Trump’s deportation drive is straining the US public coffers and labor market

The anti-immigrant crusade launched by the Trump administration in the first year of his second term has not only caused personal and social hardship: the U.S. economy has also suffered. Labor shortages, the closure of successful businesses, the loss of tax revenue from immigrants, and a drop in consumer spending are some of the consequences economists are warning about, which were already being felt in 2025 and are expected to worsen in 2026. Even the new 1% tax on remittances, which went into effect on January 1, could harm the U.S. economy — a bad omen for someone like Trump, who won the election on the promise of improving the financial situation of his voters.

The most immediate effects of law enforcement operations against migrants were felt in the labor market, where arrests, deportations, and fear of going to work due to raids have led to labor shortages. Edward Flores, associate professor of sociology and director of the labor center at the University of California, Merced, demonstrates in a recent study the relationship between increased operations by federal agents and the decline in employment. He uses as examples California, one of the states with the largest immigrant populations in the country, and Washington, D.C., where last summer Trump ordered the deployment of the National Guard to combat a supposed rise in crime that statistics refuted.

In California, private sector employment fell by 2.9% between May and September. There was a recovery in August due to the halt in raids after a judge prohibited racial profiling by Immigration and Customs Enforcement (ICE), but employment declined again when law enforcement operations resumed in September.

In the District of Columbia, which Flores uses as a reference, private sector employment fell 3.3% through August, but increased 0.5% in September, coinciding with the end of federal control of the local police.

“The effect of stricter immigration controls on the labor market is comparable to that of the Great Recession and the beginning of the Covid-19 pandemic,” Flores states. “The continued tightening of immigration controls suggests the need for policy interventions to mitigate the negative economic consequences.”

In addition to deportations and absenteeism due to fear of raids, the United States has lost some of its appeal to foreigners, who fear being targeted by the crackdown. Furthermore, the administration has put up even more barriers to hiring foreigners by eliminating automatic renewals of temporary work permits (EWPs) in October.

More than 100 business leaders went to the Capitol in October to urge members of Congress to take action to prevent their businesses from going bankrupt due to job losses. The American Business Immigration Coalition (ABIC), a bipartisan coalition of more than 1,700 CEOs, business owners, and trade associations in 17 states, led the group. This was not their first such visit; they have been warning for months about the catastrophic consequences of the administration’s immigration policies. According to the coalition, there are eight million unfilled jobs nationwide, which is “driving up prices across the economy, from food to construction materials, and limiting access to everyday products and services for Americans.”

Agriculture, hospitality, and construction

The impact is not the same across all sectors. Fifty-one percent of dairy workers are immigrants, as are 45% of meatpacking workers and 29% of construction workers. A significant portion of these immigrants are undocumented, the target (at least rhetorically) of the Republican president’s deportations. They represent approximately 5% of the U.S. workforce, a figure that skyrockets in some key sectors such as agriculture (45%), construction (14%), and hospitality (7%). Other service sectors, such as nursing homes, are losing staff and facing labor shortages, which jeopardizes the quality of care they provide to the public.

For the first time in more than 50 years of growth, the migrant worker population is declining. According to the Pew Research Center, in January 2025 there were 53.3 million migrants living in the United States, representing about 16% of the country’s population. By June, the country’s migrant population had decreased by more than one million, to 51.9 million, and this decline has likely continued. This is not good news for a market where the age of the workforce is a factor favoring migrants.

In 2022, nearly 90% of undocumented immigrants were of working age (between 16 and 64 years old), compared to 61.3% of the U.S.-born population. Additionally, an estimated 1.1 million undocumented entrepreneurs in the United States typically open small, local businesses such as gas stations, hair salons, dry cleaners, and grocery stores.

In addition to the labor market, the U.S. economy is suffering from the drop in income. Contrary to popular belief, undocumented immigrants do pay taxes. According to the American Immigration Council, undocumented immigrant households paid $46.8 billion in federal taxes and $29.3 billion in state and local taxes in 2022. They also contributed $22.6 billion to Social Security and $5.7 billion to Medicare, programs for which they are not eligible.

“In 40 states, they pay state and local income taxes at a higher rate than almost any other taxpayer, sometimes even more than the top 1% of income earners. This is because they are not eligible for most tax credits, and many of these taxpayers do not claim refunds,” notes a report from the National Immigration Forum, an organization that advocates for immigrants.

Lower consumption

According to the same source, the purchasing power of undocumented immigrants amounted to nearly $300 billion in 2023. Deportations represent a considerable cost to U.S. businesses, as they spend money in the country, buying goods and services and contributing to the economy. Economists have estimated that mass deportations would cause a loss of between 4.2% and 6.8% of the U.S. annual GDP, equivalent to between $1.1 trillion and $1.7 trillion in 2022 values. By comparison, U.S. GDP contracted by 4.3% during the 2007-2009 recession.

GoFundMe to pay for food

The deportation campaign has left many families in dire straits, with the primary breadwinner unable to work or having been deported. The GoFundMe platform has revealed that a growing number of families are turning to this method to seek help covering basic needs. The company, which allows anyone to open an account to raise funds, has seen a 20% increase in donations this year.

Another administration initiative that could backfire is the 1% tax on remittances, which went into effect on January 1 and was included in Trump’s budget bill. Experts believe it could incentivize irregular immigration in receiving countries due to the drop in income sent by relatives from the U.S. Furthermore, migrants sending remittances will have less money available for goods and services, and the tax will encourage sending remittances through informal channels, leaving them vulnerable to fraud.

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