President-elect Donald Trump’s plan to cut taxes and increase spending could help accelerate economic growth in the U.S. and around the world, according to a just-released report. Still, those gains could be wiped out if plans for protectionist tariff increases are instituted, the Paris-based Organisation for Economic Co-operation and Development (OECD) said in its twice-annual Economic Outlook report.
While campaigning for the presidency, Trump vowed to slash personal and corporate income taxes, and to bolster infrastructure spending by as much as $1 trillion. Such actions, the OECD believes, could help lead to 2.3% economic growth for the U.S. in 2017 – a rise from the previously projected 2.1%. Even more encouragingly, gross domestic product could ramp up by 3% in 2018, achieving a growth rate not seen since 2005. Relatedly, the OECD says unemployment in the United States would drop from 4.9% in 2017 to 4.5% by 2018.
According to the OECD, a stronger domestic economy in America could help fuel the economies of other nations, as demand for imports rises in the U.S. The OECD predicts that global growth will jump from 2.9% this year to 3.3% in 2017, then reach 3.6% in 2018.
“There’s now some prospect of the world exiting from this low-growth trap,” said Ángel Gurria, the OECD’s secretary-general, as reported by the Wall Street Journal. “Even though we still show the signs of those very heavy legacies of the crisis, we may be at a moment where we could see a turn for the better.”
Nonetheless, the OECD cautioned that protectionist policies could offset potential economic gains made possible by tax cuts and increased government spending. Trump has expressed interest in introducing higher tariffs on imports from China and Mexico, and reevaluating trade relationships that he believes place U.S. workers at a disadvantage.
“Protectionism and inevitable trade retaliation would offset much of the effects of the fiscal initiatives on domestic and global growth, raise prices, harm living standards, and leave countries in a worsened fiscal position,” said Catherine Mann, the OECD’s chief economist.
Other economists have voiced concerns about Trump’s economic plans. A report from Oxford Economics said Trump would cost the economy $1 trillion in just five years, and other economists forecast the loss of millions of jobs under Trump’s immigration policy.