Donald Trump signals drastic shift on immigration with move to allow some undocumented migrants to stay in US

US President is considering a 'compromise' bill that could potentially benefit millions of undocumented migrants living in America

President Donald Trump holds up a hat that reads "Make Counties Great Again" (AP)

Donald Trump's hardline stance on immigration looks set to be drastically softened after it emerged he was considering allowing some undocumented migrants the right to stay in America.

Hours before the speech to US lawmakers, Mr Trump signalled he was willing to change direction on his policy towards undocumented migrants.

During a lunch with journalists, he said he was willing to "compromise" on a new immigration bill, which could include legalisation for some of the estimated 11 million people living in the US illegally.

Reports suggested it could also lead to citizenship for the "Dreamers" — people brought to the US illegally as children.

During the speech to Congress, he said: "By finally enforcing our immigration laws, we will raise wages, help the unemployed, save billions of dollars and make our communities safer for everyone."

Mr Trump also used the address to call for a major increase in military spending, and outlined a plan he said would boost job growth while tightening border security.

His much-anticipated joint session address, which lasted for more than an hour, also touched on the thorny issue of how he plans to repeal and replace Obamacare.

The White House and Congress lack agreement on how to reform the US healthcare system, amid signs of growing Republican division on the issue.

He said: "Tonight, I'm also calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower cost and, at the same time, provide better health care.

"Mandating every American to pay government-approved health insurance was never the right solution for America.

"The way to make health insurance available to everyone is to lower the cost of health insurance, and that's what we'll do."

President Donald Trump (Getty Images) (Getty)

As speculation mounts that Mr Trump will call on congress to back a new immigration bill, a senior White House official confirmed the issue may be raised during Mr Trump’s address, but did not give details about what specific measures it would include.

The White House would not expand on Mr Trump's comments beyond spokeswoman Sarah Sanders saying that the president was "open to having conversations about that moving forward".

It follows a major setback for the Trump administration after moves aimed at restricting arrivals from seven Muslim-majority countries were blocked by a federal appeals court.

White House press secretary Sean Spicer said last week that the theme of the address would be “the renewal of the American spirit” and would focus on “public safety, including defence, increased border security, taking care of our veterans, and then economic opportunity, including education, job training, healthcare reform, jobs, and tax and regulatory reform”.

Among the others proposals unveiled by the Trump team on Tuesday was a plan to cut diplomacy and foreign aid budgets by 37 per cent to help pay for increased military spending.

Speaker of the House of Representatives, Paul Ryan, said the speech was "an opportunity for the people and their representatives to hear directly from our new President about his vision and our shared agenda".

The White House said in a statement Mr Trump would “communicate his vision for the future of the country directly to the American people as he moves forward with his plans to take on the many challenges facing this nation”.