Federal agents detain a person exiting a court hearing at immigration court at the Jacob K. Javitz Federal Building on August 06, 2025 in New York City. Photo by Michael M. Santiago/Getty Images via Fortune
The average daily deportation of 750 immigrants under Trump's immigration policies has sparked worries about their effect on inflation rates. The U.S. inflation rate could increase from 2.5% to 4% during the first months of next year because of workforce reduction according to Moody's chief economist Mark Zandi. The reduction of foreign-born workers leads to labor shortages in agriculture and construction and hospitality and manufacturing and personal services sectors which drives up costs.
The Producer Price Index (PPI) experienced its biggest increase since 2021 when it rose 0.9% from June to July according to recent data while service costs led the price surge. The prices of fresh and dry vegetables increased by almost 40% and the rising labor expenses appear in meat production and food processing and personal services including haircuts and dry cleaning.
The White House denies any relationship between deportation policies and inflation rates while maintaining that these policies will increase domestic employment opportunities. The Trump administration reports that every job created since his return to power has gone to American-born citizens. However, economists are divided. Zandi and his colleagues maintain that supply-side worker shortages drive inflation but other economists attribute rising prices to declining business confidence and weaker consumer demand.
Zandi explains that supply-driven inflation maintains itself longer than demand-driven inflation does and requires different solutions than interest rate adjustments. According to Zandi immigration restrictions lead to persistent labor shortages which result in higher wages and inflation but easing immigration rules would solve these problems quickly and boost entrepreneurship.
Reference: Zandi, M. (2025, August ). Trump’s deportation policy could push U.S. inflation to nearly 4% by next year. AInvest. https://fortune.com/2025/08/16/trump-deportation-immigration-inflation-2026/