Slowing activity in China and other emerging market economies will be a headwind to growth over the next year, but the US economy is in good shape to weather the storm, according to a report released today by TD Economics.

Led by consumer spending, economic growth is expected to average 2.5% on an annual average basis in 2015 and rise to 2.6% in 2016, according to the report. With the unemployment rate falling to 4.8% and the Fed in the midst of a gradual tightening cycle, growth is expected to slow modestly to 2.4% in 2017.

“We can’t ignore the renewed bout of financial volatility and deterioration in global growth, but also recognize that the American economy has a lot of strengths,” said TD Bank Chief Economist Beata Caranci. “Domestic sectors of the economy, such as housing and consumer spending have been gaining strength over the last several months. With lower gasoline prices leaving even more in consumers’ pockets, this is likely to continue.”

The chief cause for concern for the economic outlook is the slowdown in China and its ramifications for the rest of the world, according to Caranci.

“China is the world’s second largest economy and the largest source of demand for many of the world’s commodities,” she said. “Its slowdown will weigh heavily on commodity-producing countries and those in its immediate vicinity.”

For the US, however, the impact is more indirect. China accounts for just 10% of US exports, but 23% of US imports. A bigger issue is the fear created in financial markets and the cascading effect of China’s currency depreciation on the currencies of other countries. As financial volatility spread in August, the US dollar jumped close to 5% on a trade-weighted basis, with most of this coming against emerging market economies.

“With a higher dollar and slower global demand, America will export less and import more from the rest of the world,” Caranci said. “This will weigh on production growth in America, even as it helps to pull the rest of the world up.”

TD Economics provides analysis of global economic performance and forecasting, and is an affiliate of TD Bank, N.A.