In Dresden, Germany, the final car rolled off Volkswagen’s “Transparent Factory,” a showcase of European industrial prowess. Thousands of miles away in Spartanburg, South Carolina, BMW runs its biggest plant in the world. The contrast between these two operations helps explain a persistent puzzle economists have debated: why has the American economy continued to outperform many peers despite facing the same global shocks?
Over the past several years, much of the developed world buckled under multiple shocks. Conflict in the Middle East has sent oil prices lurching, and a wave of tariff policy and migration changes rattled labor markets. Yet the US economy has kept growing at a steady pace. Inflation has proved stubborn at times, but the feared combination of weak growth and sharply rising prices has not materialized to the extent many anticipated.
Joe Brusuelas, chief economist at RSM, argues that the trade environment itself offered a surprising proof of resilience. He points to the way policy friction and realignments unfolded: “The own goals that the Trump administration imposed on the US with respect to trade and immigration are probably the single best example of the underlying dynamism of the American economy.” When faced with a sudden tax on foreign components, US firms did not retreat; they invested more.
CapEx remains a bright spot. Brusuelas notes, “CapEx is 13.9% of US GDP.” He adds that, for all the shocks—supply disruptions, demand shifts—investment has stayed stronger than expected. A large part of this strength has come from productivity gains that offset some of the pressure from external shocks.
The broader US economy has continued to expand at an annualized rate around 2%. Energy markets offer another partial explanation. The war in the Middle East has pushed oil prices higher, a development that historically would threaten growth. Yet the shale revolution has reshaped the energy landscape. Over the past two decades, the US has become one of the world’s largest oil and gas producers, and businesses have reduced their reliance on petroleum. Brusuelas notes that “the development since the early 2000s of fracking… has created the conditions where oil’s contribution to GDP per unit has fallen by half over the past 50 years.”
The contrast with Europe remains stark. The US has emphasized flexibility—fracking and responsive pricing—while Europe has leaned on long-term contracts and interconnected supply networks to guard energy security. That approach left many European countries vulnerable when Russian gas supplies were curtailed after the Ukraine invasion, and the current tensions in the Middle East keep that risk alive for some.
Rebecca Christie of Bruegel, a Brussels think tank, argues the divergence goes beyond policy choices to cultural attitudes toward risk. “Americans are very solutions-oriented and much more comfortable with taking a short-term risk in service of a long-term advantage,” she says. She recalls an event where the EU’s financial services commissioner observed that Europe “talks enough about the risk of not taking risk.” The different financing ecosystems also reflect this split. In Europe, many companies rely on bank loans and workers’ pensions tied to guaranteed contracts; in the US, firms can tap investors and the stock market for financing, which can provide flexibility during fluctuations.
Still, resilience at the macro level can mask real pain beneath the surface. Christie cautions that the US remains a land of notable inequality. “If you’re struggling, you are really going to have a hard time because the labor market is not adding piles of new jobs, things are getting more expensive, many cities have housing crises,” she says. Her worry is that inequality could reach a tipping point. “Even then, having the dollar and fairly stable banks won’t help if you have a real jobs crisis in the real economy.”
So far, there is little evidence of such a downturn. In May, American employers added 172,000 jobs, far surpassing expectations. Yet the latest inflation data showed consumer prices rising at their fastest pace in three years, suggesting the limits to resilience may be approaching. In May, prices were 4.2% higher than a year earlier, up from 3.8% in April.
Even with this outperformance, higher energy costs, stubborn inflation, and widening inequality remain risks that could erode the current advantage. Compared with many other advanced economies, the US still looks robust. Its mix of flexible markets, rapid investment, abundant energy, and a willingness to absorb risk has helped it weather shocks that have strained peers. As Brusuelas put it: “It’s the cleanest shirt in a very filthy laundry.”
