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U.S. President Donald Trump’s efforts to curb immigration are coming at a precarious time for the U.S. labour market, threatening to choke off a key growth engine just as tariffs are poised to drag down economic activity.

Crossings of undocumented migrants essentially came to a halt last month after surging to unprecedented levels in the aftermath of the pandemic. The crackdown is expected to intensify as the Trump administration ramps up raids, encourages undocumented immigrants to “self-deport” and takes measures to restrain legal immigration as well.

Economists say these actions will reduce job creation and stoke inflation, exacerbating anticipated consequences of the administration’s trade policies that are fuelling recession fears. The 5.5 million immigrants — undocumented and legal — who joined the workforce since 2020 helped the U.S. labour market bounce back and fuel economic growth in recent years. The current restrictions, and threats of mass deportations, risk derailing that trend.

“Population growth helped economic growth, that’s pretty clear — so you’re taking that away from the picture now,” said Olu Sonola, head of U.S. economic research at Fitch Ratings. “The combination of a slowdown in the labour force and the drag on economic growth from much higher tariffs paints a much weaker growth picture and a much higher inflation picture in 2025.”

The retreat in immigration will slow the pace of monthly job creation to 80,000 by the end of 2025, according to Goldman Sachs Group Inc., from an average pace of 168,000 last year. Economists at Morgan Stanley and the U.S. Federal Reserve Bank of Dallas say the slowdown will also crimp economic growth and put upward pressure on wages, and eventually prices.

Migrants are more likely to take jobs in industries facing chronic labor shortages, including construction, food processing and child care — part of why business leaders have generally called for more legal immigration. Fed officials have credited immigration with helping take some pressure off the labor market following the pandemic, with Chair Jerome Powell saying last week that the high inflows in recent years helped propel economic growth.

But that influx left federal and local governments overwhelmed, leading then-U.S. President Joe Biden to sign an executive order last year that limited asylum options. Trump — who capitalized on anti-immigrant sentiment to help him reclaim the White House — has gone further by requiring millions of immigrants to register with the federal government and seeking to revoke temporary legal status for foreign workers. However, many of those moves are now facing legal challenges.

Eduardo Escobar, 25, didn’t want to take his chances. He left the U.S. in recent days after the Trump administration chose to end a special designation that had allowed him and hundreds of thousands of other Venezuelans to work legally in the U.S. Since 2023, he was employed at a Minnesota firm that helps small businesses and content creators facing copyright and patent issues.

“I will lose my job, my income and the professional momentum I built here,” Escobar said in an interview before leaving the U.S. “I will have to start from zero in a place with a low ceiling that won’t let me grow.”

The White House said its initiatives to curb immigration will benefit the country. “Mass deporting violent terrorists and criminal illegal aliens is unquestionably a net positive for our economy and society,” spokesman Kush Desai said in a statement.

Immigration has not only been credited with fueling job gains, but also as a way to ease wage pressures across the economy by filling open roles — especially for lower-paying jobs.

As tariffs threaten a resurgence in price pressures, fewer available workers could make it harder for Fed officials to accomplish their long sought-after goal of lowering inflation back to 2%.

“Immigration was an important driver of the labor market rebalancing, helping to ease excessive wage growth and inflation,” said Lydia Boussour, a senior economist at EY. “Reduced immigration could therefore fuel renewed inflationary pressures.”

To be sure, most economists and Fed officials say the labor market is in pretty good shape. And while the slowdown in immigration might on its own present a threat, it’s been accompanied by a drop in demand for workers, which Powell said last week is helping to keep a lid on unemployment.

Longer term, the balance between those supply and demand factors means that immigration will have a limited impact on inflation, he said.

In New York City, Michael Robinov is carefully considering how a broad-based immigration crackdown might trickle down to his business, Farm To People, which delivers locally-sourced groceries and goods to customers across the five boroughs.

He’s particularly worried about farmers having access to labour. Trump tried to address that recently by looking to allow undocumented workers in that industry to leave the U.S. for a short period of time and reenter the country legally.

Robinov said the lesson learned from the post-pandemic period is that labor shortages at farms can put upward pressures on prices for food. “If our prices are going up, we’re not in a vacuum. That will be affecting grocery stores all across the country.”

There’s also the long-term implication of curbing immigration as the workforce ages. The nonpartisan research group Congressional Budget Office estimates that, without immigration, the U.S. population would begin shrinking as soon as the next decade.

“There will come a time — and we’re seeing it already — where the competition for the workforce is going to become greater and greater,” said Amy Pope, director general of the International Organization for Migration and a former Biden adviser on immigration.

Economies that fail to acknowledge that “are going to be at a significant disadvantage.”

With assistance from Alex Tanzi, María Paula Mijares Torres and Jonnelle Marte.

Augusta Saraiva, Amara Omeokwe and Enda Curran, Bloomberg News