Immigration in free fall?
There is no doubt that we are currently witnessing a historical U-turn on America’s immigration policies. Similar to what other advanced economies experienced, net migration to the United States surged from an average of about 1 million before the pandemic to 2.3 million in 2023 and 2.8 million in 2024. The massive inflows coincided with (and perhaps caused) a backlash in American politics that culminated in the re-election of Donald Trump as president in November 2024.
Ronald Reagan once regarded immigration as “one of the most important sources of America’s greatness.” However, the current Trump administration’s immigration policy seems determined to restrict migration inflows as much as possible and additionally deport millions of undocumented or illegal workers.
While an increase in the number of deportations is all but certain, the bigger labor force impact will likely stem from policies aimed at further curbing immigration inflows.
Deportation numbers difficult to increase
Deportations averaged around 400,000 a year in the early 2010s under President Obama and averaged just a little over 200,000 in the years preceding the pandemic. If the Trump administration manages to increase deportations to about half a million a year by the end of his term, the U.S. would barely return to 2010 levels in terms of outflows as a percent of the labor force.
And that is a big if. Deportation capacity is constrained by logistical, legal, and political hurdles, requiring hundreds of billion dollars of investments in detainment facilities, transportation, increased border security, staffing costs, etc.
Although a more aggressive deportation agenda could see a modest increase, the scale would probably fall short of truly transformative labor market impacts. Prediction markets, which generally tend to perform just as well or even better than expert forecasters, agree with us for now. They assess as the most likely scenario that deportations will be kept between 250,000 and 500,000 with odds of around 60%. The odds that deportations fall between 500,000 and 750,000 are below 20%.
The more real impact: chilling the labor force
Potentially a larger concern is the loss of working hours that may come from undocumented immigrants avoiding workplaces amidst ongoing ICE raids.
While the Trump administration is also seeking ways to curtail legal immigration, current numbers have yet to show any decline in the number of visas that have been issued in recent months. Companies have been lobbying hard to preserve visas like the H-1B that allow high-skilled workers and talented individuals to come to the U.S. Despite all the talk, it seems somewhat unlikely that the current administration will significantly curb legal ways for talented and high-net-worth individuals to come to the U.S.
The more consequential development so far has been the collapse of new migrant inflows, especially at the southern border. Border crossings in early 2025 have plummeted compared to the levels seen in 2022 and 2023, down by more than 90%. This dramatic drop reflects a mix of policy crackdowns, economic deterrents, and a chilling effect of aggressive immigration rhetoric on would-be migrants. Such a steep decline in unauthorized entries means far fewer new workers, particularly in low-wage sectors that have historically relied on newly arrived migrants, both documented and undocumented.
In practical terms, this reshapes the labor force in industries like agriculture, construction, and hospitality, where the presence of new, often unauthorized, migrant labor has historically served as a shock absorber for tight labor markets. Though the Trump administration has shifted its policy and pivoted away from conducting deportations in workplaces like farms and hotel, the decrease in migrant inflows will have an impact. While there may be upward pressure on wages in these industries, the broader economy is left grappling with the challenge of sustaining growth without the traditional pipeline of labor supply from immigration.
In short, even if a second Trump presidency ramps up deportations modestly, the larger labor market effect will continue to be the dramatic reduction in the flow of new workers at the border – a trend already well underway in 2025.
How big is the total reduction in the labor force?
The big question is of course how much of an impact Trump’s policies will have overall. And thus, how high would immigration be without all of Trump’s policies? No doubt, the period of 2023 through 2024 should hardly count as the baseline as there was an immigration surge across all advanced economies. We are now seeing a reduction everywhere, even among countries with much more accommodative immigration regimes than the U.S. currently has.
Nevertheless, when combining all three effects mentioned above— deportations, lower legal immigration, and the plunge in illegal immigration—our best estimate is a decline of about 1 to 1.5 million immigrants on an annual basis compared to baseline (the hypothetical world without Trump’s policies being implemented). This translates to a hypothetical annual decline in the U.S. labor force between 640 and 960 thousand.
Assumption: Around 80% of migrants are of working age, the labor force participation rate of the foreign-born workforce is close to 80%.
Conclusion
We do not yet have a great understanding as to what extent immigration will decline under the second Trump administration. It will require investments worth hundreds of billions of dollars to massively increase deportations. Trump’s “Big Beautiful Bill,” which still needs to pass the Senate, aims for an additional $60 billion in funding for border security and $75 billion for Immigration and Customs Enforcement (ICE) in the coming years.
Our baseline scenario is that the number of deportations will increase slowly to hit half a million in a couple of years from now, but a quicker and more dramatic increase cannot be ruled out.
The bigger decline in immigration will come from the plunge of unauthorized crossings at the Southwest border. Encounters are down some 90% relative to their peak in 2023.
For high-skilled workers, the data does not show any decline in visa issuances yet. Nevertheless, on balance, the U.S. has also become a less attractive place for global talent, given all the inflammatory rhetoric against immigration.
Our best guess is that when accounting for all the effects above, annual immigration might fall by about 1 to 1.5 million relative to baseline. However, more moderate and more extreme scenarios cannot be ruled out.
Such a steep decline in the immigrant workforce would obviously have severe implications for the economy (lower GDP) and labor market (the shortage of workers drives up wages). Quantifying the precise effects will be the focus of our upcoming piece.
