The downtown area of Los Angeles (LA) was plunged into chaos as protesters opposed to a raid operation by the Immigration and Customs Enforcement (ICE) clashed with the state National Guard.
Concerns are growing that a significant decrease in immigrants due to harsh crackdowns could lead to a 'labor supply shock' that undermines the U.S. economy.
On the 8th, the economic media outlet Fortune quoted a Deutsche Bank report stating, "The immigrant crackdown issue will have a more lasting negative impact on the U.S. economy than tariff issues."
George Saravelos, head of foreign exchange research at Deutsche Bank, noted in the report, "Everyone is focusing on the impact of tariffs, but the real problem for the U.S. economy is the decline in immigration," adding, "This year, the number of immigrants in the U.S. has decreased by more than 90% compared to last year, which will bring about a slowdown in the increase of over 2 million in the workforce."
Saravelos emphasized, "The decline in immigration is expected to have a far more sustained negative impact on the U.S. economy than tariff issues."
In the labor market indicators released on the 6th for May this year, the number of foreign-born workers showed the largest decrease in five years since 2020. According to this count, the current number of foreign-born workers in the U.S. amounts to 32.3 million. This represents about 19.2% of the U.S. workforce.
According to research by the Hamilton Project, these workers surged after the Biden administration took office in 2022. In 2022, the number of jobs for foreign-born workers in the U.S. increased by 70,000 each month. In 2023 and 2024, this is expected to accelerate to reach 100,000 foreign-born workers contributing to the U.S. economy each month.
Last year, the Congressional Budget Office (CBO) predicted that by 2033, the number of foreign-born workers in the U.S. would increase by 5.2 million compared to 2023. Over the next ten years, the gross domestic product (GDP) generated by these workers in the U.S. is estimated to be $8.9 trillion (approximately 1,210 trillion won), with federal government revenue projected at $1.2 trillion (approximately 1,630 trillion won).
The Kansas City Federal Reserve assessed in its economic report that "the influx of immigrants over the past two years has played a strong catalytic role in stabilizing the overheating U.S. labor market and easing wage inflation pressures," adding, "Without immigrants, a soft landing for the U.S. economy, which has been referred to as 'the lone boom,' would have been impossible."
However, existing American workers have lost jobs or seen wages decline as low-skilled immigrants have surged in.
As prices surged sharply and housing difficulties intensified following the 2020 pandemic, the perception spread that the 'incoming' immigrants were lowering the wages of the previously 'stuck' workers and increasing social expenses.
Opposition was particularly strong in the Rust Belt, where support for Trump is substantial. In declining manufacturing regions like Ohio, Indiana, Michigan, and Pennsylvania, the population has decreased by 45% since 1970. White workers in these economically devastated areas have blamed immigrants for this and supported the anti-immigration policies of the Trump administration.
The spark for this protest was a large-scale crackdown carried out by ICE in the Fashion District and Home Depot stores. The Trump administration conducted a crackdown in downtown LA with robust law enforcement, without consulting the Governor of California.
Trump introduced a hardline approach by deploying 2,000 National Guard members to the protests on the 8th, citing a 'restoration of law and order.'
According to an ICE spokesperson, a total of 118 people were arrested in LA over three days. The protesters gathered in front of the city hall, where the detainees were held, shouting "Release them all." The police and National Guard responded with tear gas and flashbangs.
Gavin Newsom, the Governor of California, criticized, saying, "The federal government is trying to stir up chaos to escalate the situation."
This incident symbolizes that the U.S. is trapped in a dilemma between economic growth and immigration control. It highlights how vulnerable America is to discrimination and prejudice, which the American Dream once symbolized in a multiethnic and multiracial society.
Experts warned that the anti-immigration policies reinforced by the Trump administration may rally support among the base in the short term, but they are likely to become a 'self-defeating' factor that undermines long-term economic growth potential.
In particular, executives in industries with a significant proportion of Hispanic workers, such as agriculture, construction, manufacturing, and services, expressed considerable concerns.
According to analysis by the American Farm Bureau, 25.3% of agricultural workers in the U.S. are immigrants. In jobs related to the sorting and packaging of agricultural products, over half, or 54.3%, are immigrants. Farms in the U.S. have already been facing a labor shortage of 1.5 to 2 million workers annually.
The construction industry is also expected to face a shortage of 500,000 jobs next year. The Los Angeles Times reported, "In California and Texas, over 40% of construction workers are immigrants, so extensive crackdowns will inevitably impact the economy as a whole."
Researchers at George Mason University analyzed that the lack of immigrants leads to a shortage of labor supply, which triggers wage and price increases. Wall Street financial experts forecast that the employment growth benchmark will be adjusted down to about 90,000 from the previous 170,000 a month.
Seventy percent of executives at major U.S. corporations also predicted in a Littler employment law firm survey that "intensified ICE crackdowns will significantly impact business sites within the next 12 months."