It's Not Just Tariffs - Trump's Deportation Plan Will Also Increase Inflation

The following is part of a post by Nobel Prize-winning economist Paul Krugman in The New York Times:

For the past few years, over and over, voters have told pollsters and pundits that they’re hopping mad about inflation. Well, we just elected a president who, if he follows through on two of his central campaign promises — across-the-board tariffs and mass deportation of undocumented immigrants — will probably cause soaring inflation. . . .

I’ve written about the likely inflationary impact of Donald Trump’s policies. All of that still stands. But there’s an issue that I haven’t stressed as much as I probably should have: the specific effects of his proposed deportations on grocery and housing prices. . . .

With the economy starting from, essentially, full employment in his second term, Trump, with mass deportations, would degrade productive capacity, balloon deficits and — yes — bring inflation roaring back. . . .

Here’s what I mean: If you’re upset about grocery prices now, see what happens if Trump goes after a huge part of the agricultural work force; immigrants are around three-quarters of agricultural workers — and roughly half of them are undocumented. (And do you really doubt that many workers legally here will be caught up in Trump’s threatened dragnets?) Undocumented immigrants also play a large role in food processing. For example, they account for an estimated 30 to 50 percent of workers in meatpacking.

If these workers are deported, the food industry will probably have great difficulty replacing them. Even in the best case, the industry will have to offer much higher wages — and, of course, these higher wages will be passed on in higher prices.

(Oh, and while we produce most of what we eat, we also import a lot of food — whose prices would be raised by tariffs.)

And when it comes to the downstream economic effects of deportations, it’s not just about grocery prices; it’s also about the cost of housing. The answer to that problem is to build more housing units. But undocumented immigrants are more than a fifthof the construction work force, so deportations would severely hamper efforts to increase the housing supply. (And no, contrary to what JD Vance said, immigration hasn’t driven the recent spike in housing costs.)

Could we easily make up for the loss of these workers by replacing them with native-born workers? No. Employment among native-born adults in their prime working years is higher than it was at any point during Trump’s first term. There just isn’t a large pool of idle but employable native-born Americans to put to work.