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."

Intensified immigration enforcement and policy changes in 2025 caused labor shortages, closure of businesses, loss of immigrant tax revenue, and reduced consumer spending, with worsening trends expected in 2026. A new 1% tax on remittances, effective January 1, poses further risk to economic activity. Arrests, deportations, and fear of workplace raids directly reduced workforce participation in affected areas. Empirical analysis finds correlations between increased federal operations and declines in private sector employment, with examples from California and Washington, D.C. Employment fell sharply during enforcement periods and partially recovered when operations were halted, indicating enforcement-driven labor market disruption.

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