How Trump’s Immigration Plans Could Affect the Economy

Expelling noncitizens on a mass scale is likely to raise prices on goods and services and lower employment rates for U.S. workers, many economists say.

The wave of migrants who arrived during the Biden administration fueled some of the anger that propelled Donald J. Trump back to power. They also offset a labor shortage, putting a damper on inflation.

With the next administration vowing to seal the border and carry out the largest deportation program in American history, those economic forces could reverse — depending on the degree to which Mr. Trump can fulfill those promises.

Mr. Trump’s newly appointed “border czar,” Tom Homan, has said that the administration would start with the immigrants who have committed crimes. There are not nearly enough of those to amount to removals on a mass scale, however, and Vice President-elect JD Vance has also said that all 11 million undocumented immigrants should prepare to leave. “If you are in this country illegally in six months, pack your bags, because you’re going home,” Mr. Vance said in September.

The numbers could rise by another 2.7 million if the new administration revokes several types of temporary humanitarian protection, as the Trump adviser Stephen Miller previewed last year. On top of that, millions of undocumented residents live with U.S.-born children or green card holders who could end up leaving the country as well.

There are logistical, legal, diplomatic and — even though Mr. Trump has said there is “no price tag” he wouldn’t direct the government to pay — fiscal obstacles to expelling millions of people who would rather stay. (According to the American Immigration Council, an advocacy group for immigrants, it would cost $315 billion to arrest, detain, and deport all 13.3 million living in the United States illegally or under a revocable temporary status.)

That’s why forecasting a precise impact is impossible at this point. But if Mr. Trump accomplishes anything close to what he has pledged, many economists expect higher prices on goods and services and possibly lower employment rates for American workers.

“That gargantuan shock will cost trillions of dollars in economic growth, eliminating hundreds of thousands of jobs held by U.S. natives,” said Michael Clemens, an economics professor at George Mason University who focuses on migration. “It will quickly raise inflation, by reducing the capacity of U.S. firms to supply goods and services faster than it reduces demand.”

There’s plenty of precedent for this projection. You could start with the past eight years: A slowdown in immigration during the first Trump administration and a full hiatus over the pandemic created a shortfall of workers. That was part of what allowed prices to jump in 2021 and 2022, both by driving up wages and by limiting the supply of goods and services, according to officials at the Federal Reserve and other analysts.

In 2023, a bounceback in legal immigration as well as a surge in border arrivals — largely driven by economic crises and wars abroad — eased the labor market pressure that had boiled over into inflation, allowing price growth to recede without widespread layoffs. The Congressional Budget Office has also estimated that this period of elevated immigration reduced projected deficits, since the new arrivals pay taxes and are eligible for fewer public benefits.

At the same time, unemployment rates for U.S.-born and foreign-born workers remained tightly tethered, indicating that the new arrivals did not broadly take jobs away from people already here. Instead, it’s likely that they allowed for job growth in industries like construction and hospitality that wouldn’t have happened otherwise.

“Because the educational attainment most folks have is relatively low, I think the skills that new arrivals bring to the U.S. are just a different set of skills than most U.S.-born workers have,” said Chloe East, an associate professor of economics at the University of Colorado.

Mr. Vance has argued that deporting immigrants could force employers to offer higher pay to attract Americans, and there is some research to suggest that restricting immigration can raise wages for low-skilled workers. That’s what appears to have happened when the United States introduced a strict quota system after World War I, according to a paper by economists at Michigan State University and the Federal Reserve Bank of Kansas City. And wages for workers in immigrant-heavy industries did grow faster while cross-border migration was cut off in 2020.

That could have been caused more by other factors, however, such as Americans’ simply not wanting to do physical, in-person work during a pandemic. And the wage gains for low-skilled workers in the 1920s were short-lived.

When it comes to mass deportations, there is a direct point of comparison: the Secure Communities program under former President Barack Obama. Under this stepped-up enforcement regime, undocumented immigrants arrested for any reason could be swiftly deported, resulting in the expulsion of some 400,000 people.

Dr. East’s research found that the program resulted in lower wages and employment for native-born workers, partly because some businesses couldn’t operate without immigrant labor and their other employees were affected. It had a particularly pronounced effect on care sectors: A shrunken supply of child care meant that fewer mothers could hold jobs.

That deportation program, like most throughout history, occurred during a time of relatively high unemployment. With the current jobless rate near 4 percent, the effects could be larger, since there are fewer available workers to take the jobs that would be left behind.

That is why independent forecasts project that Mr. Trump’s program would be a drag on the economy. In a comprehensive model of his proposals, a team of economists from the Peterson Institute for International Economics estimated that the maximum case — deporting 8.3 million immigrants — would push prices 9.1 percent higher overall by 2028. Even deporting only 1.3 million migrants would raise prices by 1.5 percent.

A model by economists at the Brookings Institution, looking at a scenario of about 3.4 million deportations and restrictions on legal immigration, found that economic growth would be 0.4 percentage points lower in 2025 alone.

In construction, where at least one in four workers is foreign-born, the impact could be particularly pronounced, pushing the cost of housing up even further. It would also vastly reduce the supply of home health aides, the fastest-growing occupation in America, as more people require assistance in old age.

Arnulfo De La Cruz is the president of SEIU 2015, a union that represents about 500,000 long-term caregivers in California’s program for low-income seniors. Nearly half of in-home care workers in the state are immigrants, he said, many with temporary protected status, meaning they are allowed to stay because the government has designated their countries unsafe to return to. “If their status were to be adjusted or they lost T.P.S., it would have a devastating impact on the care economy,” Mr. De La Cruz said.

To be sure, it’s not clear what Mr. Trump will do to other legal work programs. In his first administration, he increased the number of visas for temporary laborers, a category that he has used at his resorts and golf courses. Large trade groups whose members depend on those programs are pushing for their expansion.

John Horne, a restaurateur who is chairman of the Florida Lodging and Restaurant Association, said that about 16 percent of his 342 employees are noncitizens — many working with temporary legal status. Employing unauthorized immigrants became virtually impossible for larger businesses when Florida tightened requirements for verification last year. That’s why he wants to see a program that allows people to stay and work for longer periods and apply for citizenship.

“There are wonderful people looking to live in America who want to work here,” Mr. Horne said. “What should stop us from allowing them to become a U.S. citizen?”

In the meantime, the election itself may cause unauthorized immigrants to withdraw from the work force and limit their spending. That is already happening in Arizona, which passed a ballot initiative that allows the state police to arrest and report people who entered the country illegally, according to Irayda Flores, a Phoenix business owner.

Ms. Flores said she stayed in the United States after her tourist visa lapsed, and started her seafood distribution company long before obtaining a green card a few years ago. Her entrepreneurial drive is not unusual — immigrants start businesses at higher rates than native-born residents — and now immigrants both with and without legal status are a huge part of her staff and customer base.

“There are many people living in fear right now,” Ms. Flores said. “The economy is going to be horrible in Arizona if they start massively deporting people.”

Trump Builds His Administration

As his team ramps up the transition process, President-elect Donald Trump says his administration will radically reshape the federal government.

• Foreign Policy: While many of Trump’s foreign policy picks were once called neocons by their peers, they now speak the language of the “America First” movement.
• Skirting the Senate: Trump’s demand that Senate Republicans surrender their role in vetting his nominees poses an early test of whether his second term will be more radical than his first.
• Department of Education: The president-elect said he would use the department to further his priorities. He also said he would close it. Both options would face difficulties.
• Middle East: Trump’s nominees to serve as top diplomatic envoys to Israel and the Middle East indicate a staunch pro-Israel policy.
• Deportations: Trump is signaling with his staffing decisions his intention to carry out a campaign promise of widespread deportations of undocumented immigrants.