US braced for ‘cataclysmic’ shocks if Trump trade policies come into force

MILLIONS of jobs and billions of dollars could be wiped from the world’s economy under Donald Trump’s plans for the United States.

MILLIONS of jobs, billions of dollars worth of trade and the stability of the global financial system could be at risk following the “cataclysmic” impact of a Trump victory next Tuesday.

That’s according to economic modelling, done by the Peterson Institute for International Economics, based on Trump’s claims he would “rip up” global trade agreements and impose tariffs on the US and China.

The US-based think tank’s executive vice President Marcus Noland said the US is on the “cusp” of a decision that could turn the clock back 80 years and drive a stake through the heart of global business meccas like Silicon Valley and New York’s Wall Street.

Manufacturing, engineering, aerospace, retail and hospitality industries could also be affected, as could overseas markets like Australia who rely on a stable international system, he said.

“If the US is essentially acting as a bully and a rogue and starting trade wars with China and Mexico, that’s bad for everyone,” Mr Noland said one week before the US takes to the polls.

“It’s bad for the whole system. There’s going to be much higher levels of uncertainty, significant financial market turbulence and so on. That’s not good for Australia.”

Markets are bracing themselves for a wild ride on November 9 if Trump wins. Picture: AP Photo/Richard Drew

The New York billionaire has pledged to put a 35 per cent tariff on Mexican imports, 45 per cent on Chinese and renegotiate existing free trade agreements including ones with Canada, Mexico and Korea, if elected.

He’s also threatened to “pull out” of the World Trade Organisation which upholds a global framework for 163 trading nations that could trigger an international trade war and a spate of lawsuits from companies as diverse as GM, Levis and Chrysler, the think tank reports.

“Trump’s sweeping proposals on international trade, if implemented, could unleash a trade war that would plunge the US economy into recession and cost more than 4 million private sector American jobs,” the report states.

Those affected would be overwhelmingly from low-income industries who may not consider themselves vulnerable and could disrupt stability for decades, analysis shows.

“If he is elected and imposes the trade restrictions of the magnitudes threatened, foreign countries will soon retaliate,” the report reads.

“They will not patiently wait for US court proceedings or WTO litigation to vindicate their rights under national or international law. Enormous economic damage will ensue long before the legal battlefield is cleared.”

Hillary Clinton has crushed the prospect of the TPP in its current form despite Australian Trade Minister Steven Ciobo saying he is “optimistic” about it Picture: Jewel SAMAD

The prospect is a huge blow for Australia who relies heavily on a trading relationship with the US and China. Both Mr Trump and Mrs Clinton have also dealt a death blow to the trans-Pacific Partnership President Obama had favoured.

The 12-nation agreement was set to provide a $226 billion boost to the Australian economy and pave the way for open trade between countries as diverse as Mexico, Vietnam and Canada.

While Australian Trade Minister Steven Ciobo remains “optimistic” the ambitious deal could be done before the new President is inaugurated in January, this is increasingly unlikely.

Mr Noland said in the event of a Clinton-win it may be delayed. If Trump wins, all bets are off.

“Mrs Clinton is basically stasis with the possibility of doing some twists and turns that you could basically pass the TPP in maybe 2019,” he said.

“Mr Trump is something all together different. I think it’s very unpredictable but also very dangerous.”

The news is a blow to Australia, which is trying to increase support for free-trade deals while the US, Europe and the UK move towards more protectionist economic policies.

Australia has recently completed a scoping study with the EU on a free-trade agreement and is exploring what a deal with the UK might look like in a post-Brexit Britain. However any deal remains complicated by the fact the UK must first work out Brexit terms before proceeding with separate arrangements.

Trump has pledged to create a “booming economy” that will create 25 million jobs over a decade with growth of 3.5 per cent a year. He also wants to cut corporate tax from 39 per cent to 15 per cent and simplify America’s seven tax brackets into three.

Mrs Clinton wants to keep taxes the same with a four per cent “fair share surcharge” for the highest earners.

Trump has pledged to ‘rip up’ free trade agreements and said he would raise tariffs on Mexican and Chinese imports. Picture: Sarah Rice/Getty Images/AFP.

Australia is also in the process of exploring what its trade relationship with Britain will look like post-Brexit, while the UK works out whether or not it stays inside or outside the single market which will affect the scope of any future UK-Australia deal.

He said any trade war between the US and China will be hugely disruptive to the international system and would have ripple effects for demand for Australian products.

“The only good news is that Trump doesn’t seem to have anything in particular against Australia,” he said.

Greater protectionism is part of a global trend fuelling projectionist sentiment. While Trump supporters have said the billionaire will move towards the centre, Mr Noland said the same thing was said in the primary race, which has proved not to be true. The result could put him at odds with companies from GM to Chrysler, Gap and Levis and lead to a flood of lawsuits and disruption of supply chains that would up-end the global system.

Trump’s campaign claims to create a “booming economy” that will create 25 million jobs over a decade by boosting growth rates to 3.5 per cent a year. He also wants to cut the corporate tax rate from 39 per cent to 15 per cent and reduce the number of tax brackets to three.

Clinton wants to keep taxes the same but increase them for the highest earners with a four per cent “fair share surcharge”. She has also pledged to create a huge investment in jobs and infrastructure within the first 100 days in office.