Lutnick expects US first quarter growth above 5%, warns EU against retaliation

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 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.

"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.

"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)

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