For the first time in half a century, the U.S. is poised to experience negative net migration, a shift that threatens to shrink the workforce and slow economic growth.
A recent report from the American Enterprise Institute (AEI) warns that President Donald Trump’s aggressive deportation policies could push over 500,000 people to leave the country. Since foreign-born workers make up a disproportionate share of the American labor force, a drop in immigration may dampen labor growth and consumer spending—potentially slicing up to 0.4% off U.S. GDP growth.
The Trump administration’s immigration crackdown is expected to cause a negative net migration in 2025, something not seen in decades, which will reduce labor participation and “put significant downward pressure on growth in the labor force and employment,” according to the AEI working paper released this month.
The report estimates net migration in 2025 could range between 525,000 departures and 115,000 arrivals, but overall will likely be negative. With fewer immigrants available to work and a simultaneous drop in consumer spending—immigrants accounted for $299 billion in spending power and paid $167 billion in rent in 2023—GDP growth may contract between 0.3% and 0.4%. Given that U.S. real GDP stands near $23.5 trillion, this translates to an annual economic loss of approximately $70.5 billion to $94 billion. This slowdown reflects less hiring and reduced consumer confidence amid economic uncertainty.
“Our workforce is disproportionately made up of immigrants relative to their share of the population, and because of that we… really can’t sustain a high level of job growth with the U.S.-born population alone, because there just aren’t enough bodies, essentially, to do that,” said Tara Watson, co-author of the report and economics professor at Williams College, in an interview with Fortune.
Data from the Federal Reserve Bank of St. Louis shows the foreign-born labor force, which represented 19.2% of all workers as of 2024, has declined by 735,000 since January. This reversal follows an immigration surge during the Biden administration that bolstered economic growth—the Congressional Budget Office projected migrants would boost nominal GDP by $8.9 trillion between 2024 and 2034.
Meanwhile, the U.S.-born workforce is shrinking as many workers retire or age out.
Wendy Edelberg, Watson’s co-author and senior fellow at the Brookings Institution, described the projected loss of immigrant workers as “startling” and warned of more challenges ahead. She noted a surge in work permit applications in early 2025, suggesting many immigrants rushed to secure jobs before deportation policies intensified, fueling a strong labor market and adding 147,000 jobs in June.
“But we’re not going to ride that wave forever,” Edelberg told Fortune. She and Watson predict payroll growth will slow to 30,000 to 40,000 per month in the second half of the year—a healthy rate but indicative of a lower ceiling for labor force growth. If restrictive immigration continues through 2027, payroll growth could turn negative.
Trump’s immigration crackdown
Immigration has been a central focus of Trump’s agenda, with the president vowing on the first day of his second term to crack down on undocumented migrants. His “Big Beautiful Bill” allocated $45 billion to the Department of Homeland Security to expand deportation facilities and granted Immigration and Customs Enforcement (ICE) over $11 billion annually to increase its deportation workforce.
The White House dismissed AEI’s report on the economic fallout of mass deportations as “baseless fear-mongering in defense of illegal immigration,” pointing out that 10% of young Americans are neither employed nor in education or training.
“There is no shortage of American minds and hands to grow our labor force,” White House spokesperson Abigail Jackson told Fortune. “President Trump’s mass deportation campaign means higher wages and more opportunity for American workers.”
Compared to Trump’s first term, when immigration cuts were more moderate, deportations have ramped up sharply in his second term. Watson and Edelberg estimate about 300,000 immigrants will be removed in 2025 alone.
Besides the nearly 67,000 immigrants detained and over 71,000 deported so far in fiscal 2025 (per ICE data), many have self-deported out of fear, contributing to negative net migration. Watson warned that net migration could worsen in 2026, as temporary work visas may not be renewed and foreign-born students seek education elsewhere.
“The environment is going to make people like students reluctant to come study here,” Watson said. “Temporary workers may be questioning whether this is the right place for them to come to work.”
Widespread economic concerns
Businesses are already feeling the impact of reduced immigration. Bloomberg reports farm workers are refusing to come to work due to fear of ICE raids, and nursing homes face staffing shortages as immigrant workers lose legal status or face delays in immigration processes.
“We feel completely beat up right now,” said Deke Cateau, CEO of A.G. Rhodes nursing homes in Atlanta, where immigrants comprise a third of staff. “The pipeline is getting smaller and smaller.”
Apollo chief economist Torsten Sløk cautioned that deporting 3,000 undocumented immigrants daily for a year would shrink the labor force by 1 million. Industries relying heavily on immigrant labor—like construction, agriculture, and hospitality—could see rising wages as companies compete for fewer workers.
“Lowering the labor force by 1 million will reduce the participation rate by 0.4 percentage points, which will lower the unemployment rate, lower job growth, and increase wage inflation,” Sløk wrote in a recent blog post.
“In short, deportations are a stagflationary impulse to the economy, resulting in lower employment growth and higher wage inflation,” he added.
While some areas may face stagflation, Edelberg noted that regions with large immigrant populations might see muted effects as reduced spending power curbs demand in sectors like housing.
Watson pointed out that the most severe impact beyond GDP might be on Social Security. Undocumented immigrants contributed $25.7 billion in Social Security taxes in 2022, per a 2024 analysis from the Institute on Taxation and Economic Policy.
“There’s a very tight correlation between how many people are coming into the country and the degree to which we can sustain Social Security at its current levels going forward,” she said.
More broadly, Edelberg emphasized that while macroeconomic effects may be modest, the social and community impacts of ICE raids and the National Guard’s involvement in deportations will be significant.
“The broad macroeconomic events are going to be pretty modest,” she said. “In terms of how we’re affected by this immigration policy, I think they will be dwarfed by how we engage with this policy, just in the images and in our communities.”
