The International Monetary Fund is dialing back its expectations for the U.S. economy, according to a report out Tuesday.
The IMF no longer expects President Trump's proposed tax cuts to happen, causing the international organization to cut its forecast for U.S. economic growth this year and next.
The U.S. economy will still expand, the IMF predicts, just not as quickly as some had hoped. The IMF forecasts 2.2 percent growth in 2017 and 2.3 percent in 2018, a decline from April when the IMF projected 2.3 percent growth this year and 2.5 percent in 2018.
“The downward revision relative to April forecasts reflects a major correction in U.S. fiscal policy assumptions,” the IMF wrote in its latest World Economic Outlook report. Because of “significant policy uncertainty,” the IMF economists felt they should not count on Congress and the president passing lower taxes.
Still, it's not all bad news for America or the Trump White House. The global economy is finally humming again, with every region of the world on track to finish the year with gains for the first time this decade.
“The global recovery is continuing, and at a faster pace,” said Maurice Obstfeld, director of research at the IMF. “The picture is very different from early last year, when the world economy faced faltering growth and financial turbulence.”
Last year the global economy grew a disappointing 3.2 percent, but the world is on track for 3.6 percent growth this year and 3.7 percent next year, according to the IMF.
Optimism is picking up again around the world, causing businesses and consumers alike to open their wallets and spend more. As the global economy improves, it lifts U.S. growth as well. American companies that sell extensively overseas are expected to do the best this year, according to a research note out Monday from FactSet. China, Europe and Japan are buying more goods from around the world, including the United States.
It's a "synchronized Goldilocks upswing" that's likely to fuel more growth and better stock market performance around the world, said research firm Oxford Economics.
Trump is especially pleased with how well the stock market has done since his election. The Trump stock market rally is “close to becoming the greatest in 85 years,” Trump's daughter Ivanka wrote on Twitter Monday, linking to a New York Post story. The president retweeted it.
Even though the IMF cut its forecast for the United States, the international organization still noted that growth is “above trend” and certainly better to last year's 1.5 percent growth. The IMF encouraged American politicians to use these relatively strong economic times to reduce the debt and spend more on infrastructure and worker education and retraining.
“Our research shows that structural reforms are easier to implement when the economy is strong,” Obstfeld said.
All 15 countries the IMF tracks individually are expected to grow this year and next with China and India surging ahead the most.
China is expected to regain the fastest growing nation crown with 6.8 percent expansion this year, slightly ahead of India's 6.7 growth. But India is projected to top the growth charts in 2018.