Fed Chair Powell Links Slowing U.S. Economic Growth to Deportation Policies

At a June 24, 2025, hearing of the U.S. House Financial Services Committee, Federal Reserve Chair Jerome Powell directly linked the Trump administration’s aggressive deportation policies to a slowdown in U.S. economic growth. His comments lend credibility to long-standing concerns from economists that restrictive immigration policies, particularly those targeting undocumented but economically active workers, are undermining growth by shrinking the labor force. 

Rep. Maria Salazar (R-FL) raised the issue, pointing to ICE raids that have detained thousands of workers, many of whom were employed in essential sectors such as construction, agriculture, and hospitality, industries that collectively account for nearly 15% of U.S. GDP. “We’re losing thousands of workers,” Salazar said, warning that such policies risk significant economic fallout. 

Powell responded candidly: “There are two things that affect growth. One is labor force expansion; the other is productivity. When you significantly slow the labor force, you will slow the economy.” He confirmed that current growth is already slowing and “that’s one of the reasons.” 

Beyond the U.S.: Global Implications of Shrinking Migration Pipelines 

While the immediate focus is on the U.S., the ripple effects of immigration retrenchment extend across borders, especially to countries like Canada and those in the European Union. These economies, too, rely heavily on immigration to offset aging populations, fill labor gaps, and support long-term fiscal sustainability. 

Canada: A Cautionary Parallel 

Canada has long positioned itself as a pro-immigration country, but recent signs suggest growing strain. Backlogs, affordability concerns, and rising political polarization are putting pressure on what was once seen as a model system. In 2024, Canada welcomed over 430,000 permanent residents, yet businesses, from agriculture to healthcare, still report labor shortages. 

Should Canada pivot toward a more restrictive stance, whether due to economic pressures, housing crises, or political shifts, it risks following the U.S. down a path of reduced labor force participation and dampened growth. As Jerome Powell pointed out, “growth depends on more people working,” and Canada is no exception. For a country where immigration accounts for nearly all population growth, cutting inflows would have a profound economic impact. 

Europe: Grappling with Demographic Decline 

European countries face even starker demographic realities. Nations like Germany, Italy, and Spain are contending with rapidly aging populations and declining birthrates. According to Eurostat, nearly one-third of the EU population will be over 65 by 2050. 

Yet, many European governments are under political pressure to tighten immigration, even as industries, from eldercare to logistics, struggle to recruit workers. The United Kingdom, post-Brexit, has already experienced the negative consequences of labor market tightening, with food shortages and rising wages in low-skill sectors contributing to inflation. 

Without sustained and well-managed immigration, European economies could face what some economists describe as “secular stagnation" persistent low growth due to shrinking labor and consumer bases. 

Economic Risks of Politicized Immigration Policy 

As seen in the U.S., politically driven immigration crackdowns rarely distinguish between unauthorized and economically essential workers. The result: businesses lose long-tenured employees, communities are disrupted, and sectors already struggling to find talent are further weakened. 

Stephen Miller, a key architect of Trump-era immigration policy, is reportedly pushing for arrest quotas that force ICE agents to detain individuals regardless of criminal history. Similar enforcement zeal could spread to other countries, especially where populist parties gain influence. 

Such measures don’t just create humanitarian concerns; they threaten economic stability. Removing hundreds of thousands of workers disrupts supply chains, reduces consumer spending, and risks inflationary spikes in labor-intensive sectors. 

The Broader Economic Equation 

Labor economist Mark Regets underscores a critical point: “Increasing the labor supply is the least painful way to control inflation.” Immigrants are not just workers, they’re consumers, entrepreneurs, and taxpayers. Reducing immigration may temporarily satisfy political demands, but it creates long-term structural deficits in labor markets and weakens national competitiveness. 

In Canada, Europe, and the U.S., the core challenge is the same: Can aging, high-cost economies sustain growth without a steady flow of immigrant labor? Powell’s warning suggests the answer may be no. 

Conclusion: Immigration Is Economic Infrastructure 

Jerome Powell may have phrased it diplomatically, but the message is clear: slowing immigration slows the economy. Policymakers around the world should take note. Immigration isn’t just a social or cultural issue; it’s an economic infrastructure. Undermining it carries significant risks not only for GDP, but for wages, inflation, and long-term prosperity. 

If the U.S. continues to deport workers en masse, and if Canada and Europe follow suit by curtailing immigration pathways, the global economy may face a period of prolonged underperformance, driven not by external shocks, but by policy choices that restrict the most fundamental driver of growth: people.