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FORTUNE.COM // DECEMBER 2019
and practices to keep more people out.
U.S. business overall hates these changes
for obvious reasons. Tech companies in Silicon
Valley want immigrants with Ph.D.s to work
for them; the whole U.S. technology sector is
unimaginable without immigrants. A 2018
report, based on 2016 Census data, found
that 71% of tech employees in Silicon Valley
are foreign-born. It isn’t just tech. Farmers
across the country rely on immigrant workers.
Trump’s immigration crackdown is one reason
U.S. farmers are in crisis; his trade war and the
retaliatory tariffs on U.S. agricultural products
imposed by China are another. Holtz-Eakin
says, “Some businesses and sectors rely heavily
on non-native workers, and Trump basically
blew it up.”
On a larger scale, immigrants are crucial to
U.S. economic growth because without them
the population will shrink. The U.S. birth
rate dropped to 1.73 per woman last year,
the lowest ever and far below the replace-
ment rate (the average number of births per
woman needed to maintain the population)
of 2.1. Without substantial immigration, the
U.S. population would shift into reverse, as is
already happening in Japan and Italy, quite
possibly pulling GDP down with it. A shrink-
ing country and economy are terrible for busi-
ness. “The easiest way to boost GDP growth
would be to allow large numbers of skilled im-
migrants into the country,” says Steven Davis,
an economics professor at the University of
Chicago. “But that is not on the agenda.”
An important element of Trump’s immigra-
tion policy has nothing to do with specific
rules or procedures. It’s the creation of a
general fear among potential immigrants that
even if they get into the U.S., they might not
be allowed to stay, and even if they could stay,
they might not be welcome. “Long-term, the
U.S. is seen as less welcoming,” says Davis.
“That has an effect on students and entrepre-
neurs that’s potentially quite harmful to the
U.S. We’ve had a great advantage in attracting
the most motivated people in the world.”
Consider some of the highest-value and most
motivated potential immigrants, applicants
to U.S. business schools. Applications from
foreign students plunged 14% this year, theits wish. In a world of complex global supply chains, those rising
trade barriers dampened demand broadly. That’s an important
reason why the U.S. manufacturing sector is already in recession—
which is bad news for steel because manufacturers are valuable
customers for steelmakers. Compounding the damage, steelmak-
ers, exhilarated by the imposition of tariffs, inflated their prospects
and opened new capacity at the worst possible time. Increased
supply, shriveling demand—it’s a classic recipe for a price plunge,
and there’s no clear way out. That’s life in the real world, not the
imaginary world of easy-to-win trade wars.
Trump launched trade hostilities ostensibly to combat China’s
abuse of its trading partners with regard to intellectual property
and technology transfer, a goal that most businesspeople endorse.
“The administration is right about China’s behavior,” says Neil
Bradley, chief policy officer at the U.S. Chamber of Commerce.
“But further escalation would not be helpful. Tariffs are a tax and
a drag on the economy.” How Trump de-escalates is far from clear.
“Unwinding the tariff situation with China will take a long time,”
says an experienced China hand. “It shouldn’t, but it will. He’s Tariff
Man. Lord knows what he’s going to do with the rest of the world.”
immigration
HERE’S A SURPRISE FOR THOSE who remember arenas filled with
Trump supporters chanting “Build that wall!”: There have been no
major changes to immigration law during the Trump administra-
tion. In addition, deportations are down significantly from the
Obama years—about 276,000 per year under Trump vs. Obama’s
383,000 a year, the most of any President. As for the wall, about
60 miles of existing barrier along the nearly 2,000-mile Mexican
border have been replaced, but no wall has been built along unfor-
tified stretches of the border.
Is Trump’s immigration policy a bust? Far from it. Immigration
to the U.S. has fallen sharply. The trouble is, if there’s one thing on
which a vast majority of economists agree, it’s that this is bad news
for American business and the economy.
About 200,000 immigrants came to the U.S. last year, the few-
est in over a decade. As recently as 2014, the number was over a
million. Trump achieved this dramatic reduction—without new
laws, increased deportations, or a wall—by turning the administra-
tive dials available to a President. He has used “hundreds of policy
memos, regulatory changes, and more,” reports Sarah Pierce of the
Migration Policy Institute, a nonpartisan think tank. For example,
he has “tapped U.S. Citizenship and Immigration Services and the
State Department to increase vetting of prospective immigrants and
to slow their admission to the United States,” she writes in a study of
Trump’s immigration policies. From border crossings in Arizona to
visa offices at U.S. embassies worldwide, he has redirected policies