By William Mauldin in Washington and John Lyons in Hong Kong

Donald Trump, the newly elected leader of the world's largest trading economy, has vowed to upend global trade.

His victory may begin an era of U.S. combativeness with trade partners such as China and Mexico, which Mr. Trump says benefit in a global system that cost America jobs. If implemented, Mr. Trump's promises could bring trade wars, drive up the price of imports and rattle a global economy that has relied on the expansion of international trade to drive growth.

Mr. Trump vowed to slap a 45% tariff on Chinese imports and declare Beijing a currency manipulator on his first day in office if China doesn't change its trade practices, which the president-elect and other critics have called unfair. He also threatened to leave the North American Free Trade Agreement, which connects Canada, the U.S. and Mexico, if Mexico doesn't agree to renegotiate the pact.

The election of Mr. Trump adds to deep uncertainty about the course of global trade, which had already suffered a blow when the U.K. voted to withdraw from the European Union.

"First and foremost the election result implies more uncertainty, on policies, and politics and therefore on the global economy," said Louis Kuijs, a former International Monetary Fund official who studies Asia as senior economist at Oxford Economics in Hong Kong.

Underscoring the uncertainty, global securities plunged. Overnight, S&P 500 futures fell as much as 5%, its limit. Japan's Nikkei stock index fell around 5%, while the Mexican peso fell to a record low against the U.S. dollar. Safe havens such as the yen and gold rose.It is far from certain whether Mr. Trump will follow through on his threats to go after major U.S. trading partners, but presidents have a large measure of authority over trade policy, even without congressional approval.

For example, U.S. officials could act quickly on allegations of dumping of goods such as steel by Chinese companies by introducing tariffs. Declaring China a currency manipulator could also allow the U.S. to introduce anti-subsidy tariffs on Chinese goods under current U.S. law. China, meantime, would likely consider some kind of retaliation, experts said.

"It is a guaranteed trade war" with China, said Gary Hufbauer, senior trade expert at the Peterson Institute for International Economics, which advocates freer trade. Mr. Hufbauer said he expects Mr. Trump to signal he is considering ending Nafta, the framework for North American trade for more than two decades, within days of taking office.

Mr. Trump's aides have played down the likelihood of a damaging trade war, saying that the 70-year-old reality TV star and real-estate tycoon's negotiating ability, plus the threat of tariffs, will probably be enough to get big trading partners including China, Japan and Mexico to end alleged subsidies and lower barriers to American goods.

If needed, Mr. Trump could use emergency powers that Congress has delegated to the president to slap tariffs on a top trading partner, economists and trade lawyers say.

Proponents of trade however expressed concern that the result could hurt U.S. profits, slow the economy by reducing markets for U.S. exports, and making imports more costly. What's more, economic uncertainty may cause banks to restrict lending, economists said.

Under a scenario with large tariffs imposed on China and Mexico and retaliation from those countries, the U.S. could go into a recession and lose 5 million jobs, according to a study by the Peterson Institute.

"We hope President Trump is more nuanced than candidate Trump," Jake Parker, vice president of China operations of the U.S.-China Business Council. "Rather than build protectionist walls, we should boost American exports," he said.

Mr. Trump has said his policies will bring jobs back to the U.S., a message that has resonated in a campaign filled with complaints from voters who say globalization has left much of the country behind.

But companies ranging from Ford Motor Co. to the Carrier Corp. unit of United Technologies Corp. could suffer if Mr. Trump follows through on a threat to tax their products when imported from Mexico, part of Mr. Trump's vows to target companies "offshoring" production.

Rewriting the rules of global trade could carry enormous implications for the manufacturing economies of the developing world that have benefitted from the expansion of global trade.

No country hasgained more than China, which became the world's second largest economy in recent years by dominating the manufacture of everything from microwaves to clothing. Even smaller tariff hikes than the ones promised by Mr. Trump could have a big impact. A 15% tariff on Chinese goods could shave a full percentage point off China's economy, according to Daiwa Securities in Hong Kong.

Any slowdown by China would reverberate through the economies of Asia that now have China, not the U.S. as their chief trade partners. That includes U.S. allies such as Korea, Japan and Taiwan.

The possible changes left much of the Asia region on tenterhooks. "It still remains to be seen how much of his remarks would be made into actual policies," Junichi Sugawara, senior research officer at Mizuho Research Institute in Japan.

Mr. Trump's win also seals the fate of President Barack Obama's 12-nation trade agreement, the Trans-Pacific Partnership, or TPP. The president-elect blamed the TPP on special interests who want to "rape" the country.

Mr. Obama had hoped to work with Republican lawmakers to pass the TPP during the "lame duck" session of Congress after the election, where they faced an uphill battle even if Tuesday's vote had favored Hillary Clinton, who previously backed the TPP negotiations.

Now Republicans have little incentive to bring the TPP to a vote, since Mr. Trump could easily threaten to unravel the deal when he takes office and block its implementation, as well as punish lawmakers who vote for it.

Write to John Lyons at john.lyons@wsj.com

(END) Dow Jones Newswires

November 09, 2016 07:14 ET (12:14 GMT)

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