Inflation Could Spike in 2026 Because of Trump's Deportations, Top Economist Warns

Mass deportations under President Donald Trump's immigration policies could fuel a sharp rise in U.S. inflation next year, according to Mark Zandi, chief economist at Moody's.

Speaking to Fortune, Zandi warned that if deportations continue at the current pace—about 750 immigrants a day—annual inflation could climb from today's 2.5% to nearly 4% by early 2026.

"The foreign-born labor force is declining, and the overall labor force has gone flat since the beginning of the year," Zandi told the business news site. "That's causing tightening in a lot of markets, adding to costs and inflation."

He cited steep price increases in food, agriculture, and services as evidence that immigration restrictions are already weighing on supply chains. "You can see it in meat prices, agriculture, food processing, haircuts, dry cleaning," he said. "The fingerprints of the restrictive immigration policy are all over the CPI and PPI numbers we got this week."

The Labor Department reported last week that wholesale prices rose 0.9% from June to July, the largest monthly increase since 2021.

The White House, however, rejected the link between deportations and inflation. Spokesperson Abigail Jackson told Fortune the crackdown is meant to "protect the American workforce" and ensure job gains flow to U.S.-born workers, noting that "100% of job gains have gone to native-born American workers" since Trump's return to office.

However, Heritage Foundation economist Steve Moore, who recently paraded alternative jobs data next to Trump, told Fortune he is nonetheless "worried about a labor shortage." "I think the deportations of working illegal immigrants could have a slight impact on wages and thus prices," he said.

Recent research suggests wider economic consequences from deportations. A Penn Wharton Budget Model analysis, published by CNN on July 25, found that removing 10% of unauthorized immigrants annually over four years would reduce GDP by 1%, cost the federal government $350 billion, and lower average worker wages.

The report also found that extending deportations over a decade could shrink GDP by 3.3% and increase deficits by nearly $1 trillion. "You simply have fewer bodies to produce. Fewer people means a smaller economy," said Kent Smetters, who leads the Penn Wharton model.

Immigrant rights group FWD.us has also warned of economic risks as temporary protections are revoked for hundreds of thousands of immigrants. In a July report, the organization projected that without these workers, average U.S. household costs could rise by more than $2,000 annually by 2028.

Zandi stressed that immigration-driven inflation is a supply-side shock that interest rate cuts cannot fix. "Rate cuts won't bring more immigrants into the country," he said, adding that easing immigration restrictions "would be a game changer" for reducing costs.

Originally published on Latin Times