Trump's Mass Deportations Could Disrupt The Economy

Donald Trump’s road to the White House was paved with promises to bring down inflation and kick millions of immigrants out of the country. Once he takes office, he’ll have to square those pledges with an economy that increasingly depends on non-native workers to keep prices low and productivity humming.

Industries from construction and health care to agriculture heavily rely on immigrants for labor, accounting for anywhere between a quarter to half of certain occupations that are vital to building new homes, caring for the elderly and cultivating the food supply, government statistics show. The Congressional Budget Office and Federal Reserve Bank of Dallas say the flood of immigrants during the Biden administration — as many as 3.3 million in 2023 alone, including those who entered illegally — boosted the economy’s output and provided a much-needed supply of new workers as the native-born population ages.

As he is sworn in Monday to become the nation's 47th president, Trump’s biggest challenge may be that his plan to solve one of Americans’ most pressing issues — the border — could fuel another problem, elevated consumer prices — a concern shared by even some Trump allies.

“The two reasons that Trump won the election” were voter anger over both immigration and inflation, said former Trump adviser Stephen Moore, a senior visiting fellow in economics at the Heritage Foundation.

“There is no question that having eight to 10 million people deported — many of whom are working — would put a strain on the economy,” he said. “You could see an inflationary impact to getting rid of some of these workers — for sure.”

Trump has vowed that mass deportation will be a day-one priority, and while he intends to remove those with criminal records first, he says he has “no choice” but to deport anyone who is in the U.S. illegally.

If he follows through, the costs could be enormous. Economists warn that grocery prices would climb as agricultural production slowed. It would drive up housing construction costs and worsen staffing shortages at nursing homes and home health businesses — pushing health care costs even higher. A lot depends on how many workers are ultimately deported or if outmigration accelerates and the arrival of new working-age migrants slows.

While inflation has eased in the last year, prices are still more than 20 percent higher than when President Joe Biden took office.

Unauthorized immigrants represent a sizable chunk of the overall labor force. Estimates vary, but demographers at the Pew Research Center believe there are roughly 8.3 million undocumented immigrants working in the U.S., accounting for about 5 percent of the total workforce. They represent larger shares of the labor pool for construction and agricultural jobs — more than 10 percent — and are believed to account for nearly 7 percent of all home health aides.

Some Trump allies say the doomsaying over the incoming president’s pledges to deport as many as 20 million undocumented immigrants is overblown. Karoline Leavitt, a spokesperson for Trump's transition team, said in a statement that the "real economic crisis is the $182 billion American tax dollars spent each year to cover the costs of 20 million illegal immigrants that have flooded our communities and replaced American workers."

There isn’t an infrastructure in place for the new administration to immediately deport that many people, said Steven Camarota, director of research for the Center for Immigration Studies — an anti-immigration think tank whose work has been cited by Trump’s homeland security adviser Stephen Miller. What’s more, boosting wages at lower-income jobs could improve labor force participation rates among younger men, which remain below historical averages.

“They crowd out the native-born,” he said. “But putting that aside, the worst aspect of immigration is that it lets us say: ‘Who gives a shit? We'll just hire the eager immigrants. And if all these men are on the sidelines in rural America or in cities, what do I care? I got this eager immigrant who's willing to fix my roof or work at McDonald's or babysit my kid — babysitting wouldn't be what men do — or work in construction or be a janitor.’ And I think that’s why it’s so bad.”

Former acting Secretary of Homeland Security Chad Wolf, who now oversees the homeland security and immigration arm of the Trump-aligned think tank America First Policy Institute, noted that the U.S. has rarely deported more than 400,000 people in a year. Trump told NBC’s "Meet the Press" that initial deportations would target unauthorized immigrants with criminal records first — which account for some 425,000 individuals, according to data released by DHS last year — “then we’re starting with others and we’re going to see how it goes.”

“If there's 16 workplace raids in agriculture over the course of two months, then yeah, let's, let's start talking about how [the economic impact] may be a concern,” Wolf said. “But I think until there's actually facts there, I think it's a little overblown.”

Still, economists and business groups are warning that the U.S. lacks an adequate supply of workers to make up for a rapid deterioration of the immigrant workforce. And an economic shock of that scale would threaten growth and employment and stoke inflation.

“The number of employed workers in America would be rapidly shrinking today without immigration,” said George Mason University economics professor Michael Clemens, a nonresident senior fellow at the Peterson Institute for International Economics who studies the effects of migration. “All of our jobs depend on the growing economy, and the growing economy can only exist due to immigration.”

The housing sector, in particular, is an area that both Trump and Democratic leaders have identified as ripe for growth. Rents and home prices have surged, pushing overall inflation higher. Trump’s nominee to lead the Department of Housing and Urban Development, Scott Turner, says America needs to construct “millions of new homes” to address the affordability crisis.

Following through on those plans will require a tremendous amount of labor. National Association of Home Builders CEO Jim Tobin told POLITICO that he’s taking Trump “at his word” when it comes to immigration policy, warning that policies targeting working immigrants could further weaken the construction industry’s depleted labor market.

“Until we train enough domestic workers and track more young people into the skilled trades here in the U.S., we're going to need to go across our borders for immigration,” Tobin said, adding that he’d prefer to see more legal pathways for construction workers. The only way to solve the housing shortage is “to build ourselves out of it, and putting policies in place that slow that down and make that harder, are at your own political harm or risk.”

Clemens said recent research into the effects of the Secure Communities program — which required local law enforcement agencies to hand over fingerprints to federal immigration authorities — found that illegal immigration crackdowns can meaningfully reduce the supply of labor and slow the pace of construction of new homes.

Earlier research led by University of Colorado Denver Professor Chloe East found that the suppression of undocumented workers led to spillover effects that weakened demand for U.S.-born laborers within local economies.

“Unauthorized workers in America are not just selling labor and competing with other sellers of labor. They are critical ingredients in production, and removal of those ingredients reduces production,” Clemens said. That has “ripple effects for the jobs of everybody else in the sector — including authorized immigrants, including natives.”

Those ripple effects will invariably find their way to checkout lines at the grocery store.

Unauthorized immigrants represent about 40 percent of all crop farmworkers, according to the USDA, and their share of the workforce on dairy farms in certain states could be even higher. If farm production “got seriously disrupted, that almost necessarily translates into what one sees at the grocery store,” said J.H. Cullum Clark, the director of the George W. Bush Institute-SMU Economic Growth Initiative.

Similarly, as more Americans age out of the workforce, nursing homes and services that provide home care are also preparing for the possibility that their workers could be impacted. Immigrants represent 27 percent of all health aides, according to an American Immigration Council estimate, and as more Americans age, demand for those services is likely to accelerate.

“The industry is already facing labor shortages,” AIC’s Nancy Wu said. “Having some reduction in the supply of labor of skilled workers in that sector will definitely limit the opportunities for patients to get proper care, or limit opportunities that patients can get proper care.”