#16 What If Donald Trump's Tariffs Increased Immigration?
Historically, tariffs and immigration control have acted as substitutes: it's difficult to have both
Donald Trump’s economic policy rests on two main pillars: trade protectionism and immigration control. However, these objectives may be at odds with each other. The punitive tariffs he just imposed on Mexico, Canada, and China could paradoxically undermine his goal of controlling irregular immigration. This is because trade and immigration are deeply interconnected: trade allows for cheaper goods to enter a domestic market, while immigration provides cheaper labor to produce these goods domestically. Restricting trade may, in turn, increase demand for immigrant labor.
Margaret Peters from UCLA presents a compelling argument that trade and immigration policies function as substitutes. She suggests that trade openness often leads to more restrictive immigration policies, while trade protectionism can increase immigration. Could Trump’s aggressive tariff policies inadvertently lead to increased immigration rather than reducing it?
The Trade-Immigration Tradeoff
Peters’ core argument is that trade and immigration policies are often inversely related. Historically, when trade is open, labor-intensive firms struggle to compete with foreign producers, reducing their demand for low-skilled immigrant labor. This allows governments to implement more restrictive immigration policies without facing significant business opposition. Conversely, when trade is restricted, domestic industries that rely on cheap labor expand and seek to offset higher production costs by advocating for more open immigration policies.
From the 19th century until the mid-20th century, many countries maintained closed trade policies with high tariffs (a period Trump has hailed as one of great prosperity) but simultaneously had relatively open immigration policies (a point he seldom acknowledges). Since the 1950s, most industrialized nations have pursued free trade while tightening immigration restrictions. Trump’s administration challenges this trend by imposing tariffs and disrupting the international economic order in an effort to protect American industries and revive domestic manufacturing jobs. However, according to Peters’ theory, such protectionist policies could create labor shortages, ultimately increasing the demand for immigrant workers.
How Tariffs Could Increase Immigration
Trump’s tariffs are intended to revive American manufacturing by making foreign goods more expensive (one other possible goal would be to gut the Canadian economy to undermine it as a viable state and annex it, but that’s another story). If successful, they would boost domestic production in industries such as steel, automobiles, and agriculture—all of which require a substantial workforce. However, many of these industries traditionally rely on low-skilled immigrant labor—often undocumented—to keep costs down.
The agricultural sector provides a clear example. American farmers depend heavily on seasonal migrant labor, primarily from Mexico and Central America. Tariffs on foreign goods often provoke retaliatory tariffs on American agricultural products, negatively impacting U.S. farmers. To offset these losses, farmers may be forced to cut costs, increasing their reliance on cheaper labor. If the administration counterbalances foreign tariffs by subsidizing the industry, this could lead to growth in sectors shielded from foreign competition. As a result, demand for labor would expand, and given that such jobs are generally unattractive to U.S. workers, employers would likely push for more open immigration policies to meet labor shortages.
A similar dynamic applies to the construction industry, which could face rising costs due to tariffs on steel and aluminum. If the U.S. government sought to boost domestic steel production, steel plants would need more workers. Given that these jobs are often physically demanding and low-paid, domestic workers might be reluctant to take them, thereby increasing the pressure to allow more immigrant labor. Brexit serves as a cautionary example: leaving the EU customs union did not significantly reduce immigration as promised by Brexit advocates; rather, it led to increased immigration from outside Europe.
Peters’ research highlights that similar dynamics have played out in the past. In the late 19th century, the U.S. maintained high tariffs to protect domestic industries while allowing relatively open immigration policies. This facilitated the entry of large numbers of European immigrants who provided cheap labor for expanding industrial and agricultural sectors. Conversely, the post-World War II period saw a shift toward free trade and more restrictive immigration policies. As trade liberalization enabled firms to outsource production, the need for immigrant labor declined. With domestic firms facing greater foreign competition, they no longer lobbied as aggressively for open immigration policies.
Business Lobbying
A crucial aspect of Peters’ argument is the role of business lobbying. When trade barriers rise, industries benefiting from protection—such as manufacturing and agriculture—gain political influence. These industries then push for policies that ensure access to the labor they need, often advocating for more permissive immigration policies.
By contrast, in an open trade environment, export-oriented firms, which rely less on low-skilled labor, hold greater sway over policy. These firms tolerate stricter immigration controls since they do not require large numbers of low-wage workers, and restrictive immigration policies can appease nativist sentiments without harming their bottom line. Things may be different now as the US tech industry is actually very reliant on foreign workers
If Trump’s tariffs strengthened the political influence of labor-intensive industries, these industries might have had an incentive to push for more migrant labor—even if the administration’s stated goal was to reduce immigration. It may be hard hard to balance even for a would-be autocrat.