By John Q. Hosedrinker 
Moody’s chief economist Mark Zandi suggests that Donald Trump’s new immigration policies, particularly the rate of deportations, are contributing to rising inflation, potentially reaching nearly 4% early next year. According to Zandi, the decline in the foreign-born labor force is creating tightness in the labor market, driving up costs and inflation, as evidenced by the recent increase in the Producer Price Index. While the White House frames the policies as aimed at protecting the domestic workforce, Zandi and other economists argue that restrictive immigration is a significant factor in rising prices, especially in sectors relying on immigrant labor. This economic shift may force the Federal Reserve to hold steady on interest rates, unable to solve the supply-side issue.
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Trump’s immigration policies, particularly the ramped-up deportations, are causing economists to worry about a significant rise in inflation next year, potentially reaching as high as 4%. The core concern isn’t just the number of people being removed but the type of workers being targeted and the economic consequences that follow. It’s a complex situation, but the potential impact on the average consumer is quite concerning.
One of the biggest problems here is that the deportations aren’t just affecting those who may have recently crossed the border. A large percentage of the people being deported have actually applied for legal status, meaning they are contributing to the economy, holding down jobs, and paying taxes. Removing this workforce creates a scarcity of labor, which, combined with tariffs on imported goods, pushes prices up across the board.
The reality is that this is a very far-reaching plan that is having a chilling effect on the labor force, especially within agriculture. If farm workers leave the US, who will take those jobs, at that wage? It’s not just about agriculture; the impact is spreading to various sectors. Construction projects could slow, skilled nursing staffs could be reduced, and restaurant kitchens could find themselves short-staffed.
While some might argue that those workers can be replaced, the truth is that it’s not a simple switch. These jobs would likely need to be filled by higher-cost workers, possibly on temporary work visas, with the added expenses of OSHA regulations, unionization, taxes, and access to social services. The potential for increased costs at every level of the economy becomes a reality.
The impact of all this is being felt already. It’s leading to a slowdown in construction, a shortage of skilled nurses, and restaurants struggling to stay staffed. Simultaneously, a good portion of goods that have been grown are rotting in fields because there is no one to harvest the goods.
The idea of simply replacing these workers with other readily available labor is overly simplistic. The deportations and associated policies create a significant disruption in the labor market, pushing up wages and, ultimately, prices for consumers. The fact that border crossings have decreased under Trump suggests that those who are being deported are those with an established economic presence. It is a reality that has some Republicans questioning the economic wisdom of the plan, as the results are not matching the promises.
Furthermore, the tariffs also play a major role in driving up inflation. They increase the cost of imported goods, and when other countries retaliate with their own tariffs, it negatively affects our exports, particularly agricultural products. This double whammy of labor shortages and trade restrictions creates a challenging economic landscape for consumers.
Some sources have stated that the number of deportations in 2025 may be lower than in 2024, it’s still a concerning situation. Even if the number of actual deportations is lower, the fear and anxiety created by the policies will still have a measurable impact on the economy, causing labor scarcity and the potential for inflation to rise.
As for the political implications, there’s concern that these economic decisions will harm the Republican party, especially if the result is a rise in inflation and a stagnant job market. People might face shrinking real wages and diminished purchasing power, which naturally leads to dissatisfaction and potential changes in voting patterns.
The economic situation is further complicated by factors like the housing market, which is experiencing a decline. The overall economic picture is worrisome, and the fear is that the policies, combined with existing economic trends, could exacerbate the situation and lead to higher prices. The consensus is that the policies are playing a significant role and have the potential to destabilize the economy.