TechFlow news, February 24 — According to Jinshi News, Wall Street economists believe that Trump's strict immigration policies could have a greater impact on the U.S. economy than his tariff policies. Michael Gapen, Morgan Stanley’s chief U.S. economist, wrote in a report to clients last Thursday: “Investors are focused on the twists and turns of tariffs, but we believe immigration policy deserves more attention. The macroeconomic implications of restricting immigration could be equally significant.”
Morgan Stanley projects that under Trump’s immigration restrictions, annual U.S. immigration will drop from the current 3 million to 1 million in 2025 and further decline to 500,000 in 2026. This could cause GDP growth to slow from its current 2.5%-3% range to around 2% in 2025 and 1%-1.5% in 2026. The firm also expects that immigration restrictions may lead the Federal Reserve to cut interest rates only once in 2025.
Nancy Vanden Houten, Oxford Economics’ chief U.S. economist, pointed out that mass deportation of undocumented immigrants would exacerbate labor shortages, pushing up wages and inflation. Blake Gwinn, head of U.S. rates strategy at RBC Capital Markets, stated that when considering reasons why the Fed might ultimately lean toward rate hikes, immigration policy is likely to be the primary driver, not tariffs. “If we start seeing wage pressures arising from sustained declines in immigration, that could actually matter more to the Fed, and I think it poses a greater risk of signaling a resumption of rate hikes later this year compared to tariffs,” he said.
