By Andrea Shalal
WASHINGTON (Reuters) -White House economic adviser Kevin Hassett on Monday said he expected uncertainty about President Donald Trump’s trade policies to be resolved next month, and predicted first quarter GDP data would be positive, albeit slightly.
In an interview with CNBC, Hassett, who heads the National Economic Council, said there were many reasons to be bullish about the U.S. economy, despite some predictions of a negative GDP result in the first quarter and concerns about inflation.
Trump’s tariffs on Canada, China and Mexico were already having the intended effect of bringing manufacturing and jobs back to the United States, he said.
“There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data, including the negative GDP, Dow, which are related both to the Biden inheritance and to some … timing effects that are happening ahead of the tariffs,” Hassett said.
He said the Atlanta Federal Reserve’s prediction of negative GDP growth this quarter would be a “very temporary phenomenon,” driven largely by a historical tendency to hold off on investment after a big election. This tendency should be resolved this month, and tariff uncertainty should be resolved in April, he said.
Reuters polls of economists last week showed risks to the Mexican, Canadian and American economies are piling up amid a chaotic implementation of U.S. tariffs that has created deep uncertainties for businesses and decision-makers. The surveys showed 70 of 74 economists polled across Canada, the U.S. and Mexico judged that the risk of a recession had increased.
Trump has imposed an additional 20% tariff on Chinese goods entering the United States, as well as 25% tariffs on imports from Canada and Mexico, although he suspended most of the duties on U.S. neighbors until April 2, when he plans to unveil a global regime of reciprocal tariffs on all trading partners.
The seesaw tariff announcements have unnerved Wall Street – the U.S. benchmark S&P 500 index has given up all of its gains since Trump’s November election.
Hassett struck an upbeat note, arguing U.S. tax cuts would boost the economy, increase investment and boost real wages by the second quarter, offsetting any negative fallout from the tariffs.
“Just be very wary … of conversations about recession,” he said. “What I think that what’s going to happen is the first quarter is going to squeak into the positive category, and then the second quarter is going to take off as everybody sees the reality of the tax cuts,” he said.
Hassett rejected the notion that consumers would bear the brunt of tariffs proposed and implemented, noting that having U.S. content would allow foreign producers to avert tariffs in many cases.
He noted that trade comprised only “a fraction” of the U.S. economy, and even if there was a small change in the price of imported goods, real wages were expected to go up as manufacturing employment rose.
(Reporting by Andrea Shalal and Susan Heavey; Editing by Ed Osmond and Christina Fincher)
