The market started the week with tariffs front and center. President Trump’s announcement of tariffs against Canada, China, and Mexico shook the markets briefly at the beginning of the week before actions against Mexico and Canada were postponed. Stocks recovered and remain positive year-to-date, led by foreign stocks (red), followed by US stocks (green), corporate bonds (pink), and finally government bonds (blue).
Some investors are asking about the Trump administration’s deportation strategy and what effect it could have on the US economy and the stock market. It’s a valid question as Americans are reading more quotes and articles like this one published in December –
“The president-elect’s mass deportation plans would crash the American economy, break up families and take a hammer to the foundations of our society by deporting nearly four percent of the entire US population,” Aaron Reichlin-Melnick, a senior fellow at the nonpartisan American Immigration Council, told the Judiciary Committee hearing.
https://www.barrons.com/news/trump-s-mass-deportation-would-crash-us-economy-senators-told-56ef667c
I know this is a controversial issue and there are significant humanitarian considerations here, but in this message I’m simply trying to address the economic concerns.
Looking at the numbers, there were an estimated 11-12 million undocumented residents living in the United States as of 2022, a number that stayed fairly stable over the prior decade. That figure may have increased since 2022, however, with more entries without inspection across the border and significant numbers overstaying temporary visas. Many warnings of an economic crash assume that most, if not all, illegal immigrants are deported (4% of 340 million Americans = 13.6 million people). I don’t believe this will happen, nor is it even possible. I recommend taking President Trump seriously, but not literally. I believe he plans to deport a lot of illegal immigrants, but I think he hopes many will choose to leave the country voluntarily.
Self-deportation helps Trump to achieve his goals without the government having to spend or do anything. Trump has long said he wanted to deport millions of migrants but never deported more than 350,000 a year in his first term.
So let’s look at what happened in Trump’s first term and how other presidents have handled deportations. The chart below begins with President Bush since immigration changed a lot after 9/11/2001. The orange bars represent migrants turned away at the border while the blue bars are what we generally understand to be “deportations.”
https://econofact.org/immigrant-deportations-trends-and-impacts
Politicians like to muddy the waters with redefined terms and different ways of counting things – “it depends on how you define deportation.” Nonetheless, from this chart it’s easy to see the most deportations occurred under President Obama’s administration, when the economy and markets were recovering from the Financial Crisis. While deportations were higher, the stock market performed quite well with near-zero interest rates and government stimulus for the economy. So basically, a significant increase in deportations in the years ahead would likely be a headwind for the economy in the short-term, but it is very unlikely to “crash the economy” as there are so many other factors to consider.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
