Impact of Trump’s Immigration Policies on U.S. Economy and Workforce
President Donald Trump’s efforts to deport millions of immigrants could likely result in a hit to the U.S. labor force that would shrink the country’s gross domestic product, new data shows.
A working paper published this month from the American Enterprise Institute (AEI), a conservative economics policy center, found the Trump administration’s immigration policy will likely result in a negative net migration in 2025—something the U.S. has not experienced in decades—that would shrink labor participation and “put significant downward pressure on growth in the labor force and employment.”
Net migration in 2025 will likely be between 525,000 individuals leaving the U.S. and 115,000 migrants entering the country, but will likely be negative, according to the report. With fewer immigrants available to work, combined with decreased consumer spending—immigrants had $299 billion in spending power in 2023 and paid $167 billion in rent—U.S. GDP growth may shrink by between 0.3% and 0.4%. U.S. real GDP stands at about $23.5 trillion, meaning the economic tradeoff of the deportations equates to roughly $70.5 billion to $94 billion in lost economic output annually. This slowdown would reduce what would typically be 2.8% annual growth, indicating a deceleration in economic expansion as employers hire fewer workers and consumers spend less in an uncertain environment.
“Our workforce is disproportionately made up of immigrants relative to their share of the population, and because of that we…really can’t sustain a high level of job growth with the U.S.-born population alone, because there just aren’t enough bodies, essentially, to do that,” report co-author Tara Watson, a Brookings Institute economist and professor at Williams College, told Fortune.
The foreign-born U.S. labor force—which comprised 19.2% of the total labor force as of 2024—has shrunk by 735,000 people since January, according to Federal Reserve Bank of St. Louis data. This decline follows an immigration surge during the Biden administration, which helped boost economic growth, with the Congressional Budget Office projecting that increased migration could add $8.9 trillion in nominal GDP between 2024 and 2034.
Meanwhile, the U.S.-born workforce continues shrinking as many age out and retire.
Wendy Edelberg, Watson’s co-author and a senior fellow at the Brookings Institution, described the projected loss of immigrant workers as “startling” and foresees more challenges ahead. The U.S. experienced a surge in work permit applications in early 2025, indicating many immigrants sought jobs fearing stricter policies, which contributed to a robust labor market and a increase of 147,000 in payroll employment in June.
However, Edelberg warned that “we’re not going to ride that wave forever.” She and Watson estimate that labor force growth could slow to only 30,000-40,000 monthly in the second half of the year, a healthy but modest pace indicating a lower growth ceiling. If weak immigration continues into 2027, they suggest the jobs number could turn negative.
Trump’s immigration crackdown
Immigration has been central to Trump’s policy agenda, with the president on his second term’s first day vowing to crack down on undocumented migrants. Trump’s Big Beautiful Bill allocated $45 billion to expand deportation facilities and allocated over $11 billion annually to ICE to increase deportation efforts.
The White House dismissed AEI’s report as “baseless fear-mongering,” claiming that 10% of young Americans are not engaged in employment, education, or vocational training, and asserting that the immigration crackdown would lead to higher wages and more opportunities for American workers.
Unlike during Trump’s first term, when immigration was modestly curtailed, the current administration has ramped up deportations, projecting about 300,000 immigrants to be removed in 2025. According to ICE data, over 67,000 immigrants were detained and more than 71,000 deported in fiscal 2025. Others have voluntarily left or self-deported due to concerns over hostile policies, as reported by AEI.
Watson warned that net migration could be even lower in 2026 as the administration might refuse to renew temporary visas and foreign students might opt for educational opportunities elsewhere, impacting the environment’s perception and economic appeal.
Widespread economic concerns
Early signs of economic strain include farm workers declining to work out of fear of ICE raids and nursing homes struggling to attract staff due to revoked legal statuses and slower immigration processes. Deke Cateau, CEO of Atlanta-based nursing home operator A.G. Rhodes, expressed concern over the shrinking immigrant pipeline for staff.
Economist Torsten Sløk from Apollo warned that deporting 3,000 undocumented immigrants daily over a year could reduce the labor force by 1 million, leading to wage increases in sectors heavily reliant on immigrant labor and potential stagflation—a combination of stagnant growth and inflation.
While some regions may experience stagflation, areas with significant immigrant populations might see demand decrease, tempering such effects. Watson emphasized that beyond GDP, immigration’s most notable impact is on Social Security, as undocumented immigrants paid $25.7 billion in taxes in 2022. She highlighted the close link between immigration levels and the sustainability of Social Security.
AEI’s study also notes that immigration-related policies affect community sentiment, with images of ICE raids and deportations impacting morale and social fabric. Edelberg remarked that the macroeconomic effects are modest compared to the societal and community impact of enforcement actions.