Similarly, a rise in inflation of one percentage point or so – well within Niesr’s projections – would have the same effect, as would a slowdown in nominal GDP growth of less than one percentage point.
Reeves’s headroom threatens to disappear before her very eyes.
Trump’s trade policies also threaten dire consequences for Europe. The IFO Institute in Germany estimates that a 20pc tariff imposed by Trump would deliver a €33bn (£27.5bn) blow to the country, slashing exports to the US by 15pc and hitting those to China by 10pc as result of weaker growth there as sales to America reduce.
Analysts at Goldman Sachs wrote: “We expect President Trump’s policy agenda to affect the European economic outlook via several channels. First, and most importantly, renewed trade tensions are likely to weigh materially on growth.
“Second, Trump’s re-election will likely entail renewed defence spending and security pressures for Europe.
“Taken together, our analysis points to a 0.5pc hit to real GDP in the euro area, ranging from 0.6pc in Germany to 0.3pc in Italy, with a moderate 0.4pc hit to the UK.”
Christian Schulz at Citi agrees that US tariffs on China would also hit the eurozone economy.
If China’s exports to the US tumble, its growth would take a further hit and so demand for European goods – particularly from Germany – would slump.
But if sales into the US fall, China would also try to sell more of its products into Europe, potentially flooding the continent with cheap goods.
That would offer some relief to hard-pressed consumers after the cost of living crisis, but might also spur Brussels to slap more tariffs on Chinese goods to protect domestic industry, as it has already done with electric vehicles.
Carsten Brzeski, economist at ING, says just the fear of trade taxes could force the eurozone into recession
“A looming new trade war could push the eurozone economy from sluggish growth into a full-blown recession. The already struggling German economy, which heavily relies on trade with the US, would be particularly hard hit by tariffs on European automotives,” he says.
“Additionally, uncertainty about Trump’s stance on Ukraine and Nato could undermine the recently stabilised economic confidence indicators across the eurozone. Even though tariffs might not impact Europe until late 2025, the renewed uncertainty and trade war fears could drive the eurozone economy into recession at the turn of the year.”
Dillon says: “The tariffs only harm the economy, and increase costs for the consumers, business and the interconnected supply chains.”
Trump will be undeterred about the impacts of these policies beyond his borders. Appearing at a victory event onstage in Palm Beach, Florida, on Wednesday he told the crowd: “Every single day I will be fighting for you … This is a magnificent victory for the American people that will allow us to make America great again.”