Donald Trump 'would wipe $1 trillion from the US economy if he is elected president'

Trump to offer fresh details of his economic vision in Manhattan

Donald Trump has drawn level with Hillary Clinton in recent weeks, according to the polls (Getty)

Donald Trump will attempt to clarify his economic vision on Thursday after a leading forecast company suggested America would lose one trillion dollars in output if he becomes president.

According to a report by Oxford Economics, growth in the US would be about 5 per cent lower than would otherwise be expected by 2021 if Mr Trump is elected to the White House and has reasonable success in enacting his policies. It would also adversely affect other economies.

“Towards the end of the five-year forecast, U.S. GDP falls to a level around 5 percent below baseline. And the anticipated recovery in global growth is significantly undermined,“ it said.

Analysts will be looking for new details from Mr Trump when he addresses the Economic Club of New York at the Waldorf Astoria in Manhattan on Thursday. He was scheduled to appear there alongside his running mate, Mike Pence. Later he was due at a rally in New Hampshire.

In its report Oxford Economics suggests that the likely stunting of the US economy under a Trump presidency would be the result primarily of his promised tougher stance on trade and his plans to deport millions of undocumented workers currently in the country.

A victory for Mr Trump over Hillary Clinton on 8 November would also cast a chill around the world, the report suggests, by dint of it being unexpected.

“This would transmit the shock across the globe, affecting not just countries directly impacted by the policies and not just businesses with significant direct trade exposures to the US, Mexico and China,” it said. “A weakening in confidence would most likely result in the scaling back of business investment plans, accompanied by the postponement of major household purchases.”

The underlying notion that Mr Trump being elected would be a surprise may not hold true all the way to November, of course. After a flurry of new polls showing a tightening of the race with Ms Clinton, including in key swing states, Nate Silver of FiveThirtyEight, the forecasting group, said on Thursday he was giving Mr Trump a 37.3 per cent chance of victory, a sharp improvement.

Mr Trump has insisted that his plan, with tax cuts, reduced regulation and retaliatory trade measures against some nations, would boost growth. “We’re going to provide opportunity, prosperity and security for all Americans,” he said in a recent speech in Iowa.

The firm assumes Mr Trump would face a divided Congress - the Senate under Democrat control and the House run by Republicans - and that some of his policy prescriptions would therefore be diluted. Nonetheles it sees “adverse” consequences which would be amplified if he gets his way more comprehensively.

“Should Mr. Trump prove more successful in achieving adoption of his policies, the consequences could be far-reaching – knocking 5 percent off the level of US GDP relative to baseline and undermining the anticipated recovery in global growth,” the report said.

The Oxford Economics report takes as its baseline an economy that normally should grow at a fairly constant annual rate of roughly 2 per cent from 2017 reaching $18.5 trillion in 2021 after the next presidential elections.

However, it says that with Mr Trump at the helm, growth could drop close to zero by 2019 and overall GDP would only reach $17.5 trillion by the end of a first term.

“The consequences are far-reaching,“ the economists who wrote the report, Jamie Thompson and Sarah Maxwell, said. Their report added that “towards the end of the five-year forecast, US GDP falls to a level around 5 percent below baseline. And the anticipated recovery in global growth is significantly undermined”.

Especially concerning, it warned, is the suggestion from Mr Trump that he would target China and Mexico with high tariffs to punish them for alleged unfair trade practices. The long-term knock-on effects for an array of countries, as well for US consumers who would find themselves being asked to pay higher prices for Mexican and Chinese goods, could be severe.

The candidate has also said he wants to scrap or renegotiate NAFTA, the 1993 free trade treaty binding the US with Mexico and Canada, and scrap the Transpacific Treaty planned with 11 large partner nations around the Pacific rim.

“If US businesses and consumers were to switch away from higher priced Mexican and Chinese imports following the imposition of tariffs, some other emerging market economies might initially benefit,“ the report said. ”They might then suffer if the US were to respond by raising tariffs on a broader set of emerging market economies. US exporters would most likely suffer as well, as impacted emerging market economies retaliate.”

Tariffs on Mexico could also seriously disrupt manufacturing supply chains in the US, the report warnings, noting that US-produced materials account for as much as 40 per cent of every dollar spent on goods imported to the US from Mexico.

A large-scale deportation of undocumented residents would also contribute to shrinking growth and impact labour supply across the US.