Donald Trump promised during his campaign that he would lower prices. Two of his most important policy ideas might have the opposite effect if they are put into action.
The previous president, who is now running for president again, wants to put a 20% tariff on imports into the U.S. This is already expected to make prices go up for consumers. Economists, on the other hand, say that Trump’s plan to deport millions of illegal immigrants from the U.S. could also cause prices to rise.
They say that the plan to deport a lot of people would hurt businesses that need immigrant workers, like construction and agriculture. It would make it harder to find workers, which would slow down output and raise the prices of food, housing, and other things in the long run.
Neil Shearing, group chief economist at Capital Economics, wrote in a note Monday that tariffs aren’t the real threat. “The rest of the world is naturally interested in what Trump’s trade policy will be like in his second term, but the real threat to the economy could come from the president-elect’s plans for immigration.”
BourseWatch asked the Trump transition team for a response, but they didn’t answer.
How might Trump’s plan to remove a lot of people affect the economy?
Trump has said that he will use the Alien Enemies Act, a law from 1798 that lets the president detain and deport noncitizens from a country that the U.S. is at war with, to send back to their home country millions of illegal aliens who are living in the U.S.
The president-elect has said in the past that his plan could affect up to 15 or 20 million people. However, the Center for Migration Studies says that as of July 2023, there were only about 12 million illegal immigrants living in the United States.
About 430,000 people were deported in 2013, when President Barack Obama was in office. That was the most ever in a single year.
Only a little less than 5% of American workers are undocumented, but study shows that removing them could affect a lot of other workers as well.
At the University of Colorado Denver, Chloe East is an economist who has looked into how deportations during the Obama and Bush administrations affected the job market. According to her research, there are 40,000 fewer jobs open for U.S. workers for every 500,000 illegal immigrants who are taken off the job market.
She said this is because U.S. companies have a hard time filling low-paying, less desirable jobs in fields like construction, agriculture, hospitality, and child care when illegal workers are taken off the job market. Because of this, there is less desire for other types of roles as well.
East said, “Mass deportations would make it harder for the average American to find work.”
People who want less immigration have argued against the idea that it’s hard for companies to find American workers for low-paying jobs that are usually filled by foreign-born workers.
But East said, “we really don’t see any evidence that employers are able to attract U.S.-born workers [to these roles]” from her study.
Over the past year, a lot of new immigrants have helped the U.S. economy create jobs. This has kept the job market going strong even though high interest rates could slow hiring and make unemployment rise.
“We would not have had these job gains” without the influx of workers from other countries, said Madeline Zavodny, an economist at the University of North Florida who studies immigrants and the economy.
She said that the wave of immigrants, both legal and illegal, helped make up for a lack of workers and kept prices from going up even more in recent years.
Without them, Zavodny said, “prices would have been even more pushed up.”
The possible good thing about deporting a lot of people
Some policy experts say that the jobs that will be open because of mass deportations will go to Americans who need work. This includes men of working age without college degrees, whose rate of participation in the labor force has been falling for decades.
“Wages will have to go up.” Steven Camarota, head of research at the Center for Immigration Studies, an anti-immigration think tank, said, “They’re going to have to change how they hire people.” “That’s the hope—that we can get more of these men to join.”
Camarota also doesn’t think that a large-scale move to deport people would seriously mess up the country’s huge job market.
He said it was “hard to imagine” that getting rid of a few million illegal workers would make a big difference in a workforce with more than 168 million people. Many people enter and leave the job market all the time.
Could Trump’s plan to remove a lot of people cause prices to go up?
A rising number of economists, on the other hand, say that Trump’s immigration plan would be so disruptive that it would cause prices to go up on things that many Americans have been having a hard time affording lately.
If enough people lose their jobs in construction and agriculture, farms and home builders might not be able to keep up with output. Some of the industries that will be affected, like child care and agriculture, already have trouble finding people.
East said that the lack of workers could cause prices for things like food, rent, and day care to go up.
“If there are a lot fewer people working in construction and agriculture, the cost of food and housing will go up,” she said.
The nonpartisan Peterson Institute for International Economics put out a working paper in September in which experts said that deporting a lot of people “causes a classic supply shock,” which means that prices go up and output goes down.
There are some experts who think that those fields might not be affected that much. Adam Speck, an agricultural economist at the data-analysis firm Croptell, said that a lack of workers is not one of the biggest risks of a second Trump government.
The H-2A visa program already lets farmers hire temporary foreign workers in the agriculture business. Speck said that any deportations might not have as much of an effect if that program was made bigger.
“Trump knows that he needs to get along with farmers,” Speck said.
How much Trump’s immigration plan changes things will depend on how well the new government can carry out his plans.
As soon as Trump takes office, he says he will start his plans to remove people. But the current system for enforcing immigration laws isn’t big enough for such a big operation. An study by the American Immigration Council, a nonprofit group that fights against mass deportation, says that getting it there could cost hundreds of billions of dollars.
Trump said in a Truth Social post on Monday that he would be ready to declare a national emergency and deport people using the U.S. troops.
The program would be the biggest deal of its kind in decades if it works. But Zavodny said it wouldn’t do much to fix the problems with cost that led Trump to run for office again.
She said, “Getting rid of a bunch of immigrants won’t make prices go down.” “I want more people to get that.”
