HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

With a highly skilled workforce and strong technology, aerospace, chemical and pharmaceutical industries, the US is the largest and most technologically advanced economy in the world. It is the world’s third-largest exporter (after China and the European Union), although exports account for just 13 per cent of GDP. Economic growth remains sluggish in the US, nine years after the Great Recession. Growth slowed to 1.6 per cent in 2016, the lowest since 2011, down from 2.6 per cent in 2015; exports fell 2.3 per cent over the same period. The IMF has forecast GDP growth of 2.1 per cent in 2017, below the government’s 3 per cent target for the year. However, a strong employment market (4.1 per cent unemployment in October 2017) and real wage growth (real average hourly earnings increased 0.7 per cent, seasonally adjusted, from September 2016 to September 2017) is maintaining moderate levels of consumer spending. Consumer spending, which makes up more than two-thirds of the economy, recorded its biggest increase in eight years in September 2017, as consumers began replacing goods damaged by Hurricanes Harvey and Irma. This, in addition to increased business investment, saw GDP in Q2 increase at an annualised rate of 3.1 per cent and in Q3 3 per cent. President Trump aims to boost growth to 3 per cent or more on the back of increased investment in infrastructure and tax reform. In December 2017, the Republican tax bill was passed, which is likely to effect significant changes to the US tax code. Companies will be the biggest beneficiaries: federal corporate tax rate will be reduced to 21 per cent from 35 per cent, for example. The positive long-term impact on the US economy is not yet clear.

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Legal and regulatory

  • Foreign exchange and domestic currency (USD) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are convertible into foreign currency
  • Non-resident bank accounts are permitted in both foreign and domestic currency accounts. Non-resident foreign currency bank accounts are not widely available. Non-resident domestic currency accounts are convertible into foreign currency
  • There are no central bank reporting requirements

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Taxation

  • Non-resident companies are taxable on income effectively connected (ECI) with the conduct of a trade or business in the US and on most non-ECI that is derived from US sources
  • HR 1 moves the US from a worldwide tax system with deferral to a hybrid territorial tax system by establishing a limited participation exemption system and implementing new measures to deter base erosion
  • HR 1 eliminates the current federal corporate income tax rate brackets and reduces the corporate income tax rate from a maximum rate of 35 per cent to a flat rate of 21 per cent, effective for tax years beginning after 31 December 2017
  • HR 1 repeals the corporate AMT effective for years beginning after 31 December 2017. In addition, for tax years beginning in 2018, 2019 and 2020, taxpayers may claim a refund on 50 per cent of the excess AMT carryovers

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Payment instruments and systems

  • Payment cards are the most widely used payment instruments in the US, constituting 72 per cent of all cashless payments in 2015. Credit transfers are used for both high-value corporate and low-value retail payment transactions. Cheques remain a popular payment instrument, although their use is in decline. Cash remains an important payment medium; in 2015, 32 per cent of all transactions were cash-based
  • The US operates four main payment systems: Fedwire, an RTGS system for USD payments; CHIPS, for cross-border USD payments; the ACH for low-value credit and debit payments; and cheque clearing

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Cash management

  • Notional pooling is not widely offered in the US. Domestic and cross-border cash concentration is permitted between resident and non-resident companies
  • A range of cheque collection services are available. Lockbox services in particular are popular

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Electronic banking

  • Electronic banking is commonplace in the US and offered by all of the country’s banks
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes. There were approximately 111 million registered mobile banking users in 2016. Although mobile payments continue to be less common than mobile banking, 24 per cent of consumers with access to a mobile phone made a mobile payment in 2015

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To read the full report on the US and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • IMF
  • Bureau of Labor Statistics
  • US Census Bureau
  • The Federal Reserve’s Consumer and Mobile Financial Services 2016 Report
  • Bureau of Economic Analysis

The materials contained on this page were assembled in August 2017 (unless otherwise dated).

 

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