Finance
Lutnick expects US first quarter growth above 5%, warns EU against retaliation
Published by Global Banking and Finance Review
Posted on January 20, 2026
2 min readLast updated: January 20, 2026
Quick Summary
Howard Lutnick predicts over 5% US GDP growth in Q1 2026 and warns the EU against retaliating to US tariffs, highlighting potential trade conflicts.
Lutnick Predicts Over 5% GDP Growth in Q1 2026, Cautions EU on Tariffs
US Economic Outlook and Trade Relations
DAVOS, Switzerland, Jan 20 (Reuters) - U.S. Commerce Secretary Howard Lutnick said on Tuesday he expected first quarter GDP growth in the United States would exceed 5% in the first quarter of 2026, adding that its interest rates were too high and were holding back stronger growth.
Lutnick's Growth Predictions
Lutnick also warned the European Union not to retaliate against President Donald Trump's threatened tariffs over his attempts to gain U.S. control of Greenland.
Potential EU Retaliation
"Our rates should be much lower so that our economy can finally flourish. I think we're going to grow more than 5% GDP this quarter, and that's for the $30 trillion U.S. economy," he said at the World Economic Forum's annual meeting in Davos.
Historical Context of Tariffs
"And if rates were lower, you would see us hit 6% 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 U.S. GDP data, said his outlook was his own personal opinion. It was much rosier than U.S. Treasury Secretary Scott Bessent's, who said in Davos that he expected U.S. real GDP growth this year between 4% and 5%.
The International Monetary Fund on Monday forecast U.S. real GDP growth at 2.4% 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 U.S. 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."
(Reporting by David Lawder, Chris Thomas and Shubham Kalia; Editing by Alexander Smith)
Key Takeaways
- •Howard Lutnick forecasts over 5% US GDP growth in Q1 2026.
- •Lutnick warns EU against retaliating to US tariffs.
- •US interest rates considered too high for stronger growth.
- •Potential trade conflict over US attempt to control Greenland.
- •IMF forecasts 2.4% US GDP growth for 2026.
Frequently Asked Questions about Lutnick expects US first quarter growth above 5%, warns EU against retaliation
1What are interest rates?
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount, influencing economic activity and consumer spending.
2What is economic growth?
Economic growth refers to an increase in the production of goods and services in an economy over a period, typically measured by the rise in GDP.
3What is the role of the U.S. Commerce Secretary?
The U.S. Commerce Secretary oversees the Department of Commerce, which promotes economic growth, job creation, and sustainable development through various policies and initiatives.
