The Donald Trump administration's second term has begun, and with robust economic indicators emerging, the momentum for interest rate cuts in the United States appears to be weakening. However, projections suggest that President Trump’s emphasis on "illegal immigrant deportation" may require consideration of the possibility of interest rate hikes. This is because if a significant number of illegal immigrants—who make up a considerable portion of the U.S. population—depart, it could lead to rising wages that may trigger inflation.
Experts noted that the impact of this policy on U.S. inflation varies depending on the number of deported immigrants. The scale of deportations could change the direction and pace of currency policy.
Meanwhile, some suggest that if Trump’s deportation policy intensifies, attention should be paid to the machinery and equipment sectors. There is a strong possibility that demand for automation will increase in response to rising labor costs.
Illegal immigrants are estimated to account for about 4% of the total U.S. population. The Pew Research Center and the Department of Homeland Security projected that the number of illegal immigrants in the U.S. would reach 11 million by the end of 2022. Considering the trend of large-scale immigration inflows from 2023 to 2024, the current estimate is between 11 million and 13 million.
Though they lack proper residency permits, illegal immigrants are an important labor resource in the United States. They provide low-cost labor in sectors such as agriculture, forestry, fisheries, construction, and the food service industry. According to MERITZ Securities, illegal immigrants account for around 50% of workers in roles such as simple sorting of agricultural products or installation of walls and tiles.
President Trump pledged during his campaign to deport illegal immigrants, stating that to fulfill this promise of deporting 1 million people a year, he would need to remove an average of more than 2,700 individuals per day.
The problem is that the deportation of immigrants could stimulate inflation in the United States. A decrease in the number of illegal immigrants would not only reduce the labor force but also lead to higher labor costs.
If this coincides with Trump’s tariff policy, it could exacerbate inflation. BNP Paribas, Europe's largest bank, predicted, "While the working-age population has increased, the unemployment rate has declined due to a decrease in jobless individuals, and thus we cannot rule out the possibility of interest rate hikes due to future immigration and tariff policies."
Samsung Securities projected that U.S. automation equipment companies could benefit from the deportation of illegal immigrants. Research Institute Kim Do-hyun stated, "The restriction policies on illegal immigrants in the U.S. will have a positive impact on the value of companies providing solutions related to manufacturing and farm automation."
In the securities industry, it was pointed out that the "extent of mass deportations" could have a greater impact on the economy. NH Investment & Securities estimated that if Trump proceeds with large-scale deportations of illegal immigrants, U.S. inflation could rise by 0.3 percentage points, while limited deportations could raise it by 0.1 percentage points. The shock is expected to be greater in the construction and agriculture sectors, where low-wage workers are predominant, due to a significant drop in productivity in the short term.
Kim Yung of NH Investment & Securities said, "If the influx of immigrants slows down, new demand will decrease in a situation where multi-family dwellings, which are rental-oriented, are often constructed, potentially leading to continued sluggishness in the housing sector."
However, there are opinions that mass deportation might remain a political statement. This is due to the high costs associated with deportation and the fact that large-scale deportations are not an essential condition politically. According to the American Immigration Council (AIC), deporting 1 million individuals would require an expenditure of $88 billion (approximately 127 trillion won) annually, which is more than last year's tariff revenue for the U.S. federal government.
Realistically, Trump’s mass deportation plans are likely to be more conservative than initially pledged. Indeed, after Trump’s inauguration, the Immigration and Customs Enforcement (ICE) agency's deportation numbers peaked at a maximum of 1,100 individuals per day and have been declining since. On the 8th, the daily enforcement figure was only 800.