White House economic advisers were spreading the word that second-quarter GDP, out Friday, may surpass 4% -- the first time growth has hit or exceeded that number since the third quarter of 2014, FOX Business has learned.
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Ahead of the data, Trump administration officials are preparing a major victory lap and plan to use the strong data points as proof that the president’s economic policies of lower taxes and deregulation have reversed years of economic malaise that followed the financial crisis and President Barack Obama’s fiscal agenda, according to people close to the White House.
Of course if the numbers fail to meet expectations, the White House will be deprived of a powerful talking point administration officials plan to use to reverse the negative publicity following Trump's meeting with Russian President Vladimir Putin, as well as the ongoing investigation into Russian campaign meddling.
But Trump and his economic team are increasingly convinced the GDP numbers will be strong; the president's economic advisers are privately telling associates that GDP growth should rise to 4.3% to 4.4% for the second quarter of this year, these people add. President Trump is even more optimistic, telling one associate he expects second quarter GDP to rise to as much as 4.8% in the second quarter.
If GDP does surpass 4% on a quarterly basis it will be the first time it has done so since the third quarter of 2014, when it registered 5.2% during Obama’s second term in office. Even so, economic advisers in the Trump administration, such as Larry Kudlow, have blamed Obama’s policies of higher taxes and enhanced regulations for the relatively feeble economic growth during his eight years in office, where GDP never grew above 3% on a yearly basis.
A White House spokesman had no comment.
Trump hasn’t been bashful about touting the progress of the economy under his watch, in which unemployment has fallen to 4% – near an 18-year low. He even raised eyebrows tweeting about the jobs data shortly before the May report was released. The tweet jolted the financial markets and the dollar rose as traders prepared for the official report, which in turn was strong, showing that U.S. employers added 223,000 workers and unemployment dipped to 3.8%.
Still, as the White House prepares to tout GDP as evidence of the administration’s economic prowess and progress, some business leaders and economists have expressed doubts that certain fiscal policies, as they relate to trade, may be problematic and soon endanger growth.
Trump has engaged in a trade war with many trading partners, slapping tariffs on foreign goods and materials, and threatening to walk away from the North American Free Trade Agreement [NAFTA], a trade deal the country has with Mexico and Canada. Trump has also pulled the U.S. out of deals such as the Trans Pacific Partnership [TPP], on the grounds that such deals do not benefit American workers.
Many countries have responded with tariffs of their own on U.S. products sold abroad, and there’s growing anecdotal evidence that American manufacturers are being hurt by the tariff war. It’s unclear if the retaliatory tariffs and their negative impact on the sale of U.S. goods abroad will show up in the second-quarter GDP numbers, but most economists believe such policies will ultimately hurt economic growth.
“Without question, tariffs will hit growth in the coming quarters as companies face higher prices and supply bottlenecks, and investment and consumption fall relative to where they would otherwise be,” Benn Steil, senior fellow and director of international economics at the Council on Foreign Relations, tells FOX Business. “The only question is by how much, which depends on how far tariff madness spreads,” he warns.
Jamie Dimon, the CEO of JPMorgan Chase – the largest U.S. bank – recently echoed those concerns.
“If you do another $200 billion of tariffs and this national security thing about cars, I think that you're getting pretty close to reversing some of the benefits you've seen in the economy,” Dimon said in an interview with CNNMoney.
Dimon, who is also chairman of the Business Roundtable, a lobby group of top U.S executives, said Trump is on solid ground criticizing serial abusers of trade practices, such as China. Still, Dimon was highly critical of the president’s broader trade agenda – and statement from his advisers – that minimize the effects of a tariff war against US trading partners in Europe and Canada.
“I would remind folks that the president's team has already said, ‘There will be no retaliation.’ They've already been wrong,” Dimon told CNNMoney. “If I was the president, I'd be a little ticked off at some of my advisers, to tell you the truth.”
The Commerce Department’s Bureau of Economic Analysis is scheduled to release second-quarter GDP at 8:30 a.m. ET on Friday.