According to Oxford Economics, there can be grave implications for the world’s largest economy by a win for U.S. presidential candidate Donald Trump.
U.K.-based economists Jamie Thompson and Sarah Maxwell said in a note that 5 percent off where U.S. gross domestic product (GDP) would otherwise be in 2021 could be knocked off and global economic growth could be undermined if Trump were able to implement all of his proposed policies. Thompson said that the 5 percent would equate to as much as $1 trillion off the forecast size of the U.S. economy in 2021.
"The consequences are far-reaching," the economists said.
Originally founded in 1981 as a commercial venture with Oxford University's business college, Oxford Economics is an independent advisory firm.
The slowdown would be far deeper than in a scenario of partial policy enactment and growth would remain subdued longer in what the economists call their "adverse Trump scenario" of substantially all of the Republican candidate's stated policies being enacted. For the period of 2016-2021, U.S. economy is expected to grow at 1.5 percent to 2.3 percent a year and this is the baseline for the forecasts of the Oxford Economics. The impact of Trump's trade and immigration policies on potential supply of economic inputs, such as labor and raw materials, is partly to be blamed for this.
"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," the report said.
The report said that imposing high tariffs on Chinese and Mexican goods, one of Trump’s trade policies, may also have knock-on impacts on other countries and this would be the most direct impact.
"If U.S. 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 U.S. were to respond by raising tariffs on a broader set of emerging market economies. U.S. exporters would most likely suffer as well, as impacted emerging market economies retaliate," the report added.
Citing 2011 estimates from the Federal Reserve Bank of San Francisco indicating U.S. services account for more than half of every dollar spent on China-produced items, the report noted that the trade policies would also take a bite from U.S. businesses and workers.
The report said that supply chains, particularly in the auto industry, would also be hit as they increasingly cross national boundaries. Eight times during production, cars built in North America have their parts cross U.S. borders, the report noted citing some estimates. Around 40 percent of every dollar spent on Mexican goods imported into the U.S. is accounted by U.S.-produced materials, it noted.
Due to the effects on the quality and variety of inputs available to domestic producers, those policies would also impact productivity on an indirect basis.
While Trump's proposed fiscal changes would have increasingly contractionary effects on the U.S. economy amid harsh government spending cuts after initially stimulating demand through tax cuts, the report noted that the timetable of implementation wasn't clear on tax policies.
(Source:www.cnbc.com)
U.K.-based economists Jamie Thompson and Sarah Maxwell said in a note that 5 percent off where U.S. gross domestic product (GDP) would otherwise be in 2021 could be knocked off and global economic growth could be undermined if Trump were able to implement all of his proposed policies. Thompson said that the 5 percent would equate to as much as $1 trillion off the forecast size of the U.S. economy in 2021.
"The consequences are far-reaching," the economists said.
Originally founded in 1981 as a commercial venture with Oxford University's business college, Oxford Economics is an independent advisory firm.
The slowdown would be far deeper than in a scenario of partial policy enactment and growth would remain subdued longer in what the economists call their "adverse Trump scenario" of substantially all of the Republican candidate's stated policies being enacted. For the period of 2016-2021, U.S. economy is expected to grow at 1.5 percent to 2.3 percent a year and this is the baseline for the forecasts of the Oxford Economics. The impact of Trump's trade and immigration policies on potential supply of economic inputs, such as labor and raw materials, is partly to be blamed for this.
"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," the report said.
The report said that imposing high tariffs on Chinese and Mexican goods, one of Trump’s trade policies, may also have knock-on impacts on other countries and this would be the most direct impact.
"If U.S. 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 U.S. were to respond by raising tariffs on a broader set of emerging market economies. U.S. exporters would most likely suffer as well, as impacted emerging market economies retaliate," the report added.
Citing 2011 estimates from the Federal Reserve Bank of San Francisco indicating U.S. services account for more than half of every dollar spent on China-produced items, the report noted that the trade policies would also take a bite from U.S. businesses and workers.
The report said that supply chains, particularly in the auto industry, would also be hit as they increasingly cross national boundaries. Eight times during production, cars built in North America have their parts cross U.S. borders, the report noted citing some estimates. Around 40 percent of every dollar spent on Mexican goods imported into the U.S. is accounted by U.S.-produced materials, it noted.
Due to the effects on the quality and variety of inputs available to domestic producers, those policies would also impact productivity on an indirect basis.
While Trump's proposed fiscal changes would have increasingly contractionary effects on the U.S. economy amid harsh government spending cuts after initially stimulating demand through tax cuts, the report noted that the timetable of implementation wasn't clear on tax policies.
(Source:www.cnbc.com)
