Trump’s Immigration Policies Could Cut U.S. Economy by $240 Billion

(UNITED STATES) Economists warn that Trump immigration policies could reduce U.S. economic output by roughly $240 billion over the next year, with broad effects on jobs, prices, and consumer spending. Analysts at S&P Global Ratings, the Dallas Federal Reserve, and the American Enterprise Institute say the pace and scale of enforcement since early 2025 will likely slow GDP growth, pinch labor supply in key industries, and push inflation higher.

The Department of Homeland Security’s stepped-up removals add urgency as businesses weigh hiring plans and families brace for disruption. S&P Global Ratings projects a decline of 0.5 to 1.0 percentage points in U.S. growth from mid-2025 through mid-2026, equal to $119 billion to $238 billion in lost growth over a 12-month span. Satyam Panday, who leads U.S. economic analysis at S&P, points to basic arithmetic: fewer workers and consumers mean less spending on housing, food, and goods, which directly lowers GDP growth and weakens the broader economic impact of domestic demand.

Economic projections and GDP effects

The different institutions produce varying estimates, but they converge on the same mechanism: fewer arrivals → tighter labor supply → lower output.

• S&P Global Ratings
  • Projects a 0.5 to 1.0 percentage point drop in growth from mid-2025 to mid-2026.
  • Estimates $119 billion to $238 billion in lost GDP over 12 months.
• Dallas Federal Reserve
  • Finds GDP growth could be 0.75 to 1.01 percentage points below benchmark levels in 2025, with effects lasting into 2027.
  • Baseline: a 0.81 percentage point hit in 2025, driven mainly by reduced immigration inflows at the border (not removals alone).
  • Emphasizes the role of population growth and labor force trends for potential output.
• American Enterprise Institute
  • Estimates current policies will reduce migration inflows and shrink the economy by 0.31 to 0.38 percentage points in 2025.

These estimates differ in magnitude but agree on the core economic impact: tightened labor pools reduce growth. The Congressional Budget Office had expected civilian employment to rise by 4.2 million people from 2025 to 2029. If deportation-related job losses offset those gains, total employment could decline rather than grow—marking a sharp break from post-pandemic labor trends.

Labor market and price ripple effects

Research cited in the debate models a large labor shock:

• Scenario: 1 million removals per year over four years.
  • Potential to erase nearly 6 million jobs total.
  • About 3.3 million job losses among immigrant workers.
  • About 2.6 million job losses among U.S.-born workers.
  • Combined: roughly 3.6% reduction in total employment.

Why U.S.-born workers lose jobs too: many of their roles complement immigrant labor in production lines, construction, farms, kitchens, and care work. When immigrant labor is removed, complementary positions can shrink as well.

Key sector impacts (modeled estimates):

• Construction
  • Potential loss: 2.3 million jobs (~18.8% of the workforce)
• Childcare
  • Potential loss: 548,000 jobs (~15.1% of the workforce)
• Total employment
  • Potential reduction: 3.6% (affecting both immigrant and U.S.-born workers)

Panday at S&P summarizes it as population arithmetic, but the real effects appear as lost shifts, postponed promotions, understaffed crews, and canceled bids—ripples reaching suppliers and local businesses.

Price and inflation effects

When labor supply falls faster than demand, production capacity shrinks and prices rise. Key estimates:

• Dallas Fed: inflation could be 15 basis points higher in 2025, and 5 to 21 basis points higher in 2027, versus benchmark paths.
• Medium-term dynamic: immigrants typically add more to output than to demand, which helps restrain price pressures; reducing that supply can push up costs for groceries, rent, and services even as growth cools.

The travel ban expansion intensifies these effects by closing doors to workers from 19 countries, with up to 36 more possibly affected. Nationals from these countries who entered in 2022:
– Earned more than $3.2 billion in income
– Paid $715.6 million in taxes
– Held $2.5 billion in spending power

Those earnings supported hospitality, construction, retail, manufacturing, and professional services—sectors already facing hiring gaps.

Enforcement pace, travel limits, and policy context

Recent enforcement and policy actions provide scale to the projections:

• Removals since January 2025: more than 400,000 people
• DHS expectation by year-end (2025): nearly 600,000 removals
• Congressional funding (September 2025): $170 billion approved for enforcement — the largest funding surge on record for detention beds, personnel, and operations

Net unauthorized immigration has also fallen sharply:
– Down 82% from December 2024 levels (from ~105,000 to ~19,000 per month by March 2025)
– Some projections: net immigration could drop to ~115,000 people annually, or turn negative at -525,000

S&P’s high-end estimate (a 1 percentage point hit) equals a $238 billion loss over a year. Other analyses combine lower consumer spending, fewer housing starts, and slower business expansion to reach near $240 billion in losses. These are not just abstract figures: they manifest as delayed homebuilding, longer daycare waitlists, empty restaurant tables, and production lines short on experienced hands.

Policy debate and social impacts

• Trump administration argument:
  • Enforcement will raise wages for U.S.-born workers and restore the rule of law.
• Business groups’ counterargument:
  • Labor shortages will worsen, pushing projects over budget and accelerating automation or downsizing.
• Dallas Fed: a middle path
  • Fewer arrivals imply weaker GDP growth and slightly higher inflation.
  • Wage outcomes will vary by sector and region; rural areas and growth belts with tight housing markets may feel impacts sooner.

Household and community consequences:
– Removal of a main earner reduces household income, triggers school changes for children, and shifts caregiving to relatives.
– Social costs (school disruption, care gaps, stress) rarely appear in macroeconomic tables but reduce spending on basics and worsen outcomes over time.
– These small, widespread effects aggregate into the larger dollar losses economists model.

Policymakers must weigh whether tighter labor supply offsets or worsens price trends. If productivity falls due to shortages, unit costs rise. If household demand drops because of lost incomes, some prices could ease while services remain sticky. The Dallas Fed’s estimates suggest a net tilt toward higher inflation in the near term, even as growth slows—a difficult mix for monetary and fiscal authorities.

Industry examples and on-the-ground effects

Concrete illustrations translate models into everyday impacts:

• A midsize Texas builder losing drywall crews can bid on fewer projects, slowing new housing completions when rents are already high.
• A Midwestern daycare losing caregivers cuts capacity, forcing parents to reduce work hours.
• A hotel with fewer housekeepers closes floors, lowering available rooms and local tax receipts.

Each break in these chains reduces output and increases costs, compounding macro effects.

For official background on enforcement authorities, procedures, and statistics, readers can review the Department of Homeland Security’s resources at the agency’s Immigration Statistics page.

According to analysis by VisaVerge.com, businesses in hospitality, construction, and food processing are already reporting longer hiring times and rising overtime costs as they try to cover shifts—reinforcing the concerns raised by S&P, the Dallas Fed, and the American Enterprise Institute about labor supply and broader economic impact under Trump immigration policies.