PESTLE Analysis of The USA: How Policies and Interest Rates Impact US Businesses

PESTLEanalysis Team
PESTLEanalysis Team
PESTLE Analysis of The USA: How Policies and Interest Rates Impact US Businesses
Table of Contents
Table of Contents

Our PESTLE analysis of the USA describes the political and other factors that are affecting the external macro environment of the country.

Have you ever imagined yourself roaming around in the city of New York? Or eating famous New york Cheesecake at a local cafe in New York? If yes, you would be interested in reading about the USA.

The USA is called the land of opportunity since people from all over the globe come to the USA in search of work. The USA is a multicultural country. People of different ethnicities live and work together in the USA. That's what makes it so unique.

Today's article is exceptional since, in this article, we will be conducting a PESTLE Analysis of The USA to highlight different external factors that impact the USA. Later, we will conduct the SWOT Analysis of The USA.

However, this article is different since in this article, we will analyze the political, social, environmental, economic, legal, and technological factors that impact the USA.

Before we proceed toward the PEST analysis, let's look at the history of the USA so we can get an insight into the historical significance of the USA.

Photo by Travis Saylor

The USA has a long history from the early 1600s when the first English colony settled in the modern-day USA. The British ruled the USA till 1775 when Americans confronted the British and forced them to leave.

Americans call this struggle against the colonial system as the American Revolution. This war revolutionized the entire USA. After getting independence from the British, the USA got its first constitution, and later George Washington became its first president.

In 1790, the first industrial mill was established in the USA on the British model. From then onwards, the USA experienced the industrial revolution as more industries started establishing, and machines were now used for manufacturing and agriculture.

This boosted the economic growth of the USA and increased the living standard of the people of the USA. Overall, industrialization did wonders for the USA. However, it had some downsides as well.

As the factories started making profits, the factory owners started exploiting the labor, and slavery increased. This led to the Civil War in the country. The civil war continued for a few years, ending in 1865.

After that, the USA entered a period of rebuilding. That's when the country began to grow economically, and the USA started focusing on technological advancement and innovation. As a result, urbanization occurred in the USA, which improved the living standard of the people.

As the USA experienced development, people started talking about social issues such as gender discrimination and inequality. This initiated the progressive movement that helped the USA to provide rights to the weak and decrease inequality.

Later, the USA became a significant participant in World War One and World War Two. Finally, after World War Two ended in 1945, the USA became a superpower.

After that, the USA indulged in a few wars, such as the Vietnam War, the Cold War, the Iraq War, and the famous Afghan War after the 9/11 tragedy. These wars affected the USA economically. However, it made the USA military battle-hardened.

Fast-forwarding to the early 1990s, the biggest contemporary country of the USA, the Soviet Union, collapsed, which made the USA further powerful.

From then onwards, the USA dominated the global market. Currently, it has a GDP of $23.3 trillion, which is the highest in the world. Since then, we have recapped the history of the USA briefly. Now let's share what PESTLE analysis is in a few words.

PESTLE analysis is a tool used to analyze the external factors affecting any business, industry, or country. So let's proceed and conduct the PESTLE analysis of the USA.

Political Factors That Affect The USA

Political factors are the factors that are related to the government and government policies. This section will look at the political factors that impact the USA.

Political stability plays an important role in the success of the USA. Ever since the USA gained independence, it has been a democratic country. This process of continuous democracy has helped the USA attain economic growth and prosperity.

Moreover, government policies also affect the USA significantly. The US government is responsible for making policies regarding taxes, trade, foreign investment, etc. For example, if the US government makes progressive tax policies, the inequality in the country would reduce.

Similarly, suppose the government makes policies to encourage foreign investment by providing incentives to foreign investors. In that case, the country will attract foreign investors, and the FDI inflow in the county would increase.

Besides that, the trade policies made by the USA impact the USA. The US exports came down to $2.5 trillion in 2021, while imports were worth $3.4 trillion. The USA is highly dependent on its imports to function and its exports to generate a large amount of revenue.

The trade policies of the USA can cause imports and exports to increase or fall. Hence, it could create a noticeable impact on the USA's economy.

Photo by Ramaz Bluashvili

Economic Factors That Affect The USA

Economic factors are the factors that concern the economic condition of the country. Therefore, this section of the PESTLE analysis will discuss the economic factors that create an impact on the USA.

Economic growth impacts the USA a lot. A good level of growth in the GDP indicates that the economy is growing. It creates employment in the country and improves the people's standard of living. At the same time, low levels of GDP growth can increase unemployment and make the economic conditions bad.

Other than that, interest rates deeply impact the USA since interest rates directly affect the level of expenditure in the economy. For example, suppose if the interest rates are high, people would spend less and save more. This would decrease the country's economic activity, which is not good for the economy.

On the other hand, the interest rate also impacts a country's investment level. In the case of high-interest rates in an economy, there would be less investment. As a result, the level of employment will fall.

Moreover, exchange rates have played a vital role in shaping the USA's economy. For example, the USA imported goods and services from China worth $575.69 billion in 2021.

If the US dollar depreciates with respect to the Chinese yuan, then the imports would cost a lot more. Hence, fluctuations in the exchange rate impact the USA significantly.

Photo by Pixabay

Social Factors That Affect The USA

Social factors are the factors that are linked with societal and cultural factors. In this section, we will analyze what social factors affect the USA.

The USA is full of people from different ethnicities. In addition, individuals from various parts of the globe visit the USA to gain an education or to get a good job. Such a diverse society has both pros and cons for the USA.

The advantage of having a diverse society is that all top professionals are gathered in one place. This is what helps the USA in retaining its position as a superpower. However, some disadvantages of such diversity are the loss of the actual culture of the USA and intercultural conflicts.

Besides that, the population growth rate is very important for any country since it impacts its economic scenario. The USA has a declining growth rate of population. This means that in the upcoming years, the USA can experience a shortage of labor which can be a significant problem for the USA.

Moreover, the high elderly population can be a significant problem for the USA in the coming days. For example, in 2020, around 17% of the population of the USA was above the age of 65. This means that the US healthcare system might be burdened because of the illness of so many elderly people.

Technological Factors That Affect The USA

Technological factors take account of the technological development and innovation that takes palace in a country. Since a significant amount of importance is given to technological developments in today's world, any country with a high level of technology is bound to succeed.

The Internet is significant for any country since it is widely used for educational and money-earning purposes. The USA has a significant number of people with internet access.

More than 92% of the USA's population has internet access. This helps the IT industry to flourish. Moreover, the exports of the IT sector are increasing as more people gain access to the Internet.

Besides that, the concept of research is widely found in the USA. Therefore, companies spend plenty of dollars on R&D. Moreover, many research centers in the USA publish the latest research. This provides a competitive advantage to the USA since very few countries are as advanced in research as the USA.

Other than that, the masses largely focus on the e-commerce industry since it allows them to buy products online. However, some renowned e-commerce stores, such as Amazon and eBay, are registered in the USA. These e-commerce platforms are a source of billions of dollars to the US economy.

Photo by Pixabay

Legal factors analyze the law-related factors that impact the operations of the USA. It highlights the legal framework and laws that impact the USA. This section will analyze the legal factors that impact the USA.

Labor laws in the USA significantly affect the country. If the government makes strict labor laws, it would ensure labor rights and end the mistreatment of laborers. This could end the protests of laborers and enhance their productivity.

However, strict labor laws may reduce the demand for laborers since employers would now be reluctant while hiring labor, thinking that if they can't treat the laborers according to the laws, they might have to face punishment from the government.

This would make employers reluctant to hire laborers and give birth to unemployment. Other than that, the copyright act in the USA provides security to companies since now they are the owners of their products, and their intellectual property can't be stolen.

This incentivizes the companies to operate in the USA since it protects intellectual property.

Rawpixel / Shutterstock.com

Environmental Factors That Affect The USA

Environmental factors explain the environment-related factors and natural resources that affect countries' operations. This section will analyze the environment-related factors that impact the USA.

Global warming is a phenomenon that is impacting all countries at different rates. The USA is also impacted by global warming since it is causing natural disasters to occur in the USA more frequently.

Natural disasters negatively impact the USA since they cause significant economic loss. Moreover, natural disasters displace a lot of people since they destroy homes. Due to this, the government must provide shelter for the victims.

Moreover, the USA is one of the top greenhouse gas emitting countries. This damages the reputation of the USA worldwide since people are becoming aware of sustainable practices and protesting against practices that harm the environment.


PESTLE Analysis of The USA: Final Word

The USA is widely regarded as the most influential nation on earth. It has the largest GDP, making the country economically independent. To see how the USA evolved over time and became a superpower, we looked at the rich history of the USA.

The USA has a long history that goes back to the 17th century. The USA went through a lot of ups and downs. However, following World War II, it rose to become a superpower. Ever since then, the USA has been involved in multiple wars, but nothing could push the USA on the back foot.

Looking at such strength of the USA, we decided to conduct a PESTLE analysis of the USA to see what external factors impact the USA. A PESTLE Analysis framework discusses political, economic, technological, social, legal, and environmental factors that impact any business, industry, or country.

In this article, we discussed how the USA is impacted by different external factors. At the end of this article, we assume you would have enjoyed reading this article. If you want to know more about PESTLE analysis, look at some examples of PESTLE analysis.

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