Trump's Deportation Campaign May Shrink U.S. GDP Growth by 0.4%

The U.S. is on the brink of experiencing negative net migration for the first time in 50 years, a shift that could significantly impact the country's workforce and economic growth. According to a recent report from the American Enterprise Institute, President Donald Trump’s aggressive deportation campaign could lead to more than 500,000 people emigrating from the U.S. This exodus of foreign-born workers, who make up a disproportionate amount of the American workforce, could result in a hit to U.S. labor growth and consumer spending, potentially shrinking U.S. GDP growth by up to 0.4%.

The report highlights that net migration in 2025 is likely to be between 525,000 individuals leaving the U.S. and 115,000 migrants entering the country, resulting in a negative net migration. This scenario would put significant downward pressure on growth in the labor force and employment. With fewer immigrants available to work and a decrease in consumer spending, U.S. GDP growth may shrink by between 0.3% and 0.4%. Given that U.S. real GDP is about $23.5 trillion, the economic tradeoff of the deportations is roughly between $70.5 billion to $94 billion in lost economic output annually. This drag on what would usually be 2.8% annual growth indicates a slowing in economic expansion as employers hire fewer people to fill fewer roles, and consumers spend less in an economically uncertain environment.

Tara Watson, a Brookings Institute economist and professor of economics at Williams College, emphasized that the U.S. workforce is disproportionately made up of immigrants relative to their share of the population. She noted that the country cannot sustain a high level of job growth with the U.S.-born population alone, as there simply aren't enough workers to fill the roles. The foreign-born U.S. labor force, which made up 19.2% of the total labor force as of 2024, has shrunk by 735,000 people since January. This departure follows an immigration surge during the Biden administration, which helped create a swell of economic growth. The Congressional Budget Office projected that the increase in migrants would boost the U.S. nominal GDP by $8.9 trillion between 2024 to 2034.

Meanwhile, the U.S.-born workforce is shrinking as many age out and retire. Wendy Edelberg, Watson’s co-author and a senior fellow in economic studies at the Brookings Institution, described the projected loss of immigrant workers as "startling" and sees more trouble on the horizon. The U.S. has seen a surge in work permit applications in the first half of 2025, suggesting that many immigrants, out of concern for Trump’s immigration policy, rushed to secure employment ahead of a crackdown. This contributed to a healthy labor market and a 147,000 boost to payroll enrollment in June. However, Edelberg and Watson projected that a shrinking labor force would result in payment enrollment growth of only 30,000 to 40,000 per month in the second half of the year. If weak immigration continues into 2027, Edelberg predicted that the jobs figure could turn negative.

Trump’s immigration crackdown has been a cornerstone of his administration’s policy agenda, with the president vowing to crack down on undocumented migrants. The White House has dismissed concerns about the negative economic impacts of mass deportations, claiming that there is no shortage of American minds and hands to grow the labor force. The administration has injected significant funds into the Department of Homeland Security to expand deportation facilities and increase the workforce of deportation officers. Unlike Trump’s first term, the president has ramped up deportations after a sluggish start to his second administration, with Watson and Edelberg projecting the removal of about 300,000 immigrants in 2025 alone.

Beyond the nearly 67,000 immigrants the Trump administration has detained in fiscal 2025 and more than 71,000 deported, others have self-deported or left voluntarily out of growing concern over hostile policies. Watson warned that net migration could be even lower in 2026, as the administration likely refuses to renew temporary work visas and foreign-born students snub American universities in favor of higher education opportunities elsewhere. The environment is expected to make people like students reluctant to come study in the U.S., and temporary workers may be questioning whether this is the right place for them to work.

Businesses are already seeing the early consequences of weakened immigration. Farm workers are refusing to show up to work out of fear of ICE raids, and nursing homes are struggling to attract a workforce as the Trump administration revokes some immigrants’ legal status and slows the immigration process for documented migrants. Deke Cateau, CEO of Atlanta-based nursing home operator A.G. Rhodes, which has one-third of its staff made up of immigrants, described the situation as feeling "completely beat up." The pipeline for immigrant workers is getting smaller and smaller.

Beyond concern about a shrinking GDP, Apollo chief economist Torsten Sløk warned that if the U.S. were to deport 3,000 undocumented immigrants per day for a year, the country’s labor force would drop by 1 million people. Workplaces with high rates of immigrant employment could subsequently see an increase in wages as they struggle to attract workers. Sløk described deportations as a stagflationary impulse to the economy, resulting in lower employment growth and higher wage inflation, particularly in sectors where unauthorized immigrants work, such as construction, agriculture, and leisure and hospitality.

While some parts of the U.S. could experience stagflationary environments, stagflation could be tempered in areas with large immigrant populations as their spending power wanes and demand for industries like housing construction decreases. Watson posited that besides GDP, shrinking immigration will most heavily be felt in Social Security. Undocumented immigrants paid $25.7 billion in Social Security taxes in 2022, highlighting the tight correlation between the number of people coming into the country and the degree to which Social Security can be sustained at its current levels.

More broadly, the economic ramifications of Trump’s mass deportation campaign are only one part of the policy’s impact. The other half is the palpable changes in the feeling within American cities and the mobilization of the National Guard to accelerate deportations. Edelberg noted that the broad macroeconomic events are going to be pretty modest, but the way Americans engage with this policy, just in the images and in their communities, will be more impactful.