No Free Ride: How Trade Barriers and Immigration Crackdowns Fuel Inflation

In a soft but firm tone, Moody’s Analytics chief economist Mark Zandi recently raised a cautionary beacon: the affordability crisis gripping many Americans may not fade soon. He lamented that policy choices — especially on trade and immigration — have steered the economy toward more expensive waters. What could have been a gentler trajectory has become one where prices, already climbed sharply since the pandemic, threaten to climb even higher.

Zandi points to two intertwined drivers: aggressive global tariffs and a strict immigration crackdown. He argues that tariffs, broadly imposed, are not just a one-time tax on goods — they ripple through the economy. Meanwhile, restrictive immigration policy shrinks the labor force, driving up costs in sectors that rely heavily on foreign-born workers.

Currently, consumer price inflation is hovering near 3%, well above the Federal Reserve’s 2% target. Zandi believes that trajectory may worsen: his models suggest inflation could approach 3.5% next year, if current policies persist. By contrast, he envisions a different scenario: without the new tariffs and with more open immigration, inflation might have stabilized around 2.25% through 2026.

The affordability crisis isn’t just about prices, Zandi warns. It’s about who’s bearing the burden. Higher inflation, combined with a job market under strain, slower wage growth, and weaker job creation — especially for lower- and middle-income Americans — could deepen financial stress.

Other economists echo his concern. Bank of America has warned that higher tariffs plus immigration restrictions could fuel a kind of mild stagflation — a risky mix of slow growth and high inflation. Morgan Stanley, too, expects that reduced immigration will weaken labor demand and dampen consumer spending, while tariff-driven inflation reaccumulates.

From the supply side, the impact of deportations could be particularly steep. Zandi argues that removing foreign-born workers is already pushing up costs in agriculture, construction, hospitality, and other labor-intensive sectors. The Dallas Fed supports this risk: its economists estimate that the current pace of deportations could shave off a full 0.3 percentage point from GDP growth while adding to inflation.

In Zandi’s words, “It didn’t have to be this way.” He suggests that a more balanced immigration policy — one that welcomes workers across skill levels — could ease inflation pressures and even boost long-term economic dynamism.

As things stand, though, the tough financial reality for many Americans may linger. The policies that promise greater control over borders and trade come with a cost — one measured not just in politics, but in what people pay each day for basics.

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Source Check : Fortune — Mark Zandi’s warning about inflation and affordability. Benzinga — Zandi on immigration policy driving costs. Investing.com — BofA on tariffs + immigration restrictions causing stagflation risk. Investing.com — Morgan Stanley on consumer slowdown due to tariffs + immigration crackdown. Bloomberg — Dallas Fed economist on immigration crackdown’s impact on GDP and prices.