For Donald Trump, restricting immigration is about securing America’s borders, protecting American jobs and reducing dependence on foreign workers. But what happens when a country removes workers faster
than it can replace them?
“The Trump administration’s policies will reduce legal immigration to the US by an estimated 33% to 50%, or by 1.5 million to 2.4 million legal immigrants, by the end of Donald Trump’s four-year term,” according to a January 2026 National Foundation for American Policy (NFAP) analysis.
An earlier NFAP report, which also accounted for the impact of policies targeting deportations and the termination of Temporary Protected Status, found that a sustained reduction in immigration could significantly shrink the US labour force. It estimated a potential loss of about 19 million worker-years by 2028 and 102 million by 2035. The resulting impact on the economic output could reach $1.9 trillion between 2025 and 2028 and $12.1 trillion by 2035 — equivalent to $34,369 per person. The analysis also projected that the policies could cut the pace of economic growth by nearly one-third and add substantially to federal debt.
The answer is beginning to show up in America’s labour market, businesses and population numbers. Net migration, which exceeded 2 million a year in 2022-24, fell to roughly zero or even negative in 2025. The US labour force has also shrunk by more than 1 million since January, while businesses in sectors such as construction, hospitality, food processing and care services are reporting growing labour shortages.
Nearly 1 million Indians are already caught in the US employment-based green-card backlog, with potential waits of up to 179 years in the EB-2 category and 38 years in EB-3 for applicants filing in 2026. The administration is also planning to end authorisation for H-4 visa holders and proposing a massive fee of $103,265 for H-1B visas.
What Is Happening In The US Now?
The economic consequences of the immigration crackdown are becoming harder to separate from the policy itself. Reports suggest that the US is experiencing a much smaller flow of new workers just as its population ages. According to a report by CBS News, the demand for “young workers” will “explode” over the next 10 to 15 years.
“A wave of baby boomer retirements will coincide with smaller cohorts of young people entering the labour market, resulting in a smaller overall workforce. That will lead to an ‘unprecedented situation’ where, for the first time in the US economic history, more workers will leave the workforce than enter it,” CBS News quoted Steven Ruggles, a professor of history and population studies at the University of Minnesota, and the creator of the Integrated Public Use Microdata Series – world’s largest population database.
Fewer job additions do not necessarily mean a healthier labour market. When the supply of workers is shrinking, even modest employment growth can put pressure on wages and prices. At the same time, businesses may struggle to expand because they cannot find enough people.
“Some people think AI is going to take away all jobs. But there are going to be very few people who are searching for jobs, relative to the size of the economy,” Ruggles told CBS News.
An average of 10,000 boomers a day are turning 65 from 2011 through 2029, according to Census data. In 2025, a record 4.18 million Americans, or more than 11,400 people per day, turned 65.
The International Monetary Fund estimates that changes to immigration could reduce the level of US GDP by around 0.4% by 2027. The longer-term concern is even bigger: immigration has historically expanded not only the number of workers but also the pool of consumers, entrepreneurs and highly skilled talent driving productivity.
The impact is already visible at the ground level. Construction has been particularly exposed because immigrants make up a large share of workers in trades such as roofing, framing and drywalling. Restaurants, hotels, food-processing businesses, grocery stores and care services are also losing workers.
According to Financial Times, Trump’s immigration crackdown is beginning to weigh on US fast-food sales, threatening a sector that has long benefited from population and workforce growth. Sales growth at chain restaurants slowed sharply in 2024 and 2025, while major brands have started pulling back. McDonald’s is slowing the pace of new store openings, while Wendy’s and Subway have closed hundreds of outlets over the past year.
In some places, American-born workers have not simply stepped into the vacancies left by immigrants. The jobs are often interconnected, meaning that losing one part of a workforce can reduce opportunities for other workers too.
A study done by the University of Colorado economists, published by the non-profit National Bureau of Economic Research, found that 1.3% fewer US-born men with no more than a high school education were working in those industries. It showed “no evidence of positive effects” of the labour market outcomes of US-born workers in immigrant-heavy industries.
The H-1B Squeeze
The pressure is moving beyond undocumented immigration. On August 24, the US administration proposed a $103,265 fee for new H-1B cap-subject petitions, on top of existing charges. The proposal is designed to raise billions of dollars to help cover the costs of administering the legal immigration system. It would apply to cap-subject petitions, rather than every H-1B petition.
For Indian professionals and IT companies, the significance is obvious. H-1B visas have been one of the main routes through which highly skilled foreign workers enter the US labour market. A six-figure additional fee could change the economics of hiring such workers, particularly for companies that depend on moving employees between India and the US.
That comes at a time when the US is also becoming a much harder place for Indian professionals to secure permanent residency. A new analysis estimates that nearly Nearly 1 million Indians are already caught in the US employment-based green-card backlog, with potential waits of up to 179 years in the EB-2 category and 38 years in EB-3 for applicants filing in 2026.
Can AI Fill The Gap?
This is where America’s immigration policy collides with its AI ambitions. The argument that automation can compensate for fewer workers is tempting. If companies cannot hire enough people, they have a stronger incentive to deploy AI, robotics and other labour-saving technologies.
But productivity gains do not arrive instantly. AI adoption requires investment, infrastructure, skills and time. The US is also simultaneously building enormous data-centre capacity, creating new demand for engineers, construction workers, technicians and energy-sector employees.
US construction spending is expected to rise from $2.22 trillion in 2026 to $2.85 trillion by 2031, according to a Merlo America report. Much of this expansion is being fuelled by the infrastructure required for AI, cloud computing and 5G, with data centres becoming an increasingly important driver of construction and industrial activity. But building these facilities is labour-intensive, requiring skilled workers across almost every stage of development.
A Boston Consulting Group (BCG) report said 50% to 55% of jobs in the US will be reshaped by AI over the next two to three years. “While job augmentation and new-job creation will happen rapidly, full substitution of jobs by AI will be slower. Five years from now, or perhaps further in the future, 10% to 15% of jobs in the US could be eliminated.”
A labour shortage may eventually accelerate automation, but in the short term the shortage itself can constrain growth. Recent productivity growth has not yet been strong enough to completely offset the demographic hit.
There is another risk. The US does not only import labour; it imports talent that creates companies, develops technologies and contributes to scientific research. Foreign-born workers account for around 35% of US-trained PhDs in STEM fields. A sustained squeeze on international students and skilled migration could therefore affect America’s innovation pipeline, not just its workforce.
Why GCCs Will Become Important More Than Ever
For India, the obvious opportunity is that more skilled work could stay in the country. If American companies face greater barriers to bringing Indian employees to the US, they have another reason to expand teams in India. Global Capability Centres (GCCs) could become even more important, with engineering, software development, AI research, cybersecurity, finance and other high-value functions increasingly performed from Indian cities.
Former UN advisor Santosh Mehrotra said the H-1B visa impact would depend on whether companies are will to “bear the additional cost” or pass it on to workers.
“Most American companies are coming to India to set up global capability centres. So, services that IT companies were earlier providing from here are actually being insourced by the big companies internationally and especially the US when they locate their global capability centres in Hyderabad or in Chennai or in Bengaluru and the greater national capital area,” he told ANI.
This could mean that some technology work which previously required Indian professionals to travel to or work in the US could increasingly be carried out from India, he further said.
America may be closing one door for Indian workers, but it could inadvertently open another for India’s technology and services economy. Can India capture that opportunity?
