Donald Trump
Donald TrumpReuters

The world stands to face a bigger risk if Republican candidate Donald Trump becomes the president of the United States than even if an armed clash breaks out over the South China Sea dispute, a report by research firm Economist Intelligence Unit (EIU) says. The report put a prospective hard landing of the Chinese economy as its top risk scenario. 

The report highlighted Trump's "hostile attitude" toward China and Mexico, which it said could lead to a trade war, and also warned of an increased threat from terrorist groups such as the Islamic State group owing to the American billionare's "militaristic tendencies."

"Although we do not expect Mr Trump to defeat his most likely Democratic contender, Hillary Clinton, there are risks to this forecast, especially in the event of a terrorist attack on US soil or a sudden economic downturn, [sic]" EIU said. 

The firm rated the threat of Trump's presidency on a par with the "rising threat of jihadi terrorism destabilising the global economy" on its global risk forecasting list. It warned the global economy stands to lose if terror attacks escalate, stating it could end the five-year bull run of the US and European stockmarkets.

The report ranked a possible arms clash in the South China Sea lower on the global risk assessment ranking, stating it had a "low probability," but warned escalation of the dispute would seriously undermine intra-regional economic ties, potentially interrupt global trade flows and simultaneously depress global economic sentiment more broadly."

The biggest global risk EIU cited was of a sharp economic slowdown in China.

"If China's economy slows by more than we currently expect, it will further feed the ongoing global commodity price slump...a prolonged deceleration in growth there would have a severe knock-on effect across the EU and the US - far more than would have been the case in earlier decades, [sic]" the report said. 

The threat from "Brexit" — Britain voting to leave the European Union — was ranked a weaker risk than a Trump win in the U.S. elections, but the EIU warned the move would entail "negative ramifications" for both the U.K. and the EU, while also threatening to worsen the current global currency instability. 

However, the firm said the threat from "Grexit" — Greece being pushed out of the euro zone — could be a bigger global risk, especially if it led to other countries also exiting the single-currency zone. 

The other major global risks EIU listed were the possibility of a new "cold war" due to Russia's intervention in Ukraine and Syria, and an emerging-market debt crisis.