As we finish out the first quarter of 2018, talks around renegotiating the North American Free Trade Agreement (NAFTA) cast a shadow of uncertainty on the future economic health of the United States, Mexico, and Canada. With the Trump administration talking tough and threatening to pull out of the trade deal, business leaders are finding it difficult to measure risks in North American markets. Although a change to NAFTA could indeed have major effects on companies that do business in the region, the good news is that signs point to economic resilience.

In support of our trade credit insurance business, Atradius recently released a report on the economic health and anticipated future performance of major North and Central American countries. That analysis anticipates economic growth of 2.5 percent or higher for the United States in 2018—a continuation of the momentum experienced in 2017, which saw a 2.2 percent increase. This year's projected growth in the U.S. economy will be facilitated by the following factors:

• Steadily decreasing corporate insolvencies. Insolvencies spiked following the 2008 recession and have steadily decreased ever since. A 2 percent decrease is predicted for 2018.
• Robust growth in consumption. Accounting for nearly 70 percent of U.S. GDP, and the main engine of economic growth since 2014, household consumption is expected to remain robust in 2018, increasing 2.5 percent over 2017. U.S. private consumption is aided by falling unemployment (expected to fall below 4 percent in 2018), wage growth, higher home prices, a healthy stock market, and a low household saving rate.
• Rising exports. Political uncertainty and a stronger euro caused the dollar to weaken in 2017 compared with 2016. As a result, analysts expect U.S. exports to increase another 3 percent in 2018, after contracting in 2016 and recovering in 2017. Rising exports signal an expanding manufacturing sector, which is anticipated to grow 2.6 percent this year.

Recent changes to tax law are also expected to positively impact the U.S. economy, particularly aiding exports, investment, and private consumption. The December 2017 tax overhaul is predicted to amount to approximately $1.5 trillion in tax relief over the coming decade, mainly through a 14 percent decrease in the corporate tax rate and temporary tax breaks for both businesses and individuals. However, uncertainties remain around whether these changes will strain public finances in the coming years.

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Canada and Mexico

The Atradius report is less rosy in its growth projections for Mexico and Canada. In 2017, Canada's economic growth accelerated to 3 percent, representing a slight rebound from the 2015 and 2016 slowdown caused by decreased oil prices and slowed investments in mining, quarrying, and oil and gas extraction. We do not expect this acceleration to continue into 2018. Instead, overall economic growth in Canada will likely dip slightly this year, to 2 percent, due to a slowdown in private consumption and government spending.