Government’s tax mess trapping us in a ‘doom loop’

FOR family reasons, I have spent a significant part of the summer in the USA.

- Graham Robb

It is possible that the joy of a new grandson infected my enthusiasm for the country, but I also think that there was a discernible positivity about the of state of the economy and people were feeling more upbeat.

While I was there the US government recorded its first surplus in recent history. It was a result of tariffs. These tariffs, the advanced criticism suggested, would increase inflation. But the numbers don’t reflect that, it is still low. Months ago we were told, US growth would be slowed. But US growth is at 3% a year. Unemployment would follow but the USA jobs market is buoyant and unemployment is at 4.2%, half a percentage point lower than the UK.

In one specific aspect of economic activity, the USA is soaring ahead. Investment is through the roof. In Pennsylvania, where I was visiting, massive investments have just been announced in power and Al. Elsewhere in the US, Apple has redirected major elements of its manufacturing away from Asia resulting in $600bn of planned investment in the USA. Other global firms are investing too. Samsung is opening washing machine factories.

Drugs firms like Eli Lilly and Merck have announced investments worth $15bn between them, the car manufacturer Stellantis is investing $5bn, and the consumer goods manufacturer Kimberly-Clark is to invest $2bn. These all represent ‘onshoring’ the term used to bring manufacturing back to the USA.

It has been made possible by the impact of both tariffs and some effective tax incentives.