Date
23 July 2018
Donald Trump could offset potential gains from his promised tax cuts if he triggers a trade war with rivals such as China and Mexico. Photo: AP
Donald Trump could offset potential gains from his promised tax cuts if he triggers a trade war with rivals such as China and Mexico. Photo: AP

Trump’s tax cuts could boost US, global growth, says World Bank

Donald Trump’s proposed tax cuts could goose global economic growth this year and next, the World Bank said Tuesday.

That would be fresh fuel for a world struggling with stagnant trade, weak investment and rising policy uncertainty, the Wall Street Journal reports.

In its semi-annual flagship economic report, the development institution said the global economy should expand by 2.7 percent this year, down a bit from the 2.8 percent predicted last June.

But it is up from last year’s post-crisis low of 2.3 percent. The US economy is picking up steam and stabilizing commodity prices are helping major emerging-market economies rebound, it said.

The bank estimates the US president-elect’s proposals to slash corporate and personal income taxes could add up to 0.3 percentage point to American growth this year and up to 0.8 percentage point next year.

That could raise the US growth rate to 2.5 percent this year and 2.9 percent next, and add 0.3 percentage point to global growth next year, the bank said.

“All eyes are on the likely changes in policy direction in the US,” said Ayhan Kose, the chief author of the report.

While those numbers are far from Trump’s pledge to raise growth to 3.5 percent, they are still a vote of confidence for at least one plank of the incoming president’s economic platform.

The bank said the upside projections aren’t part of its core forecasts, however, because of the uncertainty surrounding the next administration’s policies.

The institution warned Trump could offset potential gains from his promised tax cuts if he triggers a trade war with rivals such as China and Mexico.

Officials at the bank and its sister institution, the International Monetary Fund, fear the Trump administration could stir global protectionism by delivering on threats to slap China and Mexico with tough new tariffs. They caution such trade restrictions could curb global growth.

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