Biden’s new executive order on immigration may tighten labor markets but ease supply chain bottlenecks

President Joe Biden’s new executive order to tighten asylum limits on the US-Mexico border could have the dual economic effect of tightening labor markets while also easing supply chain bottlenecks between the two countries, economists and analysts say. trade.

The measure would temporarily bar undocumented immigrants who enter the U.S. at the southern border from receiving asylum, except in certain cases, and make it easier for U.S. Border Patrol agents to quickly deport these people .

“The simple truth is that there is a worldwide immigrant crisis,” Biden said at the White House on Tuesday. “If the United States does not secure our border, there is no limit to the number of people who can try to come here.”

On Tuesday, Biden confirmed in a phone call with Mexican President Andrés Manuel López Obrador that he approved three new construction permits for delayed bridge projects along the Texas-Mexico border. This new bridge infrastructure could further ease shipping bottlenecks and speed up trade between the two countries.

Asylum restrictions are triggered when the average daily number of encounters with migrants exceeds 2,500 during a week. The restrictions were then lifted two weeks after the government determined that the daily average of migrant encounters fell below 1,500 for seven consecutive days.

Currently, the average number of immigration encounters is approximately 4,000 per day, Department of Homeland Security officials told NBC News.

As a result, a senior administration official told reporters that the temporary ban will be “effective immediately.”

However, the temporary closure would not block trade or travel. It would still allow immigrants who enter the United States legally to apply for and receive asylum.

“To those who say the steps I’ve taken are too strict, I say to you, be patient,” Biden said in his remarks Tuesday, which appeared to be made, in part, in recognition of anger over the restrictions on cloud. from the progressives.

But economists and industry representatives say the move has potential impacts on the US labor market, trade, supply chains and inflation.

“This is a modest move in terms of immigration changes, so I think it would have only a small effect on job growth and economic expansion,” said Ernie Tedeschi, director of economics at the U.S. Budget Lab. Yale University. Tedeschi previously served as chief economist at the White House Council of Economic Advisers.

The order is also designed to serve as Biden’s political response to public outrage over a wave of undocumented immigrants. That frustration has become a voter liability ahead of Biden’s potential November rematch against former President Donald Trump.

But border policy also affects how businesses trade, hire workers, and the price of consumer goods — all of which affect the health of the U.S. economy.

So far, experts say the short-term economic impacts will be relatively small. In particular, the new asylum limits could put a mild dent in the growth of the US labor market. But they could also help unblock supply chain bottlenecks at the border and streamline trade with Mexico.

If the new border measure hurts the economy, experts say the pain point is likely to appear in the labor market.

If the border temporarily stops accepting new asylum seekers under Biden’s executive order, the slowdown in immigration could easily damage the strong U.S. labor market, which has already shown signs of softening.

“I would wait [job] The numbers to cool off a little bit,” Tedeschi said. “I would also expect a lot of immeasurable effects: Let’s say, a business that has a little more difficulty finding the workers they need to open a new location.”

Since 2019, immigration has added 2 million workers to the U.S. labor supply, according to an April analysis by Tedeschi. Without immigrants, Tedeschi estimated that the size of the U.S. labor supply would have shrunk by 1.2 million over that period.

“A steady flow of immigrants is critical to ensuring that the U.S. labor force continues to grow,” said Brookings Institution economist Tara Watson.

Immigrants also helped the country’s post-pandemic economic recovery, which, despite many hiccups, has outpaced developed countries around the world.

Tedeschi estimated that immigrants accounted for one-fifth of the pandemic’s increase in US gross domestic product.

The short answer is that this executive order probably won’t increase inflation.

“Immigration has an ambiguous effect on inflation as immigrants expand supply but also increase demand,” Tedeschi explained.

Some experts say the executive order could cut costs by smoothing the U.S.-Mexico supply chain.

Transportation at the border is sometimes blocked because Customs and Border Protection, or CBP, agents are tied up trying to process an overwhelming number of migrants.

“When you slow down that logistics chain, it costs everybody money,” said Jerry Pacheco, president of the Border Industries Association, a New Mexico trade group that represents more than 100 businesses that rely on Mexican manufacturers.

These increased production costs can flow throughout the economy.

“It’s like a hot potato. It’s passed from the logistics companies to the manufacturers, and the manufacturers pass it on to us, the consumers. This has a profound negative impact on our economy,” Pacheco said.

Biden’s executive order could help clear up some of these supply chain bottlenecks. By placing limits on the number of immigration crossings, CBP agents would have more time to facilitate faster transit with Mexico.

“This probably should have been done a year ago, two years ago,” Pacheco said.

Despite some of the potential economic benefits of Biden’s border policy, Pacheco said the best border policy for the economy and workforce would be one that provides a long-term fix for the country’s “broken immigration and visa system.”

Brookings’ Watson agreed. “The best way to manage the border situation would be to create more regular legal routes,” she said.

Meanwhile, Biden’s new executive order is expected to have softer economic and humanitarian effects than the wholesale border closures and hardline deportation strategies that Trump and some Republicans are proposing.

Experts say draconian immigration policies could fuel the embers of inflation that the Biden administration has worked to eliminate.

“I always laughed when former President Trump said that,” Pacheco said, referring to Trump’s promise to close the border.

“I mean, that would be like taking a shotgun, not a pistol, and shooting ourselves in the kneecap.”

A Trump campaign spokesman did not immediately respond to a request for comment from CNBC about how Trump’s immigration proposals would affect inflation and the cost of goods.