Dallas Fed: Immigration Crackdown to Shave Nearly 1% Off U.S. GDP in 2025

A recent study from the Federal Reserve Bank of Dallas indicates that the Trump administration's tough approach to immigration, characterized by heightened border enforcement and expedited deportations, is projected to lower U.S. economic growth by nearly a whole percentage point in 2025.

The study, spearheaded by economist Pia Orrenius and her team, forecasts a 0.8 percentage point decline in gross domestic product due to reduced immigration flows and labor shortages.

In a recent analysis involving five scenarios to simulate reduced immigration, researchers from the Fed discovered that the significant drop in border crossings is responsible for an overwhelming 93% of the expected GDP decline. The study recognized the limitations of the data but cautioned that reduced immigration levels, particularly among working-age individuals, could significantly hinder economic performance.

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The administration under President Donald Trump has not only concentrated on the expulsion of undocumented immigrants but has also taken steps that hinder legal immigration. This includes the termination of deportation protections for numerous foreign nationals and fostering an environment that discourages new arrivals. Following Trump's election, there was a significant decrease in immigration at the U.S.-Mexico border, a trend that has persisted, exacerbating labor shortages in various sectors, including agriculture, construction, and services.

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The researchers also simulated a scenario involving the annual removal of 1 million immigrants by 2027. In this scenario, GDP growth is projected to decline by almost 0.9 percentage points by 2025 and 1.5 points by 2027, accompanied by only a slight uptick in inflation.

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According to a survey conducted by Bloomberg, economists anticipate that the overall growth rate in the U.S. will decelerate to 1.5% in 2025, a decrease from nearly 3% in both 2023 and 2024. The impact of Trump's immigration policies may greatly hasten that downturn. Experts in the field caution that the implications may reach further than just economic output. The construction sector is preparing for an escalating labor shortage as deportations and border restrictions reduce the pool of available workers.

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In the face of possible economic repercussions, the Trump administration has stood by its actions, asserting their importance for the protection of national interests and autonomy, even as experts caution that these decisions could jeopardize future economic health.

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