Lutnick says high interest rates slow the growth of the U.S. economy.

U.S. Commerce Secretary Howard Lutnick said the national economy remains strong, possibly expanding at a pace exceeding earlier projections by early 2026.

Yet one concern that persists is whether the European Union counters American tariff threats involving Greenland; if so, friction might return unexpectedly. That outcome could disturb the current economic stability despite its present strength.

Speaking at the annual gathering of the World Economic Forum in Davos, Switzerland, the Commerce Secretary shared observations amid discussions among international figures on issues related to financial expansion, borrowing costs, and uncertainties in global exchange markets.

Lutnick says high interest rates slow the growth of the U.S. economy.

Lutnick noted the U.S. economy could grow by more than 5% near the start of 2026. With an overall value close to $30 trillion, movement at this scale looks good. In his view, such speed points toward endurance. 

Later, Lutclock identified rising borrowing expenses as central to slow growth. With rates climbing, business outlays face resistance as consumer budgets tighten. When credit becomes more expensive, enterprises postpone expansions while families avoid new liabilities. Capital flows slow as financial strain increases. What lies behind this shift is neither lack of interest nor fading confidence. Rather, stricter lending conditions raise operational costs.

A fall in interest rates may spark growth, according to his observation. When policy choices, not changes in consumer appetite, guide decisions, economic growth often loses speed. Still, higher spending can appear if those conditions hold. Employment levels could respond afterward, while investment rises. Progress in production might accelerate once the right factors are in place. Should rates decrease, U.S. growth may exceed 6%, hinting at steady demand in the future.

Even so, the Commerce chief emphasized that the prediction was based on personal belief, not official direction, while running the office responsible for America’s GDP figures. This line between roles highlights not just the view shared but confidence in how the economy is moving now, particularly because the comments drew attention abroad by sounding more upbeat than what others usually say.

Now looking at numbers again, the U.S. economy might grow between 4% and 5%, says Treasury Secretary Scott Bessent; better than past guesses but below what Lutnick thought. Before this, the IMF saw only a 2.4% climb by 2026, driven by deeper investments in artificial intelligence and smoother global trade.

Lutnick warns EU action could restart tariff fights over Greenland.

Lutnick suggested that the European Union should exercise restraint should the United States move forward with proposed tariffs tied to Greenland. Were such measures imposed, retaliation might accelerate the deterioration of ties. One misstep could push economic disagreements into broader conflict, he noted.

This warning clearly connects to Donald Trump’s approach to Greenland, especially because he threatened to impose taxes on nations blocking U.S. interests there. If the European Union responds to that move with matching penalties, a broader trade clash becomes more likely, Lutnick points out. When pushback meets harsh responses, tension builds more quickly.

“If the EU retaliates, this could start a ‘tit-for-tat’ situation, where both sides keep coming up with new tariffs,” hE said. “Once that starts, it’s very difficult to get out because everything that happens afterwards creates an additional reaction, and that adds to costs and builds more mistrust,” he said. This would result in increased and more complex costs for businesses that rely on constant international transactions.

Lutnick brought up the clash in 2018: U.S. tariffs hit European products, while officials in Brussels fired back with threats. Heated words flew, yet discussions led to an agreement meant to calm things down. When fights grow sharper, results often turn bitter; even so, the first red flags don’t guarantee that harm will follow. High nerves were present, but instead of collapse, there came a resolution.

The Commerce Secretary thinks things will stay steady even if tension pops up now and then. When arguments flare, talks tend to smooth them out over time. Lutnick trusts these back-and-forth discussions can shield U.S.-EU commerce from serious harm.

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