Donald Trump could bypass the US Congress to push through his controversial “protectionist” trade policies, managers have warned.

The president-elect, who shocked the world by winning the US election overnight, has said he wants to repatriate jobs from countries such as Mexico and China and pull out of international trade agreements such as the Trans-Pacific Partnership and the North Atlantic Free Trade Agreement (NAFTA).

Trump has claimed that NAFTA has resulted in the US losing one-third of its manufacturing jobs.  

Keith Wade, chief economist at Schroders, warned that a trade war could erupt if Trump succeeds in imposing tariffs on imports from China and Mexico, as set out in his trade policy.

“With higher tariffs pushing up prices, and wages rising as immigrant-labour supply falls, the overall outcome is likely to be stagflation, ie weaker growth and higher inflation,” he said.

AXA Investment Managers senior economist David Page went further, estimating that such policies could cut the outlook for US growth “by more than 1% over the coming two years”.

Mark Burgess, global head of equities and EMEA CIO at Columbia Threadneedle, said: “Trade protectionism is perhaps the biggest economic fear, as we could see reflationary outcomes. Expectations of inflation in the US have already turned, and protectionism will accentuate those fears.”

While the US Senate and House of Representatives could oppose Trump’s planned heavy tariffs on China and Mexico, Neil Williams, chief economist at Hermes Investment Management, said the president-elect could bypass the approval process.

Trump, as part of his ‘Seven-Point Plan’ to rebuild the US economy, has stated that he intends to “use every lawful presidential power to remedy trade disputes if China does not stop its illegal activities”.

He has accused the Chinese of stealing trade secrets, manipulating its currency and using “unfair” subsidies.

Williams warned that Trump could expand this policy to cover other countries that seek to plug the trade gap with “cheaper” imports.

“Expect … subsequent global retaliation and a flow-back from Mexico – which relies on the US for 80% of its exports and the bulk of remittances – Canada, and a likely China currency devaluation,” Williams added.

Christopher Mahon, asset-allocation director at Baring Asset Management, said: “Trade deals with the EU and Japan may also be at risk.”

The Mexican peso was hammered in global trading as Trump’s victory became clear, falling the most of any major currency, according to Bloomberg.

The MSCI Emerging Markets index also fell this morning, led by Asian markets including Hong Kong, Korea and Taiwan.

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