Trump’s immigration whiplash risks crippling key US industries: Jonathan Levin

Key topicsCrackdowns threaten labor supply in farming, hotels, and constructionFlip-flopping policies reveal economic dependence on undocumented workersGrowth and affordability at risk as immigration slows drastically.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Jonathan Levin.Like it or not, parts of the US economy depend on undocumented and other low-wage immigrant workers. The system has evolved to assume they would always be here, especially in areas such as agriculture, hospitality and construction. You can’t strip them of their status, deport them or scare them into the shadows without unleashing a wave of complications. It’s no wonder that President Donald Trump is second-guessing his immigration policy, with enforcement guidance changing erratically every few days.The flip-flopping has been on display before the nation. One week, he’s announcing enforcement carve-outs for key industries and political constituencies. The next, his administration is undoing its own guidance. “Our great Farmers and people in the Hotel and Leisure business have been stating that our very aggressive policy on immigration is taking very good, long time workers away from them, with those jobs being almost impossible to replace,” he wrote Thursday on Truth Social. According to a New York Times report Saturday, senior Immigration and Customs Enforcement official Tatum King sent an email the same day to regional leaders directing them to “hold on all work site enforcement investigations/operations on agriculture (including aquaculture and meat packing plants), restaurants and operating hotels.” But by Monday, the Department of Homeland Security, which oversees ICE, had ordered another U-turn, reversing the farm and hospitality guidance, according to the Washington Post. The Post cited sources as saying that Stephen Miller, an architect of the administration’s hardline policies, had lobbied against the carve-outs, while Agriculture Secretary Brooke Rollins had taken the other side. The mixed messages point to the inherent impossibility of delivering on nativist political promises without shooting oneself in the foot economically. Consider agriculture, where Trump has long courted votes and where somewhere close to 40% of crop farmworkers are thought to be undocumented (precise estimates vary). Here, the numbers are so stark that any sharp drop in the availability of immigrant labor could meaningfully affect farm profits, produce supplies and, ultimately, prices. Farmers and venture capitalists have been gradually moving toward more mechanised production, but there are daunting engineering challenges for such efforts, especially when it comes to fresh produce, some of which grows on trees that are hard for robots to navigate. A third option exists to meet demand at low prices, of course: importing more from trading partners. But doing so would be in tension with Trump’s stated goals to close the trade deficit and produce more domestically. In fact, the government is actively pursuing new protectionist measures in agriculture.Then there’s hospitality and restaurants, where undocumented workers perform key roles as gardeners, housekeepers and kitchen workers. Of course, this is no surprise to Trump, a hotelier and golf course owner himself. In 2018, the New York Times published a bombshell report about Victorina Morales, the undocumented woman who made Trump’s bed at his Trump National Golf Club in Bedminster, New Jersey, while he was serving as president and actively vilifying others with her profile. Later in 2019, the Times described an attempt by Trump’s Florida empire to crack down on undocumented immigrants working at their properties, apparently worried about getting called out again for the hypocrisy. In hospitality, too, technology may change the business model’s reliance on low-wage labor one day, but some hotels have been experimenting with robots for a decade already, and they’re still far from replacing the human workforce.Construction was conspicuously absent from Trump’s short-lived carve-out, but the administration will have to reckon eventually with the reality there, too. By one set of estimates, the undocumented population makes up 38% of drywall and ceiling tile installers and tapers; 32% of roofers; and 28% of painters and paperhangers. By and large, the residential construction business is built to accommodate this arrangement. It has evolved into a multitiered system of contractors and subcontractors that gives developers and general contractors plausible deniability against immigration violations — an arrangement that’s peculiarly American. Curbing the flow of new workers will make it difficult for the industry to meet the 4.5 million-home housing deficit that has created an affordability crisis in the country. Of course, the US housing industry can evolve. Scandinavia, Germany and Japan have managed to build homes with less low-cost labor by leaning heavily into offsite construction techniques. A recent report by UBS Group AG analyst John Lovallo and colleagues highlighted the productivity-boosting potential of using more wall panels — essentially factory-built pieces of wall that can even come with insulation, wiring and plumbing installed. Germany also has a well-organized development program through its Berufsschulen, or vocational schools, that feeds a pipeline of skilled construction workers. Unfortunately, the US housing deficit is such that the nation needs all of those things at once: more US-educated vocational workers, more productive construction methods and immigrant labor. It’s not an either/or situation.Finally, I’d be remiss not to mention home health and personal care aides, jobs that are becoming more in-demand as the population ages, as my Bloomberg News colleagues Augusta Saraiva and Alicia A. Caldwell wrote Monday. The report cited government data showing that immigrants constituted 40% of home health aides and 30% of personal care employment, though it wasn’t clear how many were undocumented. With Trump using raids in part for publicity with his base, it seems unlikely that we’ll see the sector caught up in high-profile enforcement actions. The optics would be horrendous. But Trump has been hitting that workforce through other attacks on work authorization, hurting a sector that’s already struggling to fill vacancies and retain workers.Deportations, after all, are just one small part of the administration’s approach to immigration. Tom Homan, Trump’s border czar, told Reuters late last month that the administration had deported around 200,000 people over four months, less than the Biden administration in the same period a year earlier — and a pace that would fall well short of the 15 million to 20 million deportations that the president teased during his campaign. I don’t doubt that influential voices like Miller would like to really deliver on those numbers. But, in all likelihood, legal and economic constraints will prevent Trump from ever getting close.Still, the rhetoric and the media blitz around ICE raids are clearly having a chilling effect on the overall flow of new immigration. Morgan Stanley now thinks that net immigration of all kinds, which totaled an estimated 2.9 million in 2024, will probably collapse to about 0.3 million this year and 0.2 million in 2026. That also factors in the administration’s termination of the Temporary Protected Status and parole programs for Cubans, Haitians, Nicaraguans and Venezuelans, which provided work status to more than a million people.The slowdown could dampen economic growth when the outlook is already shaky. Even if the reduced labor supply truly lifts wages for lower-income Americans (which is hardly guaranteed), it may drive up prices of the food and housing that those same people consume — a price that most have proved unwilling to pay. What’s more, with 4.2% unemployment rate, there aren’t a lot of Americans available to take jobs like these.For now, Trump doesn’t seem to know what he wants, but it’s self-sabotaging to forge ahead with a policy that could deliver a shock to the labor force in key industries. Ultimately, it just goes to show that the US has built a system reliant on low-wage labor — in many cases undocumented workers — and it can’t turn its back on those immigrants without incurring a large cost..2025 Bloomberg L.P.

Trump’s immigration whiplash risks crippling key US industries: Jonathan Levin

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