Impact of immigration restrictions on US economy and forecasts for EUR/USD and USD/CNY

A note via Capital Economics argues:

• While Trump’s trade policies receive attentionon, immigration restrictions may have a more substantial economic impact, potentially leading to lower growth and higher costs across critical sectors.

Capital Eco says, in brief, that the immigration policy will reduce economic growth in the US by around 1% a year:

• Proposed Restrictions:
  • Plans to remove up to 1 million undocumented immigrants annually.
  • Likely significant reduction in immigration, affecting labor supply.
• Economic Impact:
  • Immigration has driven 80% of US labor supply growth, sustaining economic growth amid high interest rates.
  • Reduced immigration could lower US potential GDP growth by ~1% annually.
  • Sectors reliant on migrant labor (e.g., construction, agriculture, hospitality) would face higher costs, leading to increased prices.
  • Immigration measures could result in a stagflationary hit to the economy.

If you want more, the full note is here, link. Worth being aware of the implications of new policies that will come into effect once the new administration is in place .

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As an aside, CE forecast EUR/USD to parity and USD/CNY to 8 by the end of 2025 under the new admin policies.

This article was written by Eamonn Sheridan at www.forexlive.com.