Trump's immigration factor
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Illustration: Lazaro Gamio/Axios
Volatile trade policy is getting all the media attention lately. But another risk to the growth outlook is also playing out — an end to the high immigration rates that were a feature of the U.S. economy in recent years.
Why it matters: Most economic policymakers say immigration helped loosen the tightest labor market in decades and eased inflation. Whatever your views on the policy, plummeting border crossings — paired with White House deportation plans — mean economic adjustment ahead.
- It is a key element of President Trump's economic shock therapy, with uncertainty about what the mix of policies — lower immigration, higher tariffs and more — will ultimately mean for businesses and consumers.
What they're saying: "For US economic growth, immigration policy deserves more attention," Seth Carpenter, chief global economist at Morgan Stanley, wrote in a recent note.
- "Immigration has been a fundamental part of the US growth story in the post-Covid phase," Carpenter wrote. A slowdown will affect growth, "boost inflation and present a thorny choice for the Fed."
By the numbers: Morgan Stanley expects net immigration of about 1 million this year and 500,000 in 2026, both notably lower compared to their estimated 2.7 million in 2024.
- Signs of a crackdown have been enough to slow immigration flows at the U.S. southern border. In February, there were about 8,300 border apprehensions, Axios reported earlier this month — the fewest on record in data that goes back to 2000.
- Deportation threats of "millions and millions" of immigrants have yet to fully materialize: Deportations are, so far, on par with that of former President Biden's final weeks in office.
The big picture: Some fear that the worker boost seen in 2022 and 2023 will play out in reverse.
- Morgan Stanley economists note that their estimate of 1 million in net immigration could trim the GDP level by as much as 0.6 percentage point this year and next.
What to watch: Large-scale deportations would be a labor market supply shock that coincides with another tariff-related supply hit. The worst-case scenario is an inflation double whammy.
- The construction sector might be among the most at risk. It depends heavily on immigrant workers. It also depends heavily on supplies — lumber, copper and more — that are prime tariff targets.
What they're saying: "The irony is that the tariffs' impacts on construction costs might just price some manufacturers out of their decision to expand or add plants in the U.S.," said Jeffrey Shoaf, CEO of the Associated General Contractors of America.
