US Commerce Secretary Howard Lutnick said on Tuesday he expected first quarter GDP growth in the United States would exceed 5 percent in the first quarter of 2026, adding that its interest rates were too high and were holding back stronger growth.
Lutnick also warned the European Union not to retaliate against President Donald Trump's threatened tariffs over his attempts to gain US control of Greenland.
"Our rates should be much lower so that our economy can finally flourish. I think we're going to grow more than 5 percent GDP this quarter, and that's for the US$30 trillion US economy," he said at the World Economic Forum's annual meeting in Davos.
"And if rates were lower, you would see us hit 6 percent what is holding us back is ourselves," Lutnick said during a panel discussion at the event in the Swiss mountain resort.
Lutnick, whose agency oversees the Bureau of Economic Analysis, which prepares US GDP data, said his outlook was his own personal opinion. It was much rosier than US Treasury Secretary Scott Bessent's, who said in Davos that he expected US real GDP growth this year between 4 percent and 5 percent.
The International Monetary Fund on Monday forecast US real GDP growth at 2.4 percent for 2026, a 0.3 percentage point improvement over an October estimate due to continued strong AI investment and a more benign tariff outlook.
The relative trade peace could be shattered, however, by Trump's threat to impose tariffs on countries that resist a US takeover of Greenland and potential EU retaliation.
If the EU proceeds with such retaliation, Lutnick said, "then we'll be back to tit-for-tat" escalation of tariffs.
Lutnick said similar threats were made when Trump first imposed tariffs on EU goods last year, but the two sides agreed on a trade deal.
He predicted a similar outcome this time, saying: "If we're going to have a kerfuffle, so be it. But we know where it's going to end. It's going to end in a reasonable manner."
Reuters
