None of the legislative proposals to reform the US mortgage market has yet come into force. Most of them start from the same position: although government guarantees are essential in ensuring a liquid and stable mortgage market, the Federal government should not be the sole party exposed to payment default risk, especially as this is transmitted through two agencies, Fannie Mae and Freddie Mac, that are in financial difficulties. In the absence of legislation, the regulator of the two agencies has sketched out the foundations of a reform, by developing a program to transfer “non-extreme” credit risk to the market.
In May 2017, Donald Trump triggered a renegotiation of the North American Free Trade Agreement (NAFTA). Some proposals, 23 years after NAFTA came into force, aiming to introduce a chapter on the digital economy and strengthen the agreement’s current arrangements, have been generally welcomed. Others, such as a tightening of rules of origin and changes to trade remedies, have prompted concern.
The new US administration’s financial deregulation project has raised considerable concern about financial stability. For the time being, the details of the changes have not been spelled out, and it is unclear what level of support they will receive from Congress. Many are arguing that the leverage ratio should be (re)established as the foundation of the US prudential framework. The scope of the application of Basel 3 could be narrowed and the body of Basel rules to be applied could be limited.
The United States remain the world’s largest economy in nominal GDP terms. Although at the root of the global financial crisis (2008-09), the country has swiftly recovered over the past decade, partly helped by the boom in the shale oil and gas industry. However, it has also lost ground in some other key industrial areas, mainly against China. At the same time, China has become a world leader in the strategic field of information and telecommunication equipment, and therefore a top supplier to US companies. This increased dependency, along with persistent and widening trade deficits, has led to a radical shift in foreign trade policy and a sizeable rise in US tariffs on imports.
As a consequence of the COVID-19 crisis, the US economy fell by 3.4% in 2020. The recession -the deepest since 1946- was nevertheless followed by a swift and strong rebound in 2021, the United-States being among the first countries to be vaccinated as well as to recover from the economic losses caused by the pandemic. In the aftermath of the authorities’ action to limit the consequences of the crisis, public debt and deficits have surged.
