The Fragile Backbone: Political Uncertainty and the Financial Risks Facing TPS-Dependent Industries in the U.S.

The U.S. economy’s reliance on Temporary Protected Status (TPS) workers has created a paradox: industries critical to national infrastructure and daily life are simultaneously bolstered and vulnerable by immigration policy shifts. Construction, food services, and healthcare—sectors already grappling with labor shortages—depend heavily on TPS holders, who contribute to 94.6% labor force participation rates and fill roles ranging from childcare to skilled trades [1]. Yet, the looming threat of TPS terminations for countries like Haiti, Venezuela, and Honduras risks destabilizing these industries, with cascading financial and operational consequences.

The Labor Shortage Amplifier

TPS workers are not just laborers; they are linchpins in sectors where domestic workforce participation is declining. In construction, 36,900 Salvadoran TPS holders—nearly a quarter of the workforce in states like California and Texas—face potential displacement if protections end [2]. This would exacerbate existing labor shortages, driving up wages and project costs. Historical data from 2020–2025 shows a 6.1% increase in construction producer prices linked to TPS-related labor gaps [3]. Similarly, the restaurant industry, which employs 22,400 Salvadoran TPS workers, risks operational strain as staffing shortages persist [2].

The financial toll extends beyond wages. Reduced consumer spending and tax contributions from displaced TPS holders could shrink local economies, creating a secondary drag on businesses reliant on these communities [1]. For example, TPS entrepreneurs—27,000 in total—inject capital into local markets through small businesses, a lifeline for regions with high immigrant populations [1].

Adaptation Strategies: Reshoring, Friendshoring, and the Cost of Resilience

Businesses have responded to TPS volatility with strategies like reshoring and friendshoring. Reshoring—relocating production to the U.S.—has gained traction but is often cost-prohibitive. Research shows it increases transaction costs and asset specificity, reducing financial performance for domestic suppliers [4]. For instance, reshoring battery manufacturing faces hurdles due to reliance on imported lithium, highlighting the limits of full self-sufficiency [4].

Friendshoring, by contrast, offers a middle ground. Sourcing from politically aligned nations like Mexico or Canada diversifies supply chains while mitigating geopolitical risks [5]. This approach has allowed companies to balance resilience with cost efficiency, though challenges like labor shortages in partner countries remain [5].

Investment Implications: Navigating Uncertainty

For investors, the key lies in assessing how companies adapt to TPS-driven volatility. Firms that invest in automation or nearshoring may mitigate labor risks, but these strategies require upfront capital. Conversely, businesses failing to diversify could face operational bottlenecks and reputational damage. The construction sector, for example, has seen mixed success with automation-driven reshoring, with larger firms better positioned to absorb costs [6].

Conclusion: A Call for Strategic Resilience

The financial risks of TPS policy shifts are clear, but so are the opportunities for innovation. Companies that integrate TPS-dependent labor into long-term workforce planning—while diversifying supply chains—stand to outperform peers. Investors should prioritize firms with agile labor strategies and contingency plans, recognizing that political uncertainty is unlikely to abate. In an era of deglobalization, adaptability is not just a competitive edge—it is a survival imperative.

Source:
[1] Temporary Protected Status protects families while also ... [https://www.fwd.us/news/temporary-protected-status-report-2025/]
[2] Workers with Temporary Protected Status in Key Industries ... [https://www.americanimmigrationcouncil.org/fact-sheet/workers-temporary-protected-status-key-industries-and-states/]
[3] New Immigration Policies Will Increase Prices for Americans [https://www.fwd.us/news/new-immigration-policies-will-increase-prices-for-americans/]
[4] Reshoring and “friendshoring” supply chains [https://www.deloitte.com/us/en/insights/industry/government-public-sector-services/government-trends/2022/reshoring-global-supply-chains.html]
[5] Securing supply chains: The rise of friendshoring in ... [https://rsmus.com/insights/industries/manufacturing/securing-supply-chains-the-rise-of-friendshoring-in-modern-manuf.html]
[6] Reshoring to survive? The other side of de-globalization [https://link.springer.com/article/10.1007/s40812-025-00342-7]