications of democratisation or respect for the human rights of dissents. This is still unlikely, as Cuban authorities have made explicit their stated purpose of perpetuating their political system – the only single-party system in the Western Hemisphere. A change in US policy towards Cuba, now likely to reversed, had given more room for the US Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce to grant more licences to conduct aid, educational, or humanitarian activities in Cuba; such as the sale, export, or re-export of medicines and medical supplies, food, and agricultural commodities to the island, financial services, transport – including aerial and marine – and other economic activities favouring, among other sectors, the tourist, food, and financial services industries.

Mexico

The bilateral relationship between the United States and Mexico is based on trade, mutual concerns on drug trafficking, border security, and immigration. Trade between the US and Mexico is governed by the North American Free Trade Agreement (NAFTA) which also includes Canada. NAFTA entered into force in 1994 and allowed Mexico to become in 2014 the US's third-largest trading partner after China and Canada. However, the treaty is due to be renegotiated in 2017–18, following the election of US president Donald Trump. Major components of the deal including the numerous agriculture, textile, and automobile tariffs phased out between 1994 and 2007 may be removed or reversed during the renegotiation process.

The US president favours the protection of US manufacturing jobs and the reduction of the US trade deficit with Mexico (USD63.2 billion in 2016), which was about to reach a 10-year high in March 2017. He issued diverse threats aimed at preparing the grounds for renegotiating better trade terms. These have included the imposition of a 35% tariff on firms that relocate to, or import goods from, Mexico; the levying of remittances to Mexico to partly finance a border wall; repeated calls aimed at pressuring private companies into reconsidering relocation plans to Mexico; considering the implementation of a US border adjustment provision that would increase taxes on US imports and exempt them from exports.

The economic uncertainty generated by Trump's protectionist stance and the desire to renegotiate or quit NAFTA, which Trump has denounced as the "worst trade deal in the history of the world", has already started to negatively affect Mexico. Companies such as Carrier Corporation, GM, and Ford have decided to cancel investment plans in Mexico. The hypothetical imposition of unilateral trade tariffs from the US would likely pave the way for a surge in investment-related disputes through NAFTA's dispute settlement provisions.

The proliferation of Mexican drug-cartels shipping narcotics to the US has also shaped bilateral relations. Co-operation is currently based on the sharing of US intelligence on the whereabouts and activities of Mexico's main criminal organisations, and on the provision of financial aid and military equipment through a programme known as the Mérida Initiative. Since its implementation in 2008 the Mérida Initiative has disbursed about USD1.6 billion out of the USD-2.6 billion approved by the US Congress to Mexico, including training programmes, police capacity building, a judicial, and other institutional reforms in Mexico, and the delivery of military helicopters.

Under former president Barack Obama, the US expelled 3.12-million deportees between 2008 and 2016 (a record of 409,849 in 2012). This number could eventually rise under President Trump, given that he promised mass deportations during his electoral campaign. Former president Obama issued an executive order in November 2014 to deal with the immigration system. This order expanded the population of unauthorised immigrants eligible to apply for citizenship, affecting 5-million undocumented migrants. On 23 June 2016, the US Supreme Court blocked Obama's Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) immigration programme, a decision that maintained the possibility of undocumented migrant deportations.

Trade

US-Mexican relations had been on an improving trajectory since the mid-1980s, principally as a result of increasing commercial ties as Mexico liberalised its economy and the two parties implemented the North American Free Trade Agreement (NAFTA); this agreement came into force in 1994 and contains chapters on several trade-related issues

such as rules of origin, customs procedures, phytosanitary measures, government procurement, and intellectual property. NAFTA allowed Mexico to become the US's third-largest trading partner after China and Canada. In 2016, bilateral trade reached USD482.23 billion. The US trade deficit with Mexico reached USD62 billion in 2016. Additionally, the US is Mexico's main trade partner, accounting for more than 80% of its total trade, and in some cases 40% of the components of products made in Mexico come from the US. Mexico's main exports to the US are vehicles, electrical machinery, machinery, mineral fuel and oil, and optic and medical instruments. Meanwhile, Mexico's main imports from the US are machinery, electrical machinery, mineral fuel and oil, vehicles, and plastic. NAFTA's Chapter 11 is vital for Mexican and US investors as it provides an impartial dispute settlement mechanism, including for instances of contract alteration and expropriation. Since 1994, there have been 58 bilateral commercial disputes in the NAFTA framework involving Mexico.

Trade is still mostly carried out by land, with 42 border crossing points that are consistently busy and are vital to the bilateral relation (San Ysidro, in Tijuana, has for example 11 lanes open 24 hours). "Maquiladoras" abound in Mexico's US border as several US firms have benefited from Mexico's lower wages and skilled labour force.

Trade under former president Obama and Peña Nieto

The Peña Nieto administration has focused on promoting US investment in Mexico's energy sector. Mexico is already the third-largest supplier of US crude oil imports (after Canada and Saudi Arabia) and its government expects US companies to invest in Mexico following the 2013–15 opening of its country's hydrocarbons sector to private participation. Furthermore, Mexico's Federal Commission of Electricity (Comisión Federal de Electricidad: CFE) announced in June 2015 its intention to build an 800-km underwater gas pipeline from Tuxpan, in the Mexican state of Veracruz, to Texas, in the US. The project is being carried out by Infraestructura Marina del Golfo (IMG), a joint venture between IEnova (40%) and TransCanada (60%), with IMG gaining a 25-year concession for the completed pipeline. Another infrastructure project is the 860-km-long Los Ramones natural gas pipeline, which would let Mexican companies import up to 2.1-billion cubic feet of natural gas per day from shale gas locations in the US. The construction of this facility began in 2014 and is expected to meet 20% of Mexico's natural gas requirements when completed. These two initiatives would allow Mexico to import cheap natural gas from the US, with several positive economic implications for both consumers and producers.

Both countries also continue to work on improving the efficiency of their 48 shared border crossings. In October 2015, Mexico, and the US signed a customs agreement that aimed to reduce cargo waiting times by 80%, with the establishment of several common joint inspections points (one in Laredo, Texas, another in Otay, Tijuana, and a third in San Jerónimo, Chihuahua). Further efforts to improve cross-border infrastructure included in 2015 a rail link that connects Matamoros, Tamaulipas, to Brownsville, Texas and the San Diego-Tijuana Passenger Bridge, linking both international airports. After a three-year pilot programme, the US Department of Transportation also announced in January 2015 that it would finally allow Mexican cargo companies to apply for permits to provide transportation services in the US; this terminated what had been one of the longest-standing bilateral disputes since NAFTA's creation in 1994, and allows the US to avoid more than USD2 billion in retaliatory tariffs on US goods.

Trade between Mexico and the Trump administration

Mexican president Peña Nieto and members of the Mexican ministerial cabinet such as Foreign Affairs Minister Luis Videgaray and Economy Minister Ildefonso Guajardo have repeatedly emphasised that they favour a relationship based on co-operation and the promotion of trade between the US and Mexico. Following the November election of Donald Trump, Mexican authorities have emphasised that they are willing to revise the bilateral relationship with the aim of modernising NAFTA; a sentiment echoed by Canadian prime minister Justin Trudeau.

Throughout his campaign, Trump threatened to impose a 35% tariff on US-based companies with operations in Mexico that imports goods into the US. NAFTA's Article 2202 allows amendments for the trade treaty in accordance with legal procedures of each party while article 2205 allows for the unilateral withdrawal of a party six months after the submission of a written notice to the other parties. Thanks to its economic size, the US holds the greatest bargaining power on the negotiating table. Failure to do so would jeopardise access to its main export market. A potential renegotiation is likely to take years and could potentially redefine the trade relationship. Such a scenario will create a period of uncertainty similar to Brexit in Europe, potentially slowing down private investment in major export sectors in Mexico such as the automotive, electrical machinery, mineral fuels, and agricultural sectors.

Drugs

The "war on drugs" of presidents Ronald Reagan and George W. Bush in the 1980s greatly expanded the scope of US operations on Mexican territory, mostly carried out by the Drug Enforcement Agency (DEA). The DEA trained hundreds of Mexican police and implied in many occasions a circumvention of Mexican jurisdiction. This issue was a significant source of bilateral impasses during the 1980s and 1990s. Mexico nevertheless continued to co-operate from political pressure in the form of "drug certification", which the US used to rate a country's anti-narcotic efforts. Despite multiple attempts, Mexico failed to establish a fully functional agency to combat drug traffickers during this period.

It was during President Vicente Fox's (2000–06) term that both countries sought to strengthen counter-narcotic efforts significantly. Fox increased the number of extraditions from six prior to his administration to 133 during his six-year term. Yet the most significant change came during the Felipe Calderón (2006–12) presidential term, after he declared Mexico's own "war on drugs" through the deployment of the army to battle armed drug-cartel cells. This generated the conditions for the US and Mexico to enhance their bilateral relationship. In 2007, the Mexican and the US governments agreed on a new package of counter-narcotics aid and assistance under the original title "Joint Strategy to Fight Organised Crime", subsequently referred to as the "Mérida Initiative", and was approved by the US Congress in 2008. Since its creation it has disbursed about USD1.6 billion in assistance programmes including training, police capacity building, institutional reforms in Mexico (anti-corruption programmes included), and the delivery of US equipment, including military helicopters.

Practical security and political co-ordination continues to date. The extent of cross-border smuggling – drugs northwards and arms southwards – has made border security a heated focus of domestic political debate in the US. An incident in early 2011 undermined bilateral trust. In March 2011, the press on both sides of the border revealed the

existence of an operation conducted by the US Bureau of Alcohol, Tobacco and Firearms (ATF), named "Fast and Furious", which had lost track of the weapons it had allowed to be smuggled across the border to gain intelligence on Mexico's drug-trafficking organisations. This generated discontent in the political class and Mexican media, particularly when it was revealed that weapons supposedly tracked under the operation had been connected to the murder of a US border agent.

Co-operation under former president Obama and Peña Nieto

Co-operation between both countries continued under the administration of former US president Barack Obama (2012–16) and Mexico's Enrique Peña Nieto (2012–18). The US no longer certifies Mexico's counter-narcotics efforts and it continues to support Mexico's efforts in fighting criminal organisations through the provision of intelligence and equipment. However, the July 2015 escape of Sinaloa cartel leader Joaquin "El Chapo" Guzmán from a Mexican maximum-security prison slightly damaged bilateral relations, as Mexico did not wish to extradite him to the US. Relations turned again sour in October 2015 when the US Department of State deputy spokesperson Mark Toner confirmed that his government had partially withheld funding for combating organised crime in Mexico based on the country's human rights track record. The total withheld amounted to about USD5 million that had been earmarked under the Mérida Initiative. The withholding of the funds was small and temporary (Mexico's defence budget is estimated by IHS Markit at about USD7.5 billion) and did not significantly affect the Mexican government's war against organised crime. The decision followed allegations of the Mexican military's involvement in the killing of 22 individuals in Tlatlaya, Estado de Mexico in 2014 (a judge release four of seven imprisoned military officers in 2015 after it could not find evidence) and the 2014 murder of 43 students in the state of Guerrero by gunmen and local police. Despite the disagreements and tensions between both governments, co-operation between both has continued. "El Chapo" Guzmán was recaptured in January 2016 and was extradited to the US in January 2017, days before Trump became president.

Trump administration and Mexico

Counter-narcotics co-operation is likely to be revised under Trump. Given Trump's protectionist stance, it is highly likely that the US will threaten the provision of military aid to Mexico under the Mérida Initiative in exchange for trade concessions, or as a way of re-allocating resources to build a wall between the US and Mexico. Such a scenario would decrease the Mexican authorities' capability to track criminals, which has previously assisted in the capture and/or killing of top drug cartel bosses in Mexico. This would be particularly problematic given that violent deaths in Mexico during early 2017 were at their highest level since 1997.

Immigration

NAFTA's implementation in 1994 boosted cross-border trade between Mexico and the US but alongside legal trade, the opening of the border allowed illegal trade to flourish, facilitating drug trafficking and people smuggling that continues to date. Under former National Action Party (Partido Acción Nacional: PAN) presidents Vicente Fox (2000–06) and Felipe Calderón (2006–12) Mexico's relations with Washington were dominated by immigration-related issues. Mexico pursued efforts to grant legal recognition to the millions of undocumented Mexican immigrants working in the US. The then Bush administration tried to hold its promise to draft an immigration bill, but the US Congress repeatedly opposed it. In response to the growing cross-border illegal trade, then-president Bush began to increase border measures, including boosted border surveillance, increased number of border patrol agents and the construction of a 1,200 kilometres fence in 2006. The US continued its approach, inspiring rallies across the country against the criminalisation of migrants.

Bilateral relations were negatively affected in 2010 by the passage of an immigration control law, known as SB 1070, in the state of Arizona, which critics claimed leads to instances of racial profiling. The Mexican government complained that the law discriminated against Mexicans and Latinos, and violated the rights of many US citizens of Latin America origin legally living and working in the US. In June 2012, the US Supreme Court upheld one of the most controversial provisions of Arizona's anti-immigration law, allowing authorities to check a person's immigration status while enforcing other laws. This law also inspired similar laws in other states' legislations further increasing bilateral tensions.

Immigration under former president Obama and Peña Nieto

Under former president Obama, the US deported hundreds of thousands of Mexican immigrants, reaching an all-time high number in 2012 with over 400,000 deportees. Given the fact that the US Congress has been unable to achieve progress on an immigration reform, Obama issued an executive order in November 2014 to deal with the US immigration system. This order expanded the population of unauthorised immigrants eligible to apply for citizenship, affecting 5 million undocumented migrants. The US Supreme Court ruled against Obama's executive order in June 2016, leaving millions of undocumented migrants subject to deportation.

Immigration under President Donald Trump and the Peña Nieto administration

US president Donald Trump took an anti-illegal immigration stance throughout his campaign, focusing on illegal Mexican immigration to rally supporters. Trump promised to deport at least 3 million individuals with criminal records, many of them likely to be Mexicans, and to build a new border wall throughout his campaign. Early in his administration, Trump issued two executive orders related to migration and security. The first ordered the building of a border wall and an escalation of deportations and immigration enforcement, while the second suspended incoming travel to the US for citizens of six predominantly Muslim countries (Iran, Libya, Somalia, Sudan, Syria, and Yemen). Although Trump has insisted that Mexico pay for the eventual building of the border wall, any such suggestion has been dismissed outright by Mexico. The US president has threatened to block Mexican remittances through the imposition of tougher requirements such as the need to demonstrate legal US residency when attempting to transfer funds towards Mexico. Mexican remittances totaled USD26.97 billion in 2016, a record high.

Asia-Pacific

Afghanistan

Following the Soviet Union's 1989 withdrawal from Afghanistan, the United States's interest in the country diminished almost entirely, until the 11 September 2001 attacks placed Afghanistan back on the US foreign policy agenda.

With the accession of President Barack Obama in 2009, the definition of success in Afghanistan moved from nation-building towards a narrower counter-terrorism objective – eradicating Al-Qaeda and its havens in Afghanistan and Pakistan. Obama ordered a surge in US troop numbers, authorising the deployment of 47,000 additional troops to Afghanistan to join the existing 30,000-strong US force, although he warned that the US would begin to withdraw its military forces by 2011. The Kabul conference in July 2010 endorsed former president Hamid Karzai's timetable for the overall control of security to be transferred from foreign to Afghan forces by 2014.

In addition to the deployment of extra troops, the US rapidly increased the size of the Afghan National Defensce and Security Forces (ANDSF). The US accelerated the timeframe for Afghan National Army (ANA) training, seeking to double the size of the ANA to 134,000 by 2011. In 2015, the ANA grew to about 176,000 personnel, including the Afghan Air Force (AAF), and total ANDSF-force strength sits above 320,000.

The US-Afghan relationship has been tumultuous, especially during Karzai's second term from 2009 to 2014. Ahead of the 2009 Afghan presidential election, relations reached an all-time low. Karzai became increasingly critical of civilian casualties committed by international troops, while Washington repeatedly criticised what it deemed as the Afghan government's insufficient progress in tackling corruption. Karzai repeatedly emphasised that ending civilian casualties and protecting Afghan lives were important preconditions for efficient counter-terrorism efforts. The accidental killing of civilians by NATO air strikes continued to increase tensions between the Afghan government and the US.

US-Afghan relations have markedly improved since Ashraf Ghani's election in 2014. Ghani has sought to demonstrate that he is a valuable and effective partner to maximise US assistance and support for his government. Ghani was warmly received on his visit to the US in March 2015, in which he personally thanked wounded US soldiers for their service in Afghanistan.

In mid-2017, President Donald Trump delegated the authority to deploy additional troops to the Pentagon. It is unlikely that this will turn into a large surge of troops; instead, the Pentagon is likely to approve a small US troop increase of approximately 3000–5000. This creates space for further debate within the administration on the future direction of its policy on Afghanistan.

India

The collapse of the Soviet Union, followed by the liberalisation of the Indian economy in 1991, led the Indian government towards a re-evaluation of its foreign policy and a closer relationship with the United States and other Western countries. The desire of India and the US to balance China's growing power has also been a major factor. Significant improvements in the relationship reached a peak in 2005, when India and the US announced a strategic partnership and 10-year defence accord during a visit by then-president George W Bush to New Delhi. This also involved a landmark civil nuclear deal in which the US agreed to supply nuclear technology, despite India refusing to sign the Non-Proliferation Treaty. In 2016, the US designated India a major defence partner.

The US continues to view India as a market with tremendous growth potential, and hopes to increase bilateral trade from its current level of around USD100 billion to USD500 billion per year. The growth in this trade is mostly in India's favour. In 2000, 21% of India's exports went to the US. By 2015, this had fallen to 15% - although the US remained the largest export destination for India. Meanwhile, the proportion of India's imports that came from the US fell from 6% – the largest import source – to just over 5%, now behind China (15%), the United Arab Emirates (6%), Saudi Arabia (5%), and Switzerland (5%). However, Indian exports to the US are mostly low value-added products. Exports of precious metals, gems, crude petroleum, steel, and organic chemicals far outweigh those of capital machinery, vehicles, or even textiles. India's Bharatiya Janata Party (BJP) government remains keen to increase the value-added component of India's exports as its balance of payments grow but this is unlikely to a point of contention with the US. India's exports have increasingly been to the Asia-Pacific and Middle East regions and strong growth there detracts attention from the low-value trade with India's largest export destination. Instead, diplomacy has focused on high-skilled ('H-1B') visas for technical Indian workers that have increasingly come to rely on the US for employment. The transfer of skills from returning expats exposed to US corporate culture is also prized for the same reason of indigenising innovation and increasing the value-added to Indian GDP.

However, the focus of India-US diplomacy remains strategic. The growth of a strong and cohesive Indian-American lobby within the US government has fostered an increasing belief that India is not only a trading partner, but increasingly a natural ally as a robust democracy and counterbalance to China. Public polling of Americans consistently returns India as one of their most favourably viewed countries. As both cause and consequence of this, India has also been de-coupled from Pakistan in US strategic discourse, with recent rhetoric emphasising common resolutions to disrupt and dismantle terrorist groups and eschewing any mention of the disputed Kashmir region , most recently during Prime Minister Narendra Modi's state visit to the US in June 2017. This has coincided with increasing Chinese financial and political support for Pakistan – most notably in the China-Pakistan Economic Corridor). In the past, the US has played an important mediation role between India and Pakistan, often intervening to de-escalate confrontations between the two nuclear-armed states. It has decisively intervened on three occasions – forcing a ceasefire in the Kargil War in 1999; persuading both countries to de-mobilise forces from their borders in 2002, following a militant attack on the Indian parliament; and ensuring that there was no military escalation between the two countries after the Mumbai attacks in 2008. Today, however, the US and India engage in regular military exercises, including, trilaterally with Japan, the annual Malabar naval exercises in the Bay of Bengal. Intelligence-sharing and co-operation to combat terrorism is becoming regularised. Also, Israel is emerging as a mutual military partner after Modi made the first state visit to Israel by an Indian prime minister, and an agreement was reached for India to buy INR32 trillion (over USD500 million) in missiles, launchers, and military-grade surveillance equipment from Israel.

Japan

Current status

Japan and the US are laying the foundation for a new diplomatic partnership. Since resuming the Liberal Democratic Party (LDP) leadership in 2012, Prime Minister Shinzo Abe has called for stronger ties with the US and a revival of the traditional US-Japan alliance. He has accused the former ruling Democratic Party of Japan (DPJ) of allowing relations with the US to deteriorate during its time in office. Abe's foreign-policy focus is driven by wider regional security worries, as well as domestic imperatives, namely his goal of shoring up the flagging economy. With the US also seeking to spur its domestic economic growth, the two countries agreed in February 2013 that trade co-operation should be the linchpin of their new diplomatic partnership. In October 2015 the regional trade pact, the Trans-Pacific Partnership (TPP), which will abolish all tariffs among member countries over the next decade, was finally agreed after years of dispute over mainly the agriculture and automotive sectors in Japan and the US. Once it passes through national legislatures in 2016 it will substantially increase trade between the two largest economies of the TPP, namely Japan and the US. In April 2015 the US and Japan updated the guidelines of their security alliance for the first time since 1997 to enhance operational co-ordination and trilateral or multilateral security co-operation. The passage through the Japanese Diet of two bills in September 2015 formalised Japan's commitment to collective self-defence, or defending its allies when Japan itself is not under attack, marking a substantial strengthening of Japan's contribution to the US-Japan security arrangement.

Japan-US relations until 2013

Relations between Japan and the US are underpinned by the bilateral Treaty of Mutual Co-operation and Security signed in 1951 and amended in 1960. US-Japanese relations have been marred by sporadic tensions over trade, which peaked during the mid-1980s. However, these have eased significantly since the 1990s and July 2013 when Japan joined the TPP trade negotiations. The US-Japan security alliance and preferential trade agreements supported Japan's post-war development as a free market and counterbalance to Communist Asia. However the necessity and practicality of the alliance has been weakened by the dissolution of Cold War structures – with the exception of the Korean Peninsula – and the weakening fiscal position of the US. Nonetheless, China's increasing military spending provides a new rationale for continued co-operation in the region, including a potentially increasing role for Japan's Self-Defence Forces (SDF). Japan is making incremental moves to become a "normal ally" of the US. Japan supported the US-led war in Iraq from 2003 through SDF reconstruction and humanitarian missions. Japan has also provided financial and legislative support to relocate thousands of marines from Okinawa to Guam, although implementation remains improbable in the medium term. Underlying concerns include the possible ramifications for Japan of any US-led military action against China in defence of Taiwan. However, this scenario remains highly unlikely in the near term.

North Korea (DPRK)

North Korea's key priority in its foreign policy has long been its relations with the US and, in particular, the establishment of a peace treaty between Washington and Pyongyang. This has been for three reasons: first, to safeguard and guarantee North Korea's own security from the country it sees as its greatest external threat; second, to restore diplomatic parity relative to South Korea, which maintains good relations with both its traditional allies of the US and Japan, and also North Korea's historic allies, China and the Russian Federation; and, third, to achieve access to international financial institutions such as the International Monetary Fund (IMF) and World Bank, from which North Korea's leadership hopes to obtain the funds required to revitalise the economy.

President Barack Obama's administration has maintained an unofficial policy of "strategic patience", which in effect means waiting for North Korea to change its behaviour and return to negotiations, while applying pressure through diplomatic and economic sanctions. North Korea's dislike for any conditions attached to negotiations means the probability of a normalisation of relations is low. Moreover, heightened public outrage over the cyber-hacking of Sony Pictures in November 2014 attributed to North Korea resulted in several new financial sanctions placed on companies and individuals, and increases the probability that sanctions will be tightened further.

Meanwhile, Obama's administration has expressed strong unity with regional allies and traditional North Korean foes Japan and South Korea. The US's co-ordination with South Korea in particular increased in intensity after the sinking of the South Korean corvette Cheonan in March and shelling of Yeonpyeong Island in November 2010, a rise in belligerent rhetoric following missile tests in 2013 and 2014, and an underground nuclear detonation in February 2013.

Pakistan

Historically, the US–Pakistan relationship has been fraught with mutual animosity but has also featured close co-operation. In 2004, Pakistan was named a major non-NATO ally by the former George W Bush administration as part of US efforts against Al Qaeda. The US has also provided USD33 billion in economic assistance to Pakistan since 2002, of which USD14 billion has been part of the Coalition Support Fund (CSF), which compensates the Pakistani military's expenditures in fighting militancy. Due to internal political dynamics, the Pakistani military establishment exerts greater influence over the bilateral relationship than the country's civilian government.

The bilateral relationship is primarily driven by US security interests in South Asia, but these are often at odds with what the Pakistani military establishment's policy agenda. Most significantly, the US has increased pressure on Pakistan to target elements of the Afghan Taliban within its territory as part of efforts to stabilise Afghanistan. However, the Pakistani military establishment perceives the Afghan Taliban to be an asset in its efforts to maintain influence in Afghanistan. The military also remains wary of extended co-operation with the US, with the latter perceived as a short-term ally. It has therefore been reluctant to act meaningfully against the Afghan Taliban.

Long-term strategic trends suggest that US-Pakistan bilateral relations will wane. In particular, Pakistan's suspicion of US interests has entrenched following the expansion of US–India ties, which Pakistan considers inimical to its interests. In contrast, Pakistan has deepened its relationship with China, primarily through the China-Pakistan Economic Corridor (CPEC), which involved in excess of USD60 billion of Chinese investment in Pakistan's energy and infrastructure sectors.

Growing US frustrations over Pakistan's perceived inaction led to disbursement of the CSF being suspended in 2016. More recently, in July 2017, Congress passed legislation with stricter requirements for US economic assistance to Pakistan. Nonetheless, complete disengagement is unlikely. US defence officials acknowledge that effective counter-terrorism measures against regional militant groups cannot be undertaken without the active support of Pakistan's military. There is also an acceptance by the US that Pakistan must be involved in any discussions over the safety and stability of Afghanistan.

Trump's administration has no stated policy on Pakistan. However, media reports suggest that it is considering a more robust approach to force Pakistan to co-operate in targeting the Afghan Taliban. Potential policy options include removing Pakistan's major non-NATO ally status, further reducing aid and increasing Unmanned Aerial Vehicle

attacks in Pakistani territory. If implemented, these policy options would probably be perceived as confrontational by the Pakistani military establishment, and would therefore actually decrease the likelihood of Pakistani co-operation.

Europe and CIS

Germany

The United States has traditionally been Germany's closest ally and partner outside the European Union. German-US relations have been firmly embedded in NATO's defence structure for the past few decades and are supported by strong economic and political links. However, these bilateral links are currently being tested by an array of policy changes by the administration of US president Donald Trump, especially regarding NATO and trade agreements. Prior to their close relationship during the presidency of Barack Obama (2009–17), diplomatic relations between Germany and the US had deteriorated in the early 2000s during the administration of former US president George W. Bush as the German government at the time was strongly opposed to US intervention in Iraq. Despite close relations between Obama and German chancellor Angela Merkel, some political differences remained and revelations that the US Secret Service had been spying on German companies while tapping Merkel's phone strained diplomatic relations slightly in 2015. Germany supports the US-led international alliance against the Islamic State and endorses the implementation of the Transatlantic Trade and Investment Partnership (TTIP), which Trump has withdrawn the US from, in a sharp U-turn from his predecessor's policy. Nevertheless, it is likely that Germany will maintain friendly relations with the US despite increasing differences.

Russian Federation

Russia's relationship with the US is a complex one, based not just on practical issues of competition and co-operation, but also Moscow's desire to maintain its status as an " equal partner" to the US in the global sphere. This has led to a foreign policy platform aimed at three main priorities:

Asserting Moscow's hegemonic authority over the "near abroad" of the former Soviet states.

Working with China and other allies to undermine US "unipolarity" – or dominance of the international order.

Developing advantageous bilateral links with other states, from Germany to Venezuela, that can have a practical impact in helping secure Russian interests and aid development.

For much of the 1990s, relations between Moscow and Washington were built on good personal relations between presidents Boris Yeltsin and Bill Clinton, as demonstrated by a number of summit agreements. However, there was a fundamental difference in assumptions about the nature of the relationship. Although the US has provided Russia with support and assistance, there was a considerable legacy of mutual suspicion, but no serious resolution of fundamental areas of disagreement between Russian and US interests. Disagreements over issues such as NATO enlargement, Kosovan independence, sanctions against Iran, the US-led invasion of Iraq and the proposed deployment of US-led NATO missile defence shield in Europe all served to undermine otherwise cordial relations, while Washington's criticism of Russia's military response to Georgia's August 2008 operation against separatist forces in South Ossetia provoked a more significant and sustained downturn in relations.

Putin was one of the first foreign leaders to express his support following the 11 September 2001 terrorist attacks on the US. Soon after that Russia agreed to US military deployments in certain former Soviet republics of Central Asia, abandoned its military installations in Cuba and Vietnam and increased its support of the Northern Alliance in Afghanistan. More importantly, it eased its opposition to such issues as NATO enlargement and the US missile defence system, albeit temporarily. Many observers were surprised by Putin's show of support, but his decisions were influenced by a recognition that involvement in the emerging war on terrorism would allow him a freer hand in dealing with his own insurgent problems, particularly in Chechnya, where Russia had previously faced criticism from the West for its alleged human rights abuses.

In return, Washington backed a breakthrough Russia-NATO agreement establishing a joint council which for the first time had given Moscow an opportunity to influence NATO's agenda. The US also recognised Russia as a market economy, and pledged its support for Moscow's bid to join the World Trade Organisation (WTO). However, while international security and the war on terrorism continue to top the bilateral agenda, the pressure on the US administration to adopt a tougher line on Russia mounted. Concern at human rights abuses in Chechnya, an anti-democratic turn in Russia and nuclear co-operation with Iran all led to criticism, which Moscow regarded as both hypocritical and a breach of its post-11 September 2001 deal.

On the other hand, Russia and the US have good reason to co-operate on a wide range of issues, from trade to non-proliferation. As a result, the administration of US president Barack Obama has sought to improve relations in what US vice-president Joseph Biden called in early 2009 the need to "reset relations". There have been some positive developments in bilateral relations since then, such as finalising of a successor agreement to the Strategic Arms Reduction Treaty (START), completed in March 2010 and signed into being by Obama and then-Russian president Dmitry Medvedev the following month. The new accord will limit both sides to 1,550 warheads, 700 deployed intercontinental and submarine-launched missiles and 800 delivery vehicles. It also stipulates that strategic offensive weapons are to be based only within US and Russian territory. The signing of the new START agreement illustrates the ability of the US and Russia to co-operate on areas of mutual interest and presaged greater collaboration on other similar issues in the future, such as Afghanistan and efforts to limit nuclear proliferation.

Despite these relative successes, on a broader scale, relations between Washington and Moscow remain poor. Moscow is unprepared to accept Washington's role as the sole global superpower, as evidenced by the open disagreement between the two countries over the best approach to the civil conflict in Syria; it also resents what it sees as efforts to resist its dominance in Eurasia by encouraging democratisation in other post-Soviet states. Indeed, the ongoing process of developing a US-led NATO missile defence shield in Europe, which Russia considers to be a threat to its strategic deterrent, remains the biggest cause of tensions in the relationship. Attempts at co-operating over the missile defence system have been made, but the clear divergence in positions between Moscow and Washington over what form the system should take, as well as

refusals from the US to provide legal guarantees that the system will not be aimed at Russia, have meant that an agreement has remained elusive. In response to the impasse and continuing development of the system Moscow has outlined plans to deploy Iskander short-range ballistic missiles to its European exclave of Kaliningrad, which it says could be used to target the planned NATO ballistic missile interceptor site to be placed in Poland.

At the same time, Washington is increasingly aware of Russia's anti-democratic tendencies and feels that Moscow's policies towards many global trouble spots – including arms sales to states such as Venezuela – continue to be unhelpful. The passage of the Magnitsky Act in 2012, which denied entry and froze the assets of individuals associated with a particularly flagrant human rights abuse, has also complicated the relationship, given that Moscow regards it as a biased move that ignores other countries' abuses.

The latest episode in US-Russian relations, sparked by Russian intervention in Ukraine, represents a new low in the post-Soviet era, one from which the relationship is unlikely to recover in the near term. The US has enacted two rounds of sanctions against Russia and has threatened more, resulting in criticism and threats of return sanctions from Russia. Meanwhile, the US and NATO will seek to bolster defences in Europe to address the perceived risk of further Russian interventionism, which Russia will view as a hostile stance.

United Kingdom

The US has traditionally been the UK's closest ally and partner outside the EU. However, the dynamics of the collaboration between the two countries is currently changing slightly following the election of the Republican Donald Trump to the US presidency in late 2016. Historically, UK-US relations have been firmly embedded in NATO's defence structure and are supported by strong economic and political links. It is a long-standing concept in UK foreign policy that there is a "special relationship" between the UK and the US. With its roots supposedly found in a shared Anglo-Saxon heritage and a common language, the relationship was largely formed as a result of the alliances between the countries in the First and Second World Wars and has endured through extremely close co-operation in the defence, security, and intelligence fields. Both countries have promoted trade liberalisation and have broadly similar conceptions of external threats. The warmth of the relationship has often been determined by the personal relationship or political affinity shared by the leaders of both countries; however, even when personal relations between the two leaders have not been so close, official ties have generally remained very friendly. The UK supports the US-led international alliance against the Islamic State.

Middle East and North Africa

Egypt

Egypt's size, large population, strategic location on the Suez Canal, and proximity to Israel mean that the United States has a keen interest in supporting Egyptian government stability and national security. As a result, Egypt has profited greatly from US interest in Egypt's adherence to a peace treaty with regional ally Israel, receiving around USD1.3 billion each year in aid from the US since 1979 – the bulk of which has been military aid. This situation, the strategic importance of Egypt to US foreign policy, and the long-standing relationship between the US and former Egyptian president Hosni Mubarak accounts for President Barack Obama's hesitancy in supporting popular protests at the start of the January−February 2011 uprising, although he did eventually call on Mubarak to resign.

The US has delivered F-16 fighter jets and Apache Helicopters to Egypt. Ultimately, aware that the US cannot afford to lose its strategic relationship with Egypt, President Abdel Fattah el-Sisi is unlikely to question the strategic partnership with the US, while continuing to expand economic and military co-operation with other actors, including Gulf states and Russia.

Historical context

Following Mubarak's toppling, the US government sent several diplomatic delegations to the Muslim Brotherhood headquarters even before Mohamed Morsi was declared president of Egypt, in order to seek good relations with the Islamist government. However, relations were strained over the Cairo protests against a September 2012 film made by a US Copt that ridiculed the Muslim prophet Mohammed. Protests, which broke out on the anniversary of the 11 September 2001 attacks on the US, targeted the US embassy and little attempt was made at first to prevent damage to American property in Cairo. Morsi's slow response and failure to condemn the attack on the US embassy outright caused Obama to state that Egypt "is not our ally".

The US was also dismayed by the reduction of Egyptian-Israeli military and intelligence co-operation following Morsi's election. It did not officially oppose Morsi's removal on 3 July 2013 by the army, but expressed concern over what looked like a military coup (without officially labelling it as such).

After hundreds of people were killed during forcible dispersion of pro-Muslim Brotherhood sit-ins in Cairo on 14 August 2013, the US suspended military aid to pressure Egypt to end violence against opponents and hold elections. Yet, shared US-Egyptian interests in containing the insurgency in the Sinai on Israel's borders led the US to partly resume military aid to Egypt in April 2014, with the justification that these were needed to support operations targeting terrorist groups active in the Sinai Peninsula, and that Egypt was upholding the Camp David Treaty with Israel and giving ongoing support to US strategic priorities in the region. In March 2015, the US fully resumed its military aid to Egypt and, by summer 2015, the Egyptian-American relationship had been almost restored to its previous level of engagement under Mubarak. US president Donald Trump has sought to build a personal relationship with Sisi and has singled him out as a key ally in confronting political Islam regionally.

Iran

The Trump administration has adopted a markedly more hostile stance towards Iran than that held by the previous Obama administration. The Iran nuclear agreement (Joint Comprehensive Plan of Action – JCPOA), negotiated, finalised, and implemented under the Obama administration, has intensified Iran's commitment to its expansionist regional objectives. The Trump administration seeks to contain, if not actively confront, Iran's regional expansion, not least Iran's gains in Syria, Iraq, and to a lesser extent in Yemen. Iran is unlikely to abandon its regional objectives, particularly establishing a land-bridge between Iran and the Mediterranean through Iraq, Syria, and Lebanon.

Although the US would see this outcome as unacceptable, given that this would establish Iran as the ascendant regional power and threaten the US's regional allies, the US has limited options. There is very little appetite in the US for military action against Iran with the objective of regime change. Meanwhile, although the US preserves the authority to impose economic sanctions on Iran for its non-nuclear provocative actions, any sanctions legislations that would otherwise impede Iran's ability to benefit from its nuclear-related sanctions relief risk JCPOA's collapse. Barring any significant Iranian nuclear violations, a perceived US-instigated collapse of the JCPOA would likely challenge the US' ability to re-gain Russian, Chinese, and perhaps even European acquiescence to enforcing the multilateral sanctions regime on Iran. This means that additional US sanctions are likely to remain limited to designations of entities and individuals connected to Iran's support for terrorism, ballistic missile programme, and humanitarian violations, rather than much more aggressive blanket sanctions on Iran's strategic energy, automotive, and financial sectors. Although Iran and the US do not have formal diplomatic relations, the JCPOA has institutionalised bilateral relations. Nevertheless, the US's more hostile stance vis-à-vis Iran is weakening centrist president Hassan Rouhani's diplomatic outreach and reduces room for flexibility in bilateral relations.

Historical context

The US cut off formal diplomatic relations with Iran after the 1979 hostage crisis, following the Islamic Revolution that overthrew the US-backed Shah's regime. A telephone call between Rouhani and Obama in September 2013 was the first direct contact between the presidents of the two countries since 1979. A bilateral meeting between Iran's foreign minister, Mohammad Javad Zarif, and US secretary of state John Kerry in November 2014 was also the first bilateral talks at ministerial level since 1979. Relations progressively deteriorated following a series of bombings targeting Americans attributed to Iran's proxy, Hizbullah, in particular the 1983 bombing of the US Embassy in Beirut, which killed 17 Americans; the 1983 bombing of a US Marine barracks in Beirut, which killed 241 Americans, and the 1996 Khobar Towers bombing in Saudi Arabia, which killed 19 Americans. In the following years, US concerns over possible military dimensions to Iran's nuclear programme resulted in efforts to isolate and pressure Iran both unilaterally and through the UN. The policy resulted in a series of UN Security Council resolutions since December 2006 which imposed trade and financial sanctions on Iran.

Iraq

Iraq remains dependent on support from the US, both financially and militarily. Despite US forces completing their withdrawal from Iraq in December 2011, US involvement in Iraq was renewed following the launch, on 15 June 2014, of Operation Inherent Resolve (OIR) against the Islamic State. 3,000 US troops were deployed in the initial phase, mostly in a training and advisory capacity. As of early 2017, this number had risen to more than 5,000. In the same time frame, the US launched a combined 17,000 airstrikes against Islamic State targets in Iraq and Syria. On 11 July 2017, in the wake of the liberation of Mosul from the Islamic State, the commander of the OIR Combined Joint Task Force, Lt. Gen. Stephen J. Townsend, announced that the "fight was far from over" and that no change was likely in US troop levels in the "immediate future".

The US remains Iraq's main arms supplier. The most high-profile recent deal was Iraq's USD3-billion acquisition of 18 F-16 aircraft in 2011, with a subsequent order of a further 18 being placed in 2012. This deal was controversial and received much condemnation from the Kurdistan Regional Parliament due to fears that it would be used to attack Kurdish-dominated areas. The shipment was slow to materialise, but the first deliveries arrived at Balad Air Base in July of 2015. In January 2014, the Pentagon informed the US Congress that it intended to sell 24 Apache attack helicopters to Iraq in a deal worth USD4.8 billion. Despite Iraq seeking to diversify its suppliers – it entered into a USD4.2-billion arms deal with Russia in 2012 – Baghdad's remains overwhelmingly dependent on Washington for arms. Iraqi army's capability deficiencies include insufficient artillery (a large number of US-supplied howitzers were taken by the Islamic State two years ago). Therefore the US is deploying its own artillery in support of Iraqi advances in Nineveh province.

Israel

US-Israeli ties have historically been strong, with the US providing some USD3 billion a year in mostly military aid to Israel. The new Trump administration has signalled a supportive stance vis-à-vis Israel, with Israel standing as the second leg of Trump's first foreign trip after Saudi Arabia. Bilateral relations deteriorated under Obama, not least over disagreements over the Iran nuclear agreement and US attempts to pressure Israel into freezing its settlement programme in the occupied Palestinian territories. Although the US vetoes virtually all UN Security Council resolutions that criticise Israel, the Obama administration refused to a veto UNSC 2334 in December 2016, which condemned Israel's settlement activities as threatening the viability of a two-state solution based on the 1967 lines. Despite this primarily political censure, the US signed a USD38-billion package in military aid in September 2016 for the next decade, reaffirming its role as Israel's primary security guarantor. Although there are concerns that a closer US partnership with Arab Gulf countries, primarily to contain Iran, would be at the expense of US relations with Israel, the US is unlikely to withdraw its support for Israel, a reliable ally in the Middle East.

Historical context

The strategic alliance between the two countries began in earnest when then-president John Kennedy sold HAWK anti-aircraft missiles to Israel in 1962 after Egypt obtained long-range bombers from the Soviet Union. Dismissing its previous policy of ensuring that no one state should gain a military advantage in the region, US military and economic aid to Israel began to grow. Since then, the US has been Israel's primary arms supplier. In 1987, Israel was designated as a major non-NATO ally, and allowed to compete equally with NATO countries and other US allies for defence contracts. The two countries also hold joint military exercises, and have a joint anti-terrorism working group and a hotline between the Pentagon and Israel's Ministry of Defence. The relationship is underpinned by a powerful pro-Israel lobby in the US.

The US has also acted as a peace broker between Israel and its Arab adversaries. Former president Jimmy Carter brokered the 1979 treaty between Israel and Egypt, while Bill Clinton oversaw the 1994 peace deal with Jordan. Clinton also came close to getting then-premier Ehud Barak and his Palestinian counterpart, Yasser Arafat, to come to a final settlement at Camp David in July 2000. Since then, as Israeli-Palestinian relations deteriorated, no other initiative has had much chance of success, although President George W Bush convened the Annapolis conference in 2007 and Obama appointed peace envoys and had John Kerry conduct intensive diplomacy in 2014.

Sub-Saharan Africa

Nigeria

Current status

The US has stepped up assistance to Nigeria in the wake of the kidnapping of over 200 girls from their school in Chibok, Borno state, in April 2014; President Barack Obama dispatched a team of advisers and technical experts to assist the Nigerian military, and sanctioned reconnaissance flights and the use of unmanned drones. The biggest contingent is a group of 80 military personnel sent to Chad to run and protect intelligence, surveillance, and reconnaissance missions over northeast Nigeria. Assistance is likely to continue over the long term, now that the scale of the Boko Haram insurgency is clear, but US law limiting the levels of co-operation and information-sharing with foreign militaries considered to have poor human rights records will curtail the practical usefulness of this relationship. This was emphasised in November 2014 when the Nigerian ambassador to the US complained that its refusal to sell hi-tech weaponry including attack helicopters was preventing Nigeria dealing a "knockout blow" to Boko Haram. US secretary of state John Kerry visited President Muhammadu Buhari in late August 2016 and is believed to have discussed the sale of up to 12 A-29 Super Tucano light aircraft in recognition of warmer US-Nigeria relations. President Donald Trump reportedly called Buhari in February 2017 to assure him that he wanted to expedite the sale in order to serve the twin aims of combating Islamist terrorism and boosting the US defence industry, although it remains unclear how Nigeria can afford to meet the estimated USD600-million cost.

Closer co-operation has followed the victory of Buhari in the March 2015 presidential election, as he had enjoyed significant implicit support from the US which had shown signs of frustration with levels of rampant corruption in the Goodluck Jonathan administration and his failure to tackle Boko Haram. Kerry played a particularly prominent role in co-ordinating international opinion before the election, and warning Jonathan to ensure a free and fair poll was permitted.

The signs of a new rapprochement with the US were immediate, as Buhari was invited for a four-day state visit in July 2015, including personal meetings with Obama. Buhari secured commitments for closer co-operation and technical assistance in the fight against Boko Haram, as well as help in recovering an estimated USD150-billion worth of assets stolen under previous administrations. Security concerns are now the overriding priority of the US-Nigeria relationship, particularly with the US having ended its imports of Nigerian oil in 2014.

1990s to 2010s

Although relations between the US and Nigeria have markedly improved since Nigeria's return to democracy, concern about corruption in Nigeria has remained high on the US priority list. Then Nigeria president Olusegun Obasanjo's official visit to the US at the end of October 1999 led to more US aid to Nigeria and an end to a US ban on flights to the country due to poor airport security and drug smuggling. In 2000–01 the US provided some USD29 million per year to Nigeria in development aid, making it the country's largest bilateral donor, just ahead of the United Kingdom. The consolidation of civilian control over the military and the full restoration of democratic institutions in Nigeria have also been high on the US agenda.

During then president Bill Clinton's official visit to Nigeria in September 2000, a number of bilateral agreements were concluded, among others relating to increased military co-operation and countering drug trafficking. Military assistance was resumed in May 1999, following six years of suspension under the Sani Abacha military government. In 2000, Operation Focus Relief saw US Army trainers undertake a 10-week peacekeeping training and equipment programme for five battalions of Nigerian troops to be deployed as part of the United Nations Mission in Sierra Leone (UNAMSIL) force in Sierra Leone. The US has also assisted in the professionalisation of Nigerian military forces by refurbishing aircraft and supplying coast guard patrol craft. It met half the USD7 million cost for a private security assistance firm, MPRI, to train senior Nigerian military and defence officials on up-to-date techniques in defence budgeting, resource management, and force development. However, some military assistance from the US was suspended in March 2003, with the US citing human rights concerns over the Nigerian army's alleged killing of about 200 Tiv civilians in Benue and Taraba states during inter-communal violence in October 2001. Some Nigerian officials protested that this action was taken to punish Nigeria for its failure to back in public the US position on Iraq. US officials denied this. Assistance for military training was resumed in September 2003.

Then US president George W Bush visited Nigeria in July 2003 as part of his five-state tour of Africa. Bush and Obasanjo agreed to work together to find a solution to the crisis in Liberia. At the end of July, shortly after criticising US government inactivity, Obasanjo revealed that the US had promised to provide USD10 million to finance the first phase of deployment of Nigerian troops in Liberia, via private-sector security contractors. Obasanjo also worked closely with US officials to bring to an end the military coup in São Tomé and Príncipe in July 2003. In mid-September 2003, Nigeria suffered a setback when it was returned to the US list of major drug-transiting nations. However, the US provided USD1.1 million in assistance in early October for Nigerian law enforcement programmes, including the combating of drug trafficking.

US Secretary of State Hillary Clinton visited seven African nations in August 2009, including Nigeria, underlining Washington's commitment to the continent. In June 2011, Jonathan went on a state visit to the US, to meet with his US counterpart, Obama. The talks were also set to strengthen bilateral relations and provided an opportunity to consult on regional and global developments. Hillary Clinton returned to Nigeria in August 2012 as part of another Africa tour, meeting with Nigerian officials and speaking on various issues, including the challenges Nigeria faces in the security arena in terms of the Islamist militant group Boko Haram. In July 2013, Obama announced the 'Power Africa' initiative, pledging USD7 billion to enhance power infrastructure in six African countries, including Nigeria.

Multilateral Global organisations

NATO

In the early 2000s, Robert Gates, then Secretary of Defence, expressed fears that NATO was in danger of becoming a "two-tiered alliance" during testimony to the Senate Armed Services Committee in February 2008. Gates' comments were made against the background of an increasingly acrimonious diplomatic standoff within the alliance

regarding force levels, strategy, and tactics in Afghanistan, where NATO commands the International Security Assistance Force (ISAF). However, in recent decades NATO and the United States have further strengthened their alliance and cooperation in response to Russia's involvement in Ukraine and Syria, one of the most pressing issues facing the member states. Former secretary of defense Ash Carter under former president Barack Obama has said the alliance is "stronger than ever before", demonstrating greater support by the US to work alongside NATO countries in joint military exercises and strategic collaboration.

Following lukewarm support for NATO during his election campaign, President Donald Trump restated his concerns ahead of his inauguration, labelling the alliance "obsolete" . Despite this, new secretary of defense, James Mattis (a former army general), emphasised NATO's effectiveness during his Senate confirmation hearings.

At the NATO Wales Summit in 2014, NATO members discussed challenges posed by Russia's strategic actions and implications, calling to further improve the Alliance's military and strategic position in Europe and the rest of the world. Member states reached an agreement on the Readiness Action Plan (RAP), a comprehensive package of measures aiming to fully prepare NATO members to act swiftly and firmly to new security challenges, strengthening collective defence through continuous air, land and maritime presence, particularly in Eastern Europe. Former president Barack Obama, during remarks at the summit not only commended the actions decided upon by the NATO member states but also openly encouraged non-NATO member states to consider applying for membership. Although the US would ideally like to see NATO expansion continue by taking in the former Soviet republics of Georgia and Ukraine, Washington recognises that Russia holds sway in its "near abroad" and that it lacks the clout to effect expansion in the face of Russian opposition. Furthermore, European allies also have exhibited wariness towards expanding NATO membership. Opposition from Germany and other European states anxious not to antagonise Russia is sufficient to prevent expansion as enlargement is dependent on unanimity among existing NATO members. The president's statement in welcoming potential new member states will likely set a precedent for his successor in 2017, involving the US in a greater role in European security, given Russia's recent actions in Ukraine and Crimea.

In response to the rising Russian presence in Eastern Europe and the Middle East, as well as Islamic State in Iraq and the Levant (ISIL) in Iraq and Syria, joint NATO and US military exercises have robustly increased since 2014 to ensure greater preparation in the event of an attack. In 2015 alone, NATO has held multiple military exercises, including its largest exercise in over a decade known as Trident Juncture, an amphibious training drill in Spain, Portugal, and Italy. Another significant exercise, Swift Response, was the largest airborne drill in Europe since the end of the Cold War. Held in Germany, Italy, Bulgaria, and Romania, 5,000 soldiers from 11 NATO member states participated in "simultaneous multinational airborne operations" which spanned for four weeks. In light of criticism from Russia, NATO defends these military exercises by reiterating that these drills are necessary in order to address concerns of Russia's growing aggression in Europe and the Middle East. NATO spokesperson Oana Lungescu, in a press briefing in July 2015, affirmed NATO's stance on the series of military exercises, stating they "ensure that NATO Allies are ready to deal with any emerging crisis, from any direction, and that they are able to work effectively with partners in tackling any crisis".

Ash Carter announced in June 2015 that the US will station heavy equipment, including artillery, tanks, and infantry-fighting vehicles on a rotating basis in Eastern European NATO member states. This marks a new level of US participation in the region, especially given Obama's previous decision in September 2009 not to proceed with the Bush plan to establish a missile defence system in Eastern Europe, which was met with relief by most governments in Western Europe but was a severe disappointment to Poland and the Czech Republic. Eastern European countries such as Poland have exceptionally increased investment in military defence mechanisms alongside with the US greater defence measures in the region. In early 2015, the Polish government decided to invest in US company Raytheon's Patriot anti-missile system to bolster its defence, in light of Russia's looming influence near in Ukraine.

Ash Carter also announced in a press release that the US will meet the pledge all NATO allies made at the Wales Summit in 2014 to invest no less than 2% of the country's GDP to defence within the decade, indicating greater financial and military partnership with NATO. Understandably, the US already meets this pledge as one of the largest defence spending partners in NATO, which is currently set at 3.5% of the GDP. Although NATO Secretary General Jens Stoltenberg has expressed support for higher expenditure on defence to prepare for future defence challenges, the organisation will likely increase its spending budget only moderately as a collective whole. Most NATO member states spend small amounts on boosting military spending, remaining wary of economic conditions in Europe. In 2015, only four out of 28 countries met the organisation's spending target, which included Britain, Estonia, Greece and the US. Western European states in particular have generally not changed military spending, and will maintain this position unless prompted by NATO member states in favour of a larger expenditure on defence spending. NATO's non-binding agreement of increasing defence spending to 2% by 2024 demonstrates a greater strategic need for member states to assume more responsibility in defining and protecting European security in the midst of Russia's growing influence in the region.

Elsewhere, NATO continues to serve as an important resource in Afghanistan. After the Taliban briefly occupied the provincial city Kunduz in 2015, the US decided to retain 9,800 US troops in the region until the end of 2016, and then gradually will reduce the number of troops to about 5,500, until it decides to fully withdraw. To further support efforts to train Afghan soldiers and maintain peace in the region, NATO member states such as Germany, Turkey, and Italy will continue to keep their current level of deployment in Afghanistan.

External trade Data United States: Major trading partners, 2015

EXPORTS IMPORTS Country Billions of USD Percent share Country Billions of USD Percent share Canada 280.0 18.6 China 481.9 21.5

Mexico 236.4 15.7 Canada 295.2 13.2

China 116.2 7.7 Mexico 294.7 13.1

Japan 62.5 4.2 Japan 131.1 5.8

United Kingdom 56.4 3.7 Germany 124.1 5.5

Germany 49.9 3.3 South Korea 71.8 3.2

South Korea 43.5 2.9 United Kingdom 57.8 2.6

Netherlands 40.7 2.7 France 47.8 2.1

Hong Kong 37.2 2.5 India 44.7 2.0

Belgium 34.1 2.3 Italy 44.0 2.0

Source: IMF, Direction of Trade

United States: Major trading partners, 2000

EXPORTS IMPORTS Country Billions of USD Percent share Country Billions of USD Percent share Canada 174.6 22.6 Canada 229.2 18.5

Mexico 108.8 14.1 Japan 149.5 12.1

Japan 64.5 8.4 Mexico 135.1 10.9

United Kingdom 41.4 5.4 China 106.2 8.6

Germany 29.2 3.8 Germany 59.5 4.8

South Korea 27.3 3.5 United Kingdom 43.7 3.5

Taiwan 23.8 3.1 Taiwan 41.9 3.4

Netherlands 21.7 2.8 South Korea 40.9 3.3

France 20.4 2.6 France 30.1 2.4

Singapore 17.5 2.3 Italy 26.0 2.1

Source: IMF, Direction of Trade

Economic development Overview Producing around a fifth of total global output, the United States is the largest and most diverse economy on the planet. Average real income levels are high, even if distribution is less even than in other industrialized economies. GDP per head on a purchasing power parity basis was estimated at USD35,000 in 2002. The US economy is more market oriented than just about any other developed economy. This has created an economic dynamism, together with income disparities, more marked than in other developed economies. Impressive productivity growth in recent years has elevated growth rates and driven down the unemployment rate. Growth in the past 15 years has been solid, except for in 2001, when the economy slipped into recession. Growth in 2004 was the strongest since 1999. Growth has been accompanied by notable imbalances within the economy. The twin deficits—fiscal and current account—have grown in recent years. Although the more likely scenario is that these balances will be sorted out over time through tax increases and a weakening in the US dollar, these deficits, particularly the current-account deficit, pose risks. One risk is that the US dollar may abruptly fall, raising interest rates and throwing the economy into recession.

Policymakers generally follow market-oriented policies. Government activity as a percentage of overall economic activity is one of the lowest within an industrialized economy. Government accounted for around 14% of GDP in 2003. Despite promises, successive administrations have found it difficult to reduce the size of the public sector. In recent years, growth has been increasingly driven by expansionary fiscal policies (i.e., tax cuts) and monetary policies (low interest rates). These policies have fueled consumer spending and a housing-sector boom. The challenging factor to the authorities as growth strengthens and the potential for inflation begins to threaten again, particularly with high global oil prices, is how to bring monetary and fiscal policy toward a stance more closely associated with strong growth. The Bush administration has endeavored to make its huge program of tax cuts permanent, but some cuts may be rolled back if the deficit continues to soar. The war in Iraq and the wider costs of the war on terror have only added to the fiscal pressures.

Labor markets Historically, the economy is a job-creating machine. More than 20 million new jobs were created in the 1980s and 1990s. Nevertheless, job growth slowed after 2000, and following the onset of the 2008 recession, the economy lost more than 8 million jobs. IHS Global Insight expects more than 19 million jobs will be created this decade. The unemployment rate, which averaged 5.1% between 1994 and 2007, is usually low compared with other industrialized economies. The unemployment rate shot up when the economy went into recession in 2008, however, and it is likely to remain above 7% during the first half of this decade.

The population projections are built on the Census Bureau's latest projections, which were released in August 2008. These projections have the US population expanding at an annual rate of 0.9% in 2009–40, when the population reaches 404 million. Growth in the older-age cohorts will be stronger as the baby boomers age. The 65-years-and-over population share rises from 12.9% in 2009 to 20.1% in 2040.

Slower long-run increases in the labor force indicate more moderate long-run employment growth in the future. Total civilian employment will rise at an average annual rate of 1.0% in 2009–40. Total establishment employment will rise from 140 million in 2009 to 182 million in 2040, an increase of 30%. Manufacturing's share of total employment will continue to decline over the forecast period, falling to under 6% in 2040 from about 10% in 2009. The broad service sector will generate an increasing share of employment growth in the forecast period, although the federal government's share of employment will decline during the forecast period.

Monetary system The US dollar dominates international transactions, and US monetary policy therefore has worldwide economic consequences. Several currencies are pegged to the US dollar, and many countries use US dollars as their currency. Monetary policy is conducted by the Federal Reserve (Fed). The Fed implements monetary policy by managing the federal funds rate, while the rate

banks charge other banks for overnight loans. The target federal funds rate is set by the Federal Open Market Committee (FOMC). The FOMC seeks to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates, as required by the Federal Reserve Act. Other monetary policy tools used by the Fed include changing the required reserve ratio, and changing the discount rate, the rate the fed charges banks for loans.

Financial system The banking sector has been consolidating in recent years. Recent mergers include Bank of America with Fleet Boston (2003) and JP Morgan Chase with Bank One (2004). The big three of United States banking are Citigroup, JP Morgan Chase, and Bank of America. These banks are giants not only domestically, but also internationally. The asset base of the three largest banks at the end of 2003 stood at USD3.2 trillion. The major banks are driven both by the retail and investment banking businesses.

Below the major giants of the industry, however, the sector is surprisingly fragmented. There were around 8,000 banks at the end of 2003, and another 1,500 other savings institutions. The fragmentation of the banking sector is the product of a system still regionally orientated. The 10 largest banks in the country hold around 62% of capital. No single bank is permitted to acquire more than 10% of nationwide deposits.

The capitalized value of companies listed on the New York Stock Exchange is about USD15 trillion. The market picked up in 2003 after three consecutive years of decline. Equity indexes peaked in the first quarter of 2000, following a 20-year bull run. Market capitalization at the end of 2000 stood at more than USD11 trillion. The collapse in equity indexes in 2000 was most poignantly felt in the NASDAQ high-tech exchange, which plummeted in the wake of the dot-com bubble.

Within the bond market, the retreat of interest rates into 2000, particularly following the September 11, 2001, attacks in the US, saw yields on bonds plummet. There were accusations the Fed was feeding a bond bubble that burst around the time of the 2003 Iraq war. Subsequently, as economic activity picked up, the yield curve within the bond markets steepened noticeably. Notable within bond markets has been the degree to which foreign players, particularly foreign central banks, have been entering the US treasury market, helping to fund the US current-account deficit.

Natural resources Agricultural potential within the country is considerable. The grain baskets of the Midwest help make the economy the most important cereal producer in the world. Agricultural production amounts to 2% of GDP. The fishing sector is of some importance on the coasts, despite the decline in East Coast cod stocks.

There are substantial mineral deposits of almost all key minerals within the country, but not enough to ensure self-sufficiency. Aluminum is the most important mined product, accounting for about 17% of the global total. Iron, copper, lead, silver, and gold deposits are other major mining products.

At the beginning of 2003, the country had around 22 billion barrels of oil in proven reserves, concentrated in California, Texas, Alaska, and Louisiana. Exploration in Alaska and Louisiana is expected to increase oil reserves. United States oil production meets around 40% of total domestic oil demand. The US is still the world's third-largest oil producer. It is also the world's largest single energy market. It represents more than 25% of global consumption of oil, natural gas, coal, and nuclear energy, and ranks first in the global production of coal and nuclear energy. The country has the world's largest reserves of coal, which provide more than 50% of its electricity generation needs. Almost 1 billion tonnes of coal were produced in 2003, almost entirely for domestic electricity production. Coal production is concentrated in Wyoming, West Virginia, and Kentucky.

Proven gas reserves at the beginning of 2003 accounted for a little more than 5 trillion cubic meters. Gas reserves are not sufficient to meet domestic demand; most of the balance is imported from Canada.

Tourist attractions within the country include major urban centers (such as New York City, New Orleans, San Francisco, and Washington, D.C.), major beach centers (Florida, California, and Hawaii), and numerous spectacular natural attractions (Niagara Falls, the Grand Canyon, and Yellowstone National Park).

Energy

2008 2009 2010 2011 2012

Oil (Thousand b/d)

Production 6,492 6,941 7,212 7,431 7,633

Consumption 17,859 17,290 17,614 17,505 17,147

Natural gas (Billion cubic feet)

Production 19,375 19,741 20,452 20,947 20,947

Consumption 22,306 21,976 22,922 23,495 24,433

Coal (Thousand short tonnes)

Production 965,498 883,555 897,313 893,899 790,463

Consumption 909,607 808,296 854,994 808,459 694,974

Electricity (Thousand megawatt hours)

Production 4,343,761 4,166,144 4,346,882 4,328,650 4,348,378

Consumption 3,861,938 3,685,155 3,844,343 3,814,983 3,892,345

Source: IHS

Key sectors: Key sectors analysis Agriculture: Although only a small component of overall GDP, the United States is one of the most important agricultural producers in the world, particularly of grain. The agricultural sector is among the most capital intensive in the world. In recent years, agriculture has been consolidating. In 1940, there were 6 million farms averaging 67 hectares each. By the late 1990s, there were only about 2.2 million farms averaging 190 hectares in size. The agricultural sector, however, remains heavily dependent on a subsidy system developed as part of the New Deal. Attempts to reduce subsidies have faltered.

Automotive: The US automotive industry is the largest in the world. The country has a bigger vehicle production industry and a larger vehicle market than any other country, with only Japan able to lay claim to being in a similar league. The country boasts the world's two largest vehicle manufacturers in General Motors (GM) and Ford; a third major manufacturer, DaimlerChrysler; and the majority of the world's largest component suppliers. Competition from new manufacturers is intense, and the former Big Three are fighting hard to avoid losing market share. Energy: Today, the US is the world's largest single energy market. It represents more than 25% of global consumption of oil, natural gas, coal, and nuclear energy, and ranks first in the global production of coal and nuclear energy. It has the world's largest reserves of coal, which provide over 50% of its electricity generation needs. The US is a major oil-producing country. Most of its existing oil-producing fields, however, are maturing or in decline. Telecoms: The US generated USD302 billion in telecoms revenues in 2001. Key growth drivers for the sector include a mobile workforce and high levels of foreign direct investment. Inhibitors include overcapacity, particularly in the long-haul market.

United States: Top-10 Sectors Ranked by Value Added

2017 Level 2018 Percent Change Percent Share of GDP (Bil. US$) (Real terms) (Nominal terms)

1. Real estate activities(L) 2,359.1 2.4 12.2

2. Public admin & defense, other services (O,S,T,U) 1,862.2 1.6 9.6

3. Human health and social work activities(Q) 1,435.8 3.4 7.4

4. Wholesale trade, except of motor vehicles and motorcycles(G46) 1,176.0 2.3 6.1

5. Education(P) 1,056.6 3.0 5.4

6. Retail trade, except of motor vehicles and motorcycles(G47) 928.1 2.4 4.8

7. Security, buildings, employment (N78,N80,N81,N82) 888.0 4.1 4.6

8. Construction(F) 823.3 1.2 4.2

9. Financial service activities, except insurance and pension funding(K64) 615.1 2.8 3.2

10. Accommodation and food service activities(I) 578.8 2.3 3.0

Top-10 Total 11,723.0 60.4

Updated: 19 April 2018 Source: World Industry Service, IHS Markit

Business environment: Legal system There are federal courts and state courts, both of which are subdivided into trial courts and appellate courts. Cases begin in trial courts, with appellate courts available to hear appeals. Federal cases begin in the United States district courts, with appeals to one of 13 appellate courts. There are 12 geographically divided federal court jurisdictions, plus the Federal Circuit, which handles patent law and Claims Court appeals. Appellate court decisions are binding on lower courts in that area, but not on other appellate jurisdictions. The Supreme Court may only review cases with a constitutional element, but will also consider cases of national interest or issues on which the appellate courts have ruled differently.

Business regulation Dispute resolution

In addition to the court system there is also a well-developed arbitration process, the cornerstone of which is the Federal Arbitration Act (FAA). The act ensures that agreements to arbitrate are enforced by requiring courts to compel arbitration if a party to an arbitration agreement refuses to arbitrate, and to stay court proceedings where a valid arbitration agreement exists.

Company law and corporate governance

Any foreign person wishing to do business in the United States must select the form of business entity in which to conduct US operations. The creation, management and powers of the different forms of business entities are governed by state, rather than federal law. The choice of entity must be considered in light of the specific considerations of a particular business venture or transaction. The results, in terms of tax treatment, exposure to contract and tort liability, and efficiency and methods of governance, may vary significantly, depending on the form of entity chosen. There is no optimal entity for all situations. Each has its own advantages and disadvantages. The types of entity available throughout the US include corporations, general partnerships, limited partnerships, business trusts, joint ventures, limited liability companies (LLC), branch offices of foreign entities, and sole proprietorships. A branch of a foreign corporation is considered a mere extension of the corporation rather than a separate legal entity. In most cases , a business entity formed under the laws of one state will be recognised by all other states.

Branch offices: A US branch is a US business conducted by a foreign individual or corporation organised under the laws of another country that is not separately incorporated. Foreign corporation: A foreign enterprise can form a US company to conduct its US business. A corporation is organised under the laws of a specific state rather than under federal law.

Partnership: A foreign investor can conduct a US business through a partnership. There are three types of partnerships under US law: general; limited; and limited liability. Generally, partnerships, like corporations, are formed under state laws. Partnerships are frequently used for joint ventures or for real estate investments that involve other investors. Often, a domestic corporation is used for an investment, but that corporation becomes a partner in a US partnership with a co-venturer or co-investor.

Bankruptcy

The US Bankruptcy Code was enacted in 1978 and governs both corporate and individual bankruptcies. Each judicial district (90 in total) has a bankruptcy court. Federal bankruptcy cases are decided by the United States bankruptcy judge, a judicial officer of the US district court. In practice, however, most of the process is handled outside of the courts by trustees appointed to oversee cases. There are several types of bankruptcy: Chapters 7; 11; 12; and 13. Chapters 7 ("liquidation") and 11 ("reorganisation") are generally used for businesses and corporations. Under Chapter 7, non-exempt assets must be sold off, while under Chapter 11, the debtor will restructure but continue to operate and pay off the debts to the creditor. Chapter 11 is particularly popular and is more favourable than bankruptcy regulations in many other countries. Chapters 7 and 13 ("adjustment of debts of an individual with regular income") are used for individual debtors. Chapter 7 allows individuals' debts to be written off entirely, while Chapter 13 involves a similar repayment plan to that under Chapter 11 for companies. The 2005 Bankruptcy Reform Act reduced judges' discretion over which to apply. Chapter 12 (" adjustment of debts of a family farmer with regular annual income") is used for family farms only. There is also Chapter 9 ("adjustment of debts of a municipality"), again similar to Chapter 11. A more detailed description of all the forms of bankruptcy can be found .here

Competition

The basic antitrust statutes in the United States are:

1890 Sherman Act: Prohibits contracts, combinations, and conspiracies that restrain trade as well as monopolisation. 1914 Clayton Act: Applies to exclusive dealing arrangements, tie-in sales, price discrimination, mergers and acquisitions, and interlocking directorates. The Clayton Act was amended by the and the . Private lawsuits can be brought by those wronged and significant 1936 Robinson-Patman Act 1950 Celler-Kefauver Anti-merger Act claims made. 1914 Federal Trade Commission Act: A catch-all measure that can be used to fill apparent loopholes in the other legislation.

Competition law, particularly in the area of antitrust, has traditionally been tightly enforced in the United States and is in the remit of the Federal Trade Commission (FTC). Former president George W. Bush's administration let it been known that it would concentrate more on cartel-like behaviour than on the abuse of dominant position type action typified by the Microsoft prosecutions during the Clinton era. During the Bush era, the Department of Justice did not file a single case against a dominant firm for monopolistic behaviour. The administration of former president Barack Obama altered this policy in May 2009, with then assistant attorney general Christine Varney reversing amendments to Section 2 of the Sherman Act, which loosened the rules against forming a monopoly.

Employment

Employment and labour laws have traditionally been problematic areas for business, particularly in the area of discrimination, and this is unlikely to change. The George W. Bush administration signalled its pro-business intentions from the start when it refused to implement former president Clinton's ergonomics regulations on safety at work, but the Obama administration was tougher on labour issues. President Donald Trump, meanwhile, has taken a more business friendly approach, especially in regards to overtime and safety rules. The Supreme Court has gradually been tightening disability laws and narrowing the definitions upon which compensation can be requested. Federal employment laws – of which there are more than 180 – are administered and enforced principally by the Department of Labor. Key laws and regulations that cover multiple sectors include:

Wages and hours: The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay. It also sets minimum wages for people working in different types of job. Many states have meanwhile introduced their own, higher minimum wages. Workplace safety and health: This is handled under the terms of the Occupational Safety and Health Act (OSH), by the Occupational Safety and Health Administration . Workers' compensation, gender discrimination: There are a range of sector-specific acts that regulate compensation and medical care. Under the Civil Rights Act of 1964 provisions were brought in to counter gender pay inequality, but the practice has persisted. In 2009 the Lilly Ledbetter Fair Pay Act was signed which amended the Civil Rights Act to restart the 180-day statute of limitations for filing a lawsuit with each discriminatory pay cheque. Previously, pay inequality was often only discovered or challenged when it was already too late. Pensions and welfare benefits: The Employee Retirement Income Security Act (ERISA) applies to those employers who offer pension or welfare benefits to employees. A wide range of fiduciary, disclosure and reporting requirements are imposed. Labour representation: The Labor-Management Reporting and Disclosure Act, 1959, sets out the relationship between unions and their members. Labour organisations are bound by a range of rules on their finances and management. For employees there is a range of whistleblower protection. Family rights: The Family and Medical Leave Act requires employers with over 50 staff to offer 12 weeks of unpaid, job-protected leave following childbirth or during major illness of a family member. Migrant and seasonal workers: The Migrant and Seasonal Agricultural Worker Protection Act regulates the hiring and employment activities in this sector. Such workers are also regulated under the terms of the Fair Labor Standards Act and the Immigration and Nationality Act. Redundancies: Plant closures and layoffs are regulated by the Worker Adjustment and Retraining Notification Act (WARN). This means employees must be warned in advance.

Environmental

http://www.uscourts.gov/library/bankbasic.pdf

Major environmental laws in the United States include:

National Environmental Policy Act, 1970: This is the basic national charter for environmental protection. Clean Air Act, 1955 Clean Water Act, 1948 Comprehensive Environmental Response, Compensation, and Liability Act, 1980 Emergency Planning & Community Right-To-Know Act, 1986 Endangered Species Act, 1973 Federal Food, Drug and Cosmetic Act, 1938 Oil Pollution Act, 1990 Pollution Prevention Act, 1990 Resource Conservation and Recovery Act, 1976 Safe Drinking Water Act, 1974 Solid Waste Disposal Act, 1965 Toxic Substances Control Act, 1976

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These are all administered by the Environmental Protection Agency (EPA), but enforcement varies at the state level. There are also further state and local regulations. Under George W. Bush's presidency, some environmental restrictions were rolled back, but former president Barack Obama moved to reverse this, including by announcing the Clean Power Plan, which sought, in part, to establish national standards to limit carbon pollution by power plants. In October 2017, President Donald Trump's EPA Administrator Scott Pruitt began repealing the plan. This has been contested by several states and environmental groups. Meanwhile, the Trump administration has taken other measures in reducing other Obama environmental regulations on both the energy and mining sectors.

Intellectual property

Intellectual property rights (IPR) protection is TRIPS-compliant and enforcement is generally good. The four key laws in this area are the Digital Millennium Copyright Act, the Lanham Act on trademarks, the Patent Act and the Uniform Trade Secrets Act. Successive administrations have struggled to persuade other countries to respect the intellectual property of its artists and businesses. China has come under particular pressure on this front and the Trump administration has threatened the country with sanctions if it does not improve its own IP protections.

Land

Private property rights are one of the fundamental components of the US Constitution, and are consequently well protected. There are nonetheless some restrictions imposed by government upon property owners, usually in the interests of environmental and resource protection. Such restrictions can be imposed by either federal or state legislatures. The Endangered Species Act is one of the most commonly used tools at regulators' disposal. The concept of "eminent domain", or compulsory purchase of private property, also exists in US law, provided the state pays fair market value.

Foreign exchange and profit repatriation

There are no restrictions or requirements with respect to the use of currency accounts by domestic or foreign investors. Consequently, foreign investors are not subject to any limitations on the repatriation of share capital, loans, income, or dividends to their home country.

Investment protection

The United States welcomes foreign direct investors and provides fair, equitable, and non-discriminatory treatment. The only limited exceptions are designed to protect national security, covered by the so-called Exon-Florio provision. In 2007, Congress enacted the Foreign Investment and National Security Act, which established the framework to be used by the Committee on Foreign Investment in the United States (CFIUS) when it conducts reviews on an inter-agency basis. Exon-Florio refers to Section 721 of the 1950 Defense Production Act (amended by Section 5021 of the 1988 Omnibus Trade and Competitiveness Act). The president can block an investment if:

There is credible evidence that the foreign entity exercising control might take action that threatens national security, and The provisions of law, other than the International Emergency Economic Powers Act do not provide adequate and appropriate authority to protect the national security.

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In 2005, the George W. Bush administration came under strong pressure to resist an attempt by Chinese state-controlled energy firm, China National Offshore Oil Corp's ( CNOOC) efforts to acquire Unocal. The Obama administration did not aggressively pursue anti-investment, protectionist policies. However, recently members of Congress have begun debating new legislation that would enhance the powers of CIFUS to explicitly take a tougher line against both Chinese and Russian foreign investment.

Privatisation

http://www.epa.gov/

http://www.treasury.gov/about/organizational-structure/offices/International-Affairs/Pages/cfius-index.aspx

The United States makes widespread use of private provision of public services, with state involvement in the economy relatively low by international standards. However, there have been few conventional "privatisations" in recent years, and there are often restrictions on investments by foreign firms. Former president Ronald Reagan was a vigorous proponent of privatisation – one of the landmarks was the sale of Conrail in 1987 – but his successors have been less active in terms of outright sales of public assets or bodies. At the state and city level there is also a high level of contracting out. The unions have tended to resist privatisation as they regard it as a back-door means for the government to reduce their influence. Given the many types of "privatisation" of services, the regulations that apply are many and diverse. See also the Procurement section below.

Procurement

Given the large size of the United States' annual federal budget, with spending of USD4.147 trillion budgeted for fiscal year 2017, firms around the world are keen to gain access to contracts. The US operates a complex system of agencies and rules governing procurement, some of which are more open and transparent than others. There has long been a "revolving door" for jobs between government agencies and their major suppliers, although former president Barack Obama and current president Donald Trump have announced reforms to limit this practice. The best starting point for finding out about public procurement procedures is the General Services Administration ( ). This GSA has links to legislation and a variety of websites listing available tenders and contracts. For state-level procurement, vendors should approach the administrations directly.

Major international agreements

North American Free Trade Agreement (NAFTA) World Trade Organization (WTO) Treaties Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) World Intellectual Property Organization (WIPO) Copyright Treaty

The US also has a series of bilateral free-trade agreements (FTAs). Beneficiaries of existing bilateral agreements include Australia, Bahrain, Chile, Israel, Jordan, Malaysia, Morocco, and Singapore, with FTAs for Colombia, Panama, and South Korea approved by the US Congress in 2011. There are a number of multi-country deals in addition, such as the United States-Southern Africa Customs Union FTA. Free-trade agreements have ignited considerable political controversy over recent years, which has led current President Donald Trump to announce that he will withdrawal from the Trans-Pacific Partnership and revise NAFTA. In 2017, President Trump announced that the US will withdrawal from the 2015 Paris Agreement on Climate Change, stating that enactment of the agreement would undermine the US economy.

Taxes: Corporate

Tax snap-shot

Corporate % Notes

Corporate income tax rate

21 Top rate. In addition, many states levy income or capital-based taxes. An alternative minimum tax is imposed.

Capital gains tax rate

15– 20%

Branch rate tax 35

Withholding tax

Dividends 30 Applicable to payments to non-residents.

Interest 30

Royalties from patents, know-how etc.

Branch remittance tax

30 This is the branch profits tax.

Net operating losses (years)

Carry-back 2 Special rules apply to certain types of losses and entities.

Carry-forward 20

Individual Personal Income Tax (2016 projected bands)

% Notes

http://www.gsa.gov/portal/category/100000

Top rate: Earnings above USD500,000

37 Rates (in each instance) for single individuals

Earnings between USD200,000 and USD500,000

Earnings between USD157,501 and USD200,000

Earnings between USD82,501 and USD157,500

Earnings between USD38,701 and USD82,500

Earnings between USD9,526 and USD38,700

Earnings up to USD9,525 10

Source: US Internal Revenue Service (IRS)

Infrastructure Overview In general, the operating infrastructural environment in the United States is good. Infrastructure is highly developed by global standards, although many bridges, tunnels, and roads have begun to age and are in need of repair. The labour market is flexible and dynamic, and the government bureaucracy is generally efficient. Foreign investment is welcomed in most sectors, although employing foreign staff in the US can prove very difficult. Anti-globalisation and environmentalist movements mirror those in most Western democracies, but are unlikely to cause problems for foreign investors. In the wake of terrorist attacks there have been additional security precautions at airports and other public transport hubs, which can produce lengthy delays. The current administration has pledged large-scale investment in road networks and airports. In recent years the US has been struck by a series of exceptional natural disasters. These have included Hurricane Katrina's devastation of New Orleans and surrounding areas, widespread forest fires, a record number of tornadoes in the South and Midwest in spring 2011 and an extensive drought in Summer 2012. Climate change has been blamed by environmentalists for intensified weather conditions, although it does not necessarily explain these instances. Parts of the country are prone to earthquakes, although the infrastructure is generally well prepared.

Roads The US has an extensive network of public roads. The massive "interstate" highway network was largely developed in the 1950s under the Eisenhower administration as the federal government sought to expand its competency (through promoting and regulating interstate trade) in an area previously under the remit of state governments.

The continental US is connected to Alaska via the Trans-Alaskan Highway, which passes through the Canadian hinterland and was constructed as a strategic link during the Second World War. The West Coast route between Vancouver and Anchorage is impassable to road traffic. There are few other permanent highways in Alaska.

Railways The domestic emphasis on road transport has meant that the rail network is comparatively underused and mainly handles bulk freight, such as grain and coal, rather than passengers. There are 195,000 km of Class 1 freight railroads, 34,191 km of regional freight railroads and 45,731 km of light freight railroads while Amtrak, the principle passenger company, accounts for 36,590 km of the network. The introduction of high-speed rail links has attracted more passengers to the railroads, especially on the East and West Coasts. The rail industry is divided into dozens of different companies. The rail network also has international links with both Canada and Mexico.

Waterways The US has a total of 42,000 km (26,000 miles) of navigable waterways, including rivers, canals, and lakes. The largest of the inland waterways are the Great Lakes system ( including 619 deep water ports and 144 shallow water ports) and the Mississippi-Missouri-Ohio river complex, which link up most of the major cities between the Appalachians and the Great Plains. These two natural water systems are inter-connected through canals in Illinois. The Great Lakes system connects to the Atlantic Ocean via the Welland (Niagara) shipping canal and Canada's St Lawrence Seaway, and via canals from Lake Ontario to New York's Hudson River. Another important canal is the Chesapeake and Delaware Canal, which bypasses the Chesapeake peninsula. There are around 2,400 inland river and canal ports with commercial facilities in the US.

Airports The US has around 19,000 airports, including civil, military and joint airports, heliports, STOLports (short take-off and landing), and seaplane bases in the US and its territories . Of those, about 5,400 are open to public use and about 660 are certificated airports serving air-carrier operations with aircraft seating more than 30 passengers.

The William B. Hartsfield Atlanta International Airport

Reference point 33° 38.3'N, 84° 25.7'W

Maximum runway length 11,900 ft (3,600 m)

Runway surface Concrete

Elevation 1,000 ft (320 m)

Nearest town/city Atlanta 8 miles

Boston Logan International Airport Reference point 42° 21.9'N, 71° 00.4'W

Maximum runway length 10,000 ft (3,000 m)

Runway surface Bituminous concrete

Elevation 20 ft (6 m)

Nearest town/city Boston 1 mile

Chicago O'Hare International Airport Reference point 41° 58.8'N, 87° 54.3'W

Maximum runway length 13,000 ft (4,000 m)

Runway surface Bituminous, grooved

Elevation 670 ft (200 m)

Nearest town/city Chicago 16 miles

Dallas Ft. Worth International Airport Reference point 32° 53.8'N, 97° 02.2'W

Maximum runway length 13,000 ft (4,100 m)

Runway surface Concrete, grooved

Elevation 600 ft (180 m)

Nearest town/city Dallas 15 miles, Fort Worth 18 miles

Denver International Airport Reference point 39° 51.5'N, 104° 40.1'W

Maximum runway length 12,000 ft (3,600 m)

Runway surface Concrete

Elevation 5,400 ft (1,700 m)

Nearest town/city Denver 23 miles

Detroit Metropolitan Wayne County Airport Reference point 42° 12.9'N, 83° 20.9'W

Maximum runway length 12,000 ft (3,600 m)

Runway surface Concrete

Elevation 640 ft (190 m)

Nearest town/city Detroit 15 miles

Bush Intercontinental Airport, Houston Reference point 29° 58.9'N, 95° 20.8'W

Maximum runway length 12,000 ft (3,600 m)

Runway surface Concrete, grooved

Elevation 98 ft (29.9 m)

Nearest town/city Humble 4 miles, Houston 15 miles

Las Vegas McCarran International Airport

Reference point 36° 04.8'N, 115° 09.0'W

Maximum runway length 15,000 ft (4,000 m)

Runway surface Asphalt PFC

Elevation 22,000 ft (4,400 m)

Nearest town/city Las Vegas 6 miles

Los Angeles International Airport Reference point 33° 56.6'N, 118° 24.4'W

Maximum runway length 12,000 ft (3,700 m)

Runway surface Concrete

Elevation 130 ft (38 m)

Nearest town/city Los Angeles 12 miles

Memphis International Airport Reference point 35° 02.6'N, 89° 58.4'W

Maximum runway length 9,300 ft (2,800 m)

Runway surface Concrete, grooved

Elevation 330 ft (100 m)

Nearest town/city Memphis 4 miles

Miami International Airport Reference point 25° 47.6'N, 80° 17.4'W

Maximum runway length 13,000 ft (4,000 m)

Runway surface Asphalt, grooved

Elevation 11 ft (3.3 m)

Nearest town/city Miami 10 miles

Minneapolis St. Paul International Airport Reference point 44° 53.1'N, 93° 12.9'W

Maximum runway length 10,000 ft (3,000 m)

Runway surface Asphalt, concrete

Elevation 840 ft (260 m)

Nearest town/city Minneapolis 12 miles

Newark International Airport Reference point 40° 41.6'N, 74° 10.1'W

Maximum runway length 11,000 ft (3,300 m)

Runway surface Asphalt, grooved

Elevation 18 ft (5 m)

Nearest town/city Newark, city limits

New Orleans International Airport Reference point 29° 59.6'N, 90° 15.4'W

Maximum runway length 10,000 ft (3,000 m)

Runway surface Asphalt, concrete grooved

Elevation 6 ft (2 m)

Nearest town/city New Orleans 10 miles

New York John F. Kennedy International Airport

Reference point 40° 38.4'N, 73° 46.7'W

Maximum runway length 15,000 ft (4,400 m)

Runway surface Asphalt, concrete grooved

Elevation 13 ft (4 m)

Nearest town/city New York 13 miles

New York La Guardia Airport Reference point 40° 46.6'N, 73° 52.4'W

Maximum runway length 7,000 ft (2,000 m)

Runway surface Asphalt, concrete grooved

Elevation 22 ft (6.7 m)

Nearest town/city New York City 8 miles

Oakland International Airport Reference point 37° 43.3'N, 122° 13.2'W

Maximum runway length 10,000 ft (3,000 m)

Runway surface Asphalt

Elevation 6 ft (1.8 m)

Nearest town/city Oakland 4 miles

Orlando International Airport Reference point 28° 25.9'N, 81° 19.5'W

Maximum runway length 12,000 ft (3,700 m)

Runway surface Concrete

Elevation 96 ft (30 m)

Nearest town/city Orlando 6 miles

Phoenix Sky Harbor International Airport Reference point 33° 26.2'N, 112° 00.5'W

Maximum runway length 11,000 ft (3,500 m)

Runway surface Concrete

Elevation 1,100 ft (340 m)

Nearest town/city Phoenix 2 miles

Pittsburgh International Airport Reference point 40° 29.29'N, 80° 13.58'W

Maximum runway length 12,000 ft (3,500 m)

Runway surface Concrete, asphalt

Elevation 1,200 ft (370 m)

Nearest town/city Pittsburgh 18 miles

San Francisco International Airport Reference point 37° 37.1'N, 122° 22.4'W

Maximum runway length 12,000 ft (3,600 m)

Runway surface Asphalt

Elevation 11 ft (3.3 m)

Nearest town/city San Francisco 8 miles

Lambert St. Louis International Airport

Reference point 38° 44.9'N, 90° 21.6'W

Maximum runway length 11,000 ft (3,400 m)

Runway surface Concrete, grooved

Elevation 900 ft (180 m)

Nearest town/city St. Louis 10 miles

Salt Lake City International Airport Reference point 40° 47.2'N, 111° 58.1'W

Maximum runway length 12,000 ft (3,700 m)

Runway surface Asphalt

Elevation 4,000 ft (1,300 m)

Nearest town/city Salt Lake City 3 miles

Seattle-Tacoma International Airport Reference point 47° 26.00'N, 122° 18.5'W

Maximum runway length 12,000 ft (3,600 m)

Runway surface Concrete

Elevation 430 ft (130 m)

Nearest town/city Seattle, city limits

Ronald Reagan Washington National Airport Reference point 38° 51.1'N, 77° 02.3'W

Maximum runway length 6,900 ft (2,000 m)

Runway surface Asphalt, grooved

Elevation 16 ft (5 m)

Nearest town/city Washington, DC 2 miles

Washington Dulles International Airport Reference point 38° 56.7'N, 77° 27.4'W

Maximum runway length 12,000 ft (3,500 m)

Runway surface Concrete

Elevation 300 ft (95 m)

Nearest town/city Herndon 4 miles, Washington, DC 26 miles

Civil airlines

Alaska Airlines

Alaska Airlines, founded in 1932, covers an area in the Pacific coast that spans from the northern coastline of Alaska to Mexico. The Alaska Air Group consists of two airlines; Alaska and Horizon. Alaska undertakes long haul routes as far as California, Mexico and Hawaii.

American Airlines

American Airlines had its beginnings in 1920, from which time it has expanded to become one of the largest carriers in the world. It is owned in full by AMR, which acquired American Airlines in 1982. A major source of the airline's growth has been acquisitions. AMR took over Reno Air in 1999, its subsidiary American Eagle obtained Business Express that same year, American acquired the majority of Trans World Airlines assets which has since been fully integrated into the main airline. In April 2003, AMR concluded agreements to allow financial restructuring, covering levels of staff and associated costs, and a reduction in route structure and fleet, including a down-sizing of the St. Louis hub.

In 2015, American Airlines merged with US Airways, creating the world's largest airline. It has a fleet of over 950, serving over 350 destinations.

Delta Airlines

In September 2005, Delta filed for Chapter 11 bankruptcy protection for the first time in its 76-year history, citing unsustainable labour costs and record prices for aviation fuel. At the time of the filing, Delta had USD20.5 billion in debt, USD10 billion of which it had accumulated since January 2001. By the time it emerged from bankruptcy in April 2007 Delta had undertaken a massive overhaul of its personnel and operations. It had also resisted takeover bids from a number of suitors, including US Airways.

Delta serves more destinations than any other US airline, despite having suspended numerous routes, including Los Angeles to Hong Kong, Seoul and Bangkok; and Atlanta to Tokyo.

In October 2008, Delta completed a merger with Northwest Airlines thus becoming the world's largest commercial carrier. It has a fleet of over 400 serving over 370 destinations.

Frontier Airlines, Inc

Frontier Airlines was acquired by People Express in 1986. Under this new management, it recommenced operations in July of 1994. Frontier is a low fare airline with service to selected major US cities. Frontier experienced sustained growth until the traffic downturn of 2001, but recovered strongly and continued with a four-year transition to an all-Airbus fleet, completed in 2005. It has a fleet of 50, serving nearly 60 destinations. In April 2008, Frontier announced that it filed for Chapter 11 bankruptcy.

JetBlue Airways

JetBlue Airways is a low-cost airline with its headquarters in Forest Hills, New York. Its main base is John F Kennedy International Airport. It was incorporated in 1998 and started operations out of JFK in February 2000. Several of its executives worked for Southwest Airlines, and JetBlue at first adopted a similar low-cost approach, but it has since placed more emphasis on passenger comfort. It now has a fleet of over 150 aircraft and serves 60 destinations in 20 states plus Puerto Rico, and also flies to 11 countries in Latin America and the Caribbean, including Mexico, Bermuda and the Bahamas.

Southwest Airlines

Southwest Airlines, founded as Air Southwest in 1967, began operations in 1971. Southwest primarily runs short haul routes (about 1.5 hour flights) with low fares as an alternative to ground transportation. Morris Air, acquired in 1993, was integrated into Southwest in 1994. Due to its low-cost structure, the airline was able to survive the 11 September 2001 downturn with relatively little financial disruption. Today it is the largest airline in the United States by number of passengers carried domestically per year and the second largest airline in the world by number of passengers carried.

United Airlines

In 1926, United Airlines emerged from the merger of Boeing Air Transport, National Air Transport, Pacific Air Transport and Varney Airlines. By 1991, United had purchased the Pacific, European and Latin American facilities of Pan American. In 1993, United underwent capital restructuring as a result of which a merger between Covia Partnership and Galileo Company Limited ensued through a subsidiary of United. In 1994, an ESOP agreement resulted in 55% employee ownership and voting rights until 2000 definitely , and until employee ownership falls under 20% after that, making UAL Corporation the largest majority employee-owned company in the world. UAL is quoted on various stock exchange markets.

United was a founding member of the Star Alliance airline network – of which Air Canada, Lufthansa, SAS, Thai International and Varig are also a part – in 1997.

After the 11 September 2001 attacks, the acute traffic downturn – along with the cancellation of the merger with US Airways – prompted United to suspend its common stock dividend, lay off 20,000 employees and reduce its scheduled services by 20%. In December 2002, the parent company, and certain US subsidiaries filed for protection under Chapter 11 of the US Bankruptcy code. It emerged from bankruptcy protection in February 2006.

In May 2010, United Airlines agreed a merger with Continental Airlines that was approved in October 2010. The merger has created the world's largest airline – to be called United Airlines. The deal is said to be worth over USD3 billion and is intended to produce savings of USD1 billion.

Prior to the merger United Airlines had a fleet of over 400 aircraft and served over 200 destinations. This capacity will now be greatly increased, even taking into account efficiency savings made in areas of overlap with Continental.

Ports The US has 4,050 deep-water and 2,118 shallow-water commercial ports along its coasts.

Baltimore

Baltimore is found at 39° 17'N, 76° 35'W with an arrival outer limit at North Point. There are two different entrances and exits to the sea lanes; the primary being a 150 nautical mile stretch through Chesapeake Bay and Cape Henry in the South and the second being the Chesapeake and Delaware ship canal and is shorter by about 125 miles sailing distance. The first entrance is 700 ft wide and 50 ft deep; the second is 450 ft wide and 35 ft deep. The maximum length allowed is 1,250 ft, draft is 50 ft and there are no beam restrictions. The port has 37 major terminals, one with tanker capacity with a maximum LOA 800 ft and 97,000 dwt. There are terminals with facilities for general cargo, dry bulk and liquid bulk. The nearest airport to Baltimore port is BWI Airport, 10 miles away.

Baton Rouge

Baton Rouge port is located at 30° 28'N, 91° 12'W. It holds no restrictions for entry, clearance, docking or undocking. The port maintains a projected depth of 45 ft through constant dredging. The Exxon Terminal has a LOA 810 ft maximum with no beam restrictions. The port has grain, dry bulk and molasses handling facilities and offers a midstream anchorage buoy service in the Mississippi River opposite its docks for the transfer of cargo between barges and ships. There are three bridges that cross at New Orleans -- one at Baton Rouge, one at Gramercy and one at Luling-Destrehan - all maintain sufficient clearance. There are tanker capabilities in the port, and it is six miles from Ryan Airport.

Beaumont

The port of Beaumont is at 30° 05'N, 94° 05'W and is situated on Neches River, above Sabine Lake. It mainly handles cargo such as forest products, grains, project cargo, military matériel, bagged goods, metals and wood chips. The port is accessible through either the Gulf of Mexico or the federally maintained Neches Channel, the latter maintains a minimum width of 400 ft and depth of 40 ft, and has an air draft of 136 ft. There are 6,800 linear feet of harbour front. Wharves 2 and 3 and Harbour Island provide open berths for cargo that does not require covered storage at shipside. Wharves 2 and 3 have a Ro-Ro platform and measure 758 ft in length. The port offers a floating dry dock and is serviced by four major rail carriers, five major roadways and by steamship lines.

Boston

The Boston port is located at 42° 21'N, 71° 05'W. The principal rivers to which the port facilitates access are the Charles, Mystic and Weymouth Fore River. The main entrance to Boston Harbour is through the North Channel and President Roads, with a controlling depth of 35 ft; the average rise of the tide is 9.5 ft in Boston. There are three main entrance channels from sea to President Roads – Broad South North Channel, South South Channel and The Narrows. The Main Ship Channel connects President Roads to the Chelsea and Mystic Rivers and Charlestown Bridge on the Charles River. The port consists of 114 piers or wharves, some with railroad connections and a maximum of 40 ft depth alongside at mean low water. There are dry docks, facilities for bulk cement and 12 berths with tanker capacity with depths ranging from 32 ft to 40 ft. The closest airport is Logan International Airport in East Boston.

Chicago

The port of Chicago is located at 41° 50'N, 87° 45'W. During the St. Lawrence Seaway navigation season from 1 April to 15 December, the controlling depth is 27 ft. At Seaway Locks there is a maximum of 740 ft length, 26 ft draft and 78 ft beam. The Calumet River Terminals handle general cargoes, steel products, containers, raw materials and dry bulk commodities. They have over 5,000 ft of berthing space available. The Lake Calumet Terminals transport liquid bulk cargoes, steel, ores, pig iron, scrap, containers, non-ferrous metals, lumber, pulp and general cargoes. They have over 3,000 ft of berthing available and a dockside terminal that handles steel, machinery, containers, scrap, pig iron, ferro-alloys and other metallic bulk commodities with over 1,000,000 sq ft of open storage under cranes.

Corpus Christi

Corpus Christi is found at 27° 48'N, 97° 23'W. It contains all of Nueces County. The Corpus Christi Inner Harbour is composed of the Tule Lake Channel and the Viola Channel; the Industrial Canal links the Corpus Christi Turning Basin, Avery Point Turning Basin, Chemical Turning Basin, Tule Lake Turning Basin and Viola Turning Basin. There is 24-hour service and no restrictions. The maximum size for cargo vessels is 45 ft draft and is the same for tankers. There is a main turning basin, which is over a mile long and 800 ft wide; all basins, channels and canals have a water depth of 45 ft. The dock has container, bulk cargo and tanker facilities. The nearest airport is Port, approximately eight miles away and servicing three regular airlines.

Houston

Houston is found at 29° 45'N, 95° 20'W. Maximum vessel size and LOA with beam figures are as follows: Bolivar Roads to Barbours Cut has a maximum vessel size of 950 ft and LOA with beam 135 ft; Barbours Cut to Baytown has a maximum vessel size of 900 ft and LOA with beam 135 ft; Baytown to Boggy Bayou (Shell) has a maximum vessel size of 860 ft and LOA with beam of 120 ft; Boggy Bayou to Sims Bayou (Arco) has a maximum vessel size of 750 ft and LOA with beam of 116 ft and Sims Bayou to Houston Turning Basin has a maximum vessel size of 750 ft and LOA with beam of 106 ft. There are over 60 wharves and piers in the port, some with bulk handling facilities and tanker capacity – of all the paths, the Bolivar Roads to Baytown channel has the greatest weight tolerance at 95,000. The port maintains a 12,000 ton dry dock at Greens Bayou and a 14,000 ton capacity dry dock in the Houston Ship Canal. Houston Airport is in one half hour away.

Los Angeles

The Los Angeles port is found at 33° 43'N, 118° 16'W. Its boundary is located at the breakwater at Angels Gate Light – all arriving vessels must pass through here. Vessels entering the port pass eastward of the respective sea buoy and vessels outbound pass westward of the sea buoy. There are restrictions only on draft. The supertanker terminal in the outer harbour has fairway of 51 ft. The port has container handling, tanker and specialised cargo handling facilities; berthing is arranged through Agent. There are five bridges and five drawbridges in the port.

Mobile

Mobile is located at 30° 40'N, 88° 02'W. Restrictions include a controlling depth of 40 ft for entrance, channel and anchorage and a mean tidal range of 1.5 ft. Vessels can dock and sail at any time and during any tidal stage. The port consists of 34 berths. There is a public grain elevator with a 40 ft depth alongside and a loading rate of 115,000 bushels/hour for grain. The McDuffie Terminals contain two berths, No. 1 has a length of 170 m and both together are 320 m in length, and has a bulk coal handling plant. The Bulk Handling Plant contains two berths with a 40 ft depth alongside and a quay length of 1,500 ft. The port has a container berth with 894 ft length and a 1 x 45 ton lift capacity crane. Tankers can be a maximum length of 950 ft.

New Orleans

New Orleans port is located at 29° 56'N, 90° 04'W. A projected depth of 45 ft is maintained at the entrance of the Mississippi River and along its navigable channel, although situation from decreased river current velocity make this difficult. The Southwest Pass dictates draft and there is entrance day and night. The port has container handling and tanker facilities available. There are six bridges in the port, three are located at new Orleans, one at Baton rouge, one at Destrehan and one at Donaldsonville. All provide sufficient clearance. New Orleans International Airport is located in the vicinity of the port.

New York and New Jersey

The New York and New Jersey port is found at 40° 43'N, 74° 00'W. Its main entrance is the Ambrose Channel with a projected depth of 45 ft and a width of 2,000 ft. The harbour's northern approach is through Long Island Sound to the East River and is also maintained at a 45 ft depth. The port provides container and tanker facilities as well as mobile floating cranes with a capacity of up to 500 tonnes. It has four dry docks with a lifting capacity of 25,000 tonnes and one that can handle vessels of up to 1,100 ft LOA, 140 ft beam and 120,000 dwt. Kennedy International, Newark International and La Guardia Airports are all in close proximity.

Philadelphia

Philadelphia port is located at 39° 57'N, 75° 10'W. There are no restrictions on entry except by vessel draft. Delaware River is dredged at 40 ft and there is a mean tidal range of approximately 5.7 ft. The port has 15 terminals, some with container and bulk handling facilities. There are terminals with tanker capacity and all terminals are equipped with reducers. It also offers a floating dry dock with a capacity of 70,000 tonnes. The Philadelphia International Airport is six miles from the centre of the harbour.

Portland (Maine)

Portland port is found at 43° 39'N, 70° 14'W. There are no entry restrictions at night, although deep draft vessels are only brought in on high water. The maximum beam and draft allowed through the bridge is 93 ft and 35 ft, respectively. In the harbour area, draft size is restricted to 45 ft. Arrivals and departures are controlled by tidal conditions. The port contains only one general cargo and several dry dock facilities. There are terminals with Ro-Ro, container, liquid and covered storage capability. Tankers arrive at Portland Pipe-line to one of ten terminals designed to receive them. The Portland Municipal Airport is four miles away from the port.

Portland (Oregon)

The port of Portland is situated at 43° 30'N, 122° 40'W. There are no restrictions on vessels that have a draft of under 36 ft. Larger drafts can be accommodated depending on circumstances. There are no size restrictions on length and breadth. There are four public ocean cargo terminals in the port with 19 berths with a depth alongside of 40 ft minimum. There are facilities for the special handling of commodities and general cargo handling. Tankers are able to use eight berths with drafts varying from 30 ft to 38 ft. Portland Airport is 10 miles away from port.

Savannah

The port of Savannah is located at 32° 02'N, 81° 07'W. There is a 31 ft depth restriction at any time, although depths of over that occur on incoming tide. The port operates 12 general cargo berths, two tanker berths, five container berths, one dry bulk cargo berth and a Ro-Ro ramp. The port's Eugene Talmadge Memorial Bridge has a vertical clearance of 135 ft. The port offers the Sayler Marine Dry Dock. Savannah International Airport is in close proximity.

Seattle

The port of Seattle is situated at 47° 36'N, 122° 20'W along the limits of King County. There is a passing restriction owing to overhead power cables with a vertical clearance of 155 ft at Burlington Northern Railroads Bridge. The port contains 15 terminals with over 46 berths designed for ocean-going vessels with depths alongside ranging from 11 m to 21 m. Seattle maintains 10 dry docks and is in close proximity to Seattle-Tacoma International Airport.

South Louisiana

South Louisiana port is found at 30° 06'N, 90° 29'W and is located on the Lower Mississippi River. It encompasses the parishes of St. Charles, St. John the Baptist and St. James. The minimum water depth in its main channel is 45 ft. The port contains general cargo, dry bulk and liquid bulk terminals. The port offers tanker facilities and is serviced by Illinois Central and Kansas City Southern Railroads.

Tacoma

Tacoma is positioned at reference point 47° 14'N, 122° 28'W. It allows for a maximum length of over 305 m and draft is subject to berth depth. The port consists of 32 deep-water berths with depths ranging from 9.15 m to 21.34 m. It offers bulk, container and tanker handling facilities. There are three operational bridges in the port, and Seattle-Tacoma International Airport is 16 miles north from the port.

Tampa

The port of Tampa is located at 27° 57'N, 82° 28'W. Recommended draft is 33.5 ft. There exist no tidal restrictions besides loaded vessels into Port Tampa. Maximum draft capacity is 38.5 ft MLW, there is no limit on length or breadth. Containers can be handled at various general cargo terminals although no specialised container facilities exist; general cargo, specialised general cargo and dry bulk and tanker facilities are also available. The port also offers dry docks. Tampa International Airport is about 15 minutes from the main port area.

Security: Crime Overview

Violent crime against individuals is higher than other OECD countries. According to data from the FBI, the number of violent crimes increased by 5.3% in the first six months of 2016 compared to 2015, with the number of aggravated assaults experiencing the largest percentage increase. The pervasiveness of firearms continues to be a major component of criminal activity across the range of crimes. Despite the recent increase, violent crime rates have declined over both the five- and 10-year trend. Property crimes have also declined over the same periods. Hate crimes involving acts motivated by racial, gender, gender identity, religious, and other group-based biases continue to remain significant.

Trafficking

Drugs

Illegal narcotics trafficking is regularly cited by officials as a major threat to US national security, and efforts to combat it dominate policy towards Latin America in particular. The Department of State has a special bureau for International Narcotics and Law Enforcement Affairs (INL) which runs a large foreign assistance programme, aimed at helping foreign governments prevent the production and trafficking of illicit drugs to the United States. There is also an Office of National Drug Control Policy (ONDCP).

Each year, in a memorandum to the secretary of state, the US president publishes a list of major illicit drug producing and transit countries. For the fiscal year 2017, this " determination" listed Afghanistan, the Bahamas, Belize, Bolivia, Burma, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, India, Jamaica, Laos, Mexico, Nicaragua, Pakistan, Panama, Peru, and Venezuela. The determination, issued in September 2016, also designated Bolivia, Burma, and Venezuela as countries that had "failed demonstrably" over the previous year to adhere to their obligations under international counter-narcotics agreements. The revised list reflected increasing concerns over drug production and transit in Central American countries previously unlisted, such as Belize, Costa Rica, El Salvador, Honduras, and Nicaragua. By way of comparison, the countries included in the list for 2008 were Afghanistan, the Bahamas, Bolivia, Brazil, Colombia, the Dominican Republic, Ecuador, Guatemala, Haiti, India, Jamaica, Laos, Mexico, Myanmar, Nigeria, Pakistan, Panama, Paraguay, Peru, and Venezuela.

Cocaine: According to the 2017 International Narcotics Control Strategy Report (INCSR), Columbia continues to be the major provider of cocaine in the US. In order to smuggle cocaine into the US, traffickers primarily rely on using land, air, and sea routes through Central America, Mexico, and the Caribbean. Over the past decade, traffickers have smuggled approximately 97% of the cocaine bound for the US out of South America using non-commercial maritime transportation. However, smaller amounts of cocaine have also been smuggled to the US using commercial maritime vessels and non-commercial aircraft.

Heroin: According to a 2015 report from the UN's International Narcotics Control Board (INCB), Heroin in the US primarily comes from Afghanistan and Mexico. The US Drug Enforcement Administration (DEA) noted in its 2015 National Drug Threat Assessment that Colombia was also a primary source of the heroin smuggled into the US. Mexican cartels have been expanding aggressively into the heroin market, increasing their influence into the eastern and Midwest US.

Fentanyl: Illicit fentanyl, an extremely potent synthetic opioid (up to 50 times more potent than heroin), has become a growing problem throughout the US. The drug increasingly has been mixed in with heroin and other drugs. Mexican drug cartels often obtain fentanyl from China and then lace the fentanyl in with heroin, before distributing it in the US. Fentanyl is also manufactured in China. The mixing of Fentanyl in with heroin, along with it being pressed into counterfeit prescription pills, is believed to be a contributing factor to rising overdose deaths associated with synthetic opioids throughout the US. According to the Centers for Disease Control and Prevention, the nationwide death rate from overdoses caused by synthetic opioids, including illicit fentanyl, has increased 72% from 2014 to 2015.

Marijuana: Marijuana is the most readily available and widely used illicit drug in the US. A Gallup survey published in 2016, estimated that 43% of Americans had taken marijuana at some point. While marijuana continues to be smuggled into the US from Mexico, the amounts seized at the border have been steadily decreasing in recent years . The US Border Patrol reportedly seized 1.9 million pounds of marijuana in 2014, down from 2.5 million pounds in 2011. This reduction has largely been attributed to the growing number of US states legalising marijuana. As of January 2017, nine states had legalised non-medical marijuana. Domestic production of marijuana also continues to increase in states such as California, Colorado, and Washington. This trend has also been driven by the legalisation of both medical and non-medical marijuana in a number of states. In recent years, Canada has also become more of a significant source of marijuana in the US.

MDMA and LSD: Methylenedioxymethamphetamine (MDMA) is a stimulant and hallucinogenic that is attractive to a younger, middle-class demographic, along with lysergic acid diethylamide (LSD). More commonly known as ecstasy or molly, MDMA has appeared in the US via Europe, principally from the Netherlands and Belgium where it is made in tablet form in illegal laboratories. It frequently arrives in the US via Canadian and Mexican transit points. MDMA is also produced inside the US, but domestic versions of the drug are often less pure than the MDMA coming from Europe. Most of the key ingredients required to make MDMA are produced in China and Southeast Asia. LSD has been produced on the west coast of the US in, for example, San Francisco and, further north into Oregon and Washington. Often sold by mail order, the anonymity of the transactions has hindered the task of prosecuting authorities and has given the drug a cachet to users that more "street" drugs, such as crack cocaine, lack.

Methamphetamines: According to the US Drug Enforcement Agency (DEA), Mexican drug traffickers produce approximately 90% of the methamphetamines found in the US while China has become the primary source for the majority of the ingredients required to make the drug. Although methamphetamines continue to be produced in the US, such as in the mid-west, it has become more difficult to do so due to laws restricting access to cold medicines that contain pseudoephedrine, a precursor ingredient for methamphetamines. Methamphetamine laboratories are subject to frequent raids and closures, but are comparatively easy to reassemble. Methamphetamines made under such conditions are hard to keep track of, since they can be manufactured in powder and crystal form.

Phencyclidine: Phencyclidine (PCP), a hallucinogenic that can provoke violent and paranoid behaviour in the user, has principally been produced in the Los Angeles area. Other drugs, depressants, such as Flunitrazepam, better known as the "date rape" drug Rohypnol, and gamma-hydroxybutyrate (GHB), are banned in the US, as are a wide variety of anabolic steroids.

Weapons proliferation and procurement

State

Former president George W Bush used the threat purportedly posed by Saddam Hussein's attempts and previously documented ability to develop non-conventional weapons as the main justification for the invasion of Iraq in March 2003. Saddam had previously used chemical weapons against the Kurds of Halabja in 1988 and during the Iran-Iraq war. Eliminating the threat posed by CBRN (chemical, biological, radiological, and nuclear) weapons in the hands of regimes opposed to the United States was a clear priority for the Bush administration since the president's January 2002 State of the Union speech, in which he labelled Iran, Iraq, and North Korea an "axis of evil", claiming that weapons programmes in these countries constituted the biggest threat to US national security.

Missile technology in Iran and North Korea is still largely at a developmental stage and involves fewer missiles with lower accuracy, yield, longevity, and reliability than those of the erstwhile Cold War enemies of the US. Nonetheless, North Korea has tested nuclear weapons and they are thought by the current Trump administration to pose a potential threat to the US as they continue to flout UN Security Council restrictions on their nuclear programmes.

Iran

Although a decade of worsening relations between the US and Iran has finally shown some rapprochement with the implementation of the Iran-P5+1 nuclear agreement in January 2016, concerns will remain regarding Iranian enrichment of uranium, ostensibly for non-military purposes. Without permanent safeguards, there is a clear risk that civilian nuclear enrichment capability could be developed into military applications at a later stage. Indeed, the Trump administration has increased sanctions on Iran for its ballistic missiles programme, as it could provide a means for regional nuclear weapons delivery if warheads are developed in the future. Iran stated that its right to enrich uranium for commercial purposes is non-negotiable during the November 2013 Geneva negotiations and the development of a nuclear power capacity appears key to its position. Although President Donald Trump advocated for withdrawing from the nuclear deal as a candidate, he has kept the deal in place while raising sanctions on the Iranian government. Accordingly, maintaining a level of trust for both sides will be a difficult exercise, making this deal fragile in the medium term.

North Korea

North Korea is possibly more concerning than Iran, as its nuclear programme appears even more central to the legitimacy and strategy of the regime and its direct actions are more aggressive. North Korea's nuclear programme is also more advanced; it holds stocks of weapons-grade plutonium and has conducted three successful nuclear tests thus far. North Korea has openly tested space launch vehicles, the Taepodong-1 and the Taepodong-2, which theoretically could be used as ballistic missiles capable of delivering a small biological or chemical weapon to parts of the US. It conducted its first nuclear detonation in October 2006. A sudden acceleration of nuclear and ballistic missile programmes in early 2013 was particularly concerning and caused a spike in tensions on the Korean peninsula akin to incidents of direct North Korean aggression. A nuclear test in February 2012 was followed by a successful launch of the Unha-3 rocket into orbit, which was a development of the Taepodong-2. Both of these were in direct violation of UN Security Council Resolutions and dramatically raised tensions. Although the likelihood of successful delivery is judged to be low, given the difficulties remaining in miniaturising a nuclear warhead and creating an accurate, reliable ballistic missile, the country has demonstrated an active nuclear capability and has sped up both ballistic missile and nuclear programmes since 2009. This means the threat has to be taken seriously, if not for the US directly, then for its key regional allies in Japan and South Korea.

In early April 2009, North Korea launched a long-range rocket with a payload, it claimed, of an experimental communications satellite. Although the launch was judged successful by the North Koreans, it was later confirmed that the rocket did not reach orbit. The UN Security Council subsequently condemned the test as a cover for an offensive weapons capability test, and said it would tighten sanctions against Pyongyang unless it complied with its 2006 UN resolution banning missile tests. North Korea is known to have sold ballistic missile technology to several Middle Eastern countries and to Iran in the past. Therefore, there is a high level of concern regarding the potential proliferation of nuclear weapons by North Korea.

Kim Jong-il's death in December 2011 further muddied the waters. Kim's successor was immediately named as his youngest son Kim Jong-un, yet the new leader remains an enigma with a lack of public exposure, and his probable policy intentions even more so. It is clear that Pyongyang has been keen to play up its nuclear capability since the accession of Kim Jong-un. The successful missile launch in December 2012 and the nuclear test in February 2013 caused tensions to rapidly escalate. Although these have subsided, North Korea has not toned down its nuclear programme, nor has it made signs that it is willing to make concessions regarding its nuclear ambitions. In turn, this has led Washington to strengthen its missile shield along the west coast of the US and to warn North Korea about its future conduct. The latter half of 2013 has seen North Korea beginning to restart the reactor at Yongbyon, and make infrastructure upgrades to missile launch facilities at Tonghae and Sohae and the nuclear testing range at Punggye-ri. South Korean military and government officials have voiced concerns that a fourth test is inevitable and some have gone as far as to say that it may only be a matter of three years before North Korea can mount a warhead on a ballistic missile.

In June 2013, Pyongyang said it was prepared to open talks with the US and in the same month a summit meeting in Beijing between President Xi Jinping of China and President Park Geun-hye of South Korea underlined the two governments' commitment to revive the six-nation talks on North Korea's nuclear programme. Despite all sides agreeing that a resumption of talks is desirable (particularly China), putting this into practice is proving more difficult. The US refuses to engage in high-level negotiations until North Korea agrees to renounce all of its nuclear capability, but Pyongyang has said that its position as a nuclear power must be recognised. Statements made by Glyn Davies, the US Special Representative for North Korea, said that "we're [the US] looking for strong indications that North Korea is ready to move forward and take steps and so far they are absent, so we call on North Korea to move meaningfully in the direction of the demands that have been made by the international community to give up its

nuclear weapons." The US State Department has said that "the ball is in North Korea's court", which leaves probability of meaningful dialogue at a relatively low point as North Korea's nuclear programme is central to its strategic objectives and position.

Aside from North Korea's nuclear programme, attempts at reconciliation and dialogue are also undermined by conventional North Korean attacks and constant verbal attacks from Pyongyang. The apparent sinking of a South Korean warship by a North Korean torpedo in March 2010 raised tensions on the peninsula and was followed by a North Korean artillery attack on the South Korean island of Yeonpyeong in November 2010. These underlined the unpredictability of the regime. The sudden spike in tensions in 2013, which was largely relating to Pyongyang's nuclear programme were accompanied by aggressive rhetoric, the closing of the Kaesong industrial park, cyber attacks, the severing of communication lines, and short-range missile launches. In November 2013, North Korea detained US citizen and Korean War veteran Merrill Newman for 'crimes against the state'. This will further damage relations and appears to be a propaganda effort by Pyongyang.

Non-state

US intelligence agencies remain particularly concerned about the potential for terrorists to acquire or gain access to CBRN weapons and delivery systems. Conventional explosive devices continue to be the most probable tools for attacking US targets, because they are more easily available and can be adapted to overcome security obstacles with no trouble. However, there is persistent evidence of Al-Qaeda and other terrorist groups seeking to acquire CBRN materials and weapons, which in crude form are relatively easily available. Active state sponsorship and assistance of non-state groups in the procurement and development of CBRN capabilities also remains an issue for the US intelligence agencies.

Debt indicators

2013 2014 2015 2016 2017 2018 2019 2020 2021 Foreign exchange earnings (USD, bil.) 2,376 2,476 2,363 2,325 2,466 2,679 2,875 3,092 3,291

Portfolio investment, net (USD, bil.) 30.7 120.8 53.6 196.7 131.7 37.0 28.6 20.2 10.2

Portfolio investment, net (% of GDP) 0.2 0.7 0.3 1.1 0.7 0.2 0.1 0.1 0.0

Foreign direct investment, net (USD, bil.) -104.7 -101.2 195.0 167.8 166.9 171.8 178.3 183.9 188.6

Foreign direct investment, net (% of GDP) -0.6 -0.6 1.1 0.9 0.9 0.8 0.8 0.8 0.8

Foreign exchange reserves, excl. gold (USD, bil.) 135.0 128.1 108.3 108.9 111.0 115.9 122.0 127.8 133.5

Import cover (months) 0.6 0.5 0.5 0.5 0.5 0.4 0.5 0.4 0.4

Total external debt (USD, bil.) 16,488 17,258 17,710 18,025 18,941 19,487 20,129 20,870 21,689

Total external debt (% of GDP) 98.8 99.0 97.7 96.8 97.7 95.6 93.8 92.9 92.4

Total external debt (% of forex earnings) 693.9 697.0 749.5 775.4 768.1 727.3 700.2 675.0 659.1

Short-term external debt (USD, bil.) 5,454 5,456 5,212 5,196 5,409 5,594 5,809 6,055 6,326

Short-term external debt (% of total external debt) 33.1 31.6 29.4 28.8 28.6 28.7 28.9 29.0 29.2

Short-term external debt (% of international reserves) 4,038 4,259 4,812 4,772 4,875 4,826 4,762 4,739 4,738

Total external debt service (USD, bil.) 1,399 1,406 1,388 1,409 1,432 1,456 1,484 1,513 1,543

Interest payment arrears (USD, bil.) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

External liquidity gap (% of forex earnings) 216.4 225.1 235.7 239.1 230.9 224.9 221.1 213.3 205.4

Source: Historical data from selected national and international data sources. All forecasts provided by IHS Markit.

Highlights Since Donald Trump assumed the presidency and Republicans held their majorities in both the House of Representatives and Senate in the 2016 elections, the party has been grappling with advancing their pro-business agenda. Trump campaigned on a domestic platform highlighting economic disaffection and immigration restrictions, and an " America First" foreign policy featuring trade protectionism. However, legislative progress on these issues has been complicated by divisions within his party and unified opposition by Democrats. Generally, the legal system is independent, clear, and pro-business, reducing contract alteration and contract enforcement risks. However, corporate scandals and the 2008 financial crisis exposed regulatory shortcomings. Businesses have complained that the toughened regulation in the wake of the scandals imposes an unnecessarily heavy burden, particularly in the financial sector, which Trump has sought to rollback. Tax and regulatory regimes and incentives differ extensively from state to state. In a legislative victory, Trump successfully lowered corporate tax rates from 35% to roughly 21%. The operational environment is comparatively strong, with an efficient bureaucracy, world-leading universities, and a flexible, capable labour force. The terrorist attacks of 11 September 2001 drew attention to security and operational threats. Growing cyber risk following recent cyber attacks targeting the government and US-based firms have produced calls for enhanced information sharing legislation. In the run-up to the 2016 election and since Trump's inauguration the country has experienced a number of incidents of civil unrest. Although an organised widespread anti-Trump movement has not materialised, isolated anti-Trump protests of particular issues (environment, immigration, abortion) in urban centres are likely. Race relations and police brutality as seen recently in Chicago, Cleveland, and Charlotte are likely to continue to spark violence by the Black Lives Matter movement, such as occurred in September 2017 in St. Louis, raising the risk of widespread protests and riots in urban centres.

US Consumer Markets: Monthly Forecast Analysis: Consumer Markets: Summary

Analyst Contact Details: Chris Christopher, Michael Montgomery, David Deull, Patrick Newport, James Bohnaker

Economic outlook

Following only 1.7% growth in the first quarter, we forecast GDP growth to pick up to 3.0% or better over the balance of 2018, followed by 2.9% next year and 2.1% over 2020 , lowering the unemployment rate to 3.6%. This growth is aided by recently legislated tax cuts and new federal spending, and not at all derailed by new tariffs on imports of steel and aluminum, since the growing list of exemptions from these tariffs has mitigated their effect.

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