Migration shock = economic shock?
To date, the economic policy of the Trump administration has revolved around three flagship reforms: the trade war, the Big Beautiful Bill and deregulation. But it would be a disservice to reduce it to this triptych and to forget the secondary effects of his migration policy on the economy.
With his stated objective of expelling 3,000 illegal migrants per day, or close to a million per year, Donald Trump is preparing a demographic shock with multiple economic ramifications. Let’s consider these.
In the US, more than elsewhere, history is intimately linked to successive waves of migration. According to the OECD*, inhabitants of the country born abroad represent one of the drivers of the US economy – compared to those born in the US, they are less likely to be unemployed, have a higher employment rate and a higher participation rate in the labour market. Contrary to received opinion, their net fiscal contribution – taxes and social contributions versus benefits and services received – is positive, representing close to 1% of GDP. This population represents a little under 20% of the labour force, a level that is close to the average for OECD countries.
In 2025, the American Enterprise Institute (AEI)**, a neoconservative and neoliberal US economic think tank, estimates that the migration policy of the Trump administration will result in negative net migration for the first time in decades. This will create a shock to economic growth in 2025 estimated at a loss of between 0.3% and 0.4% of US GDP depending on the scenario chosen. Around two thirds of this impact is explained by the brake on production, and the remaining third by the resulting fall in consumption and higher precautionary savings levels among migrants who remain on US soil.
The impact on inflation is also considerable, since it is estimated at an additional 0.5% increase in prices.
Lastly, the impact on employment is also substantial, as the AEI anticipates that the number of jobs created will fall in the second half of 2025 to an estimated 10,000 to 60,000, depending on the scenario chosen, versus 124,000 in the first half. This would hold the unemployment rate in check, but risks generating wage pressure in sectors where undocumented immigrants have the highest representation – primarily construction, agriculture, hotels and restaurants.
Whilst the consequences of trade tariffs, the budget programme and deregulatory measures appear to have been discounted by financial markets, the damage caused by the wave of expulsions in the US could become the focus of investor attention in the coming months.