The news: President Donald Trump’s immigration crackdown is chilling consumer spending and reducing the available labor force for key industries like construction and hospitality.

• ICE raids targeting Home Depot stores have scared off day laborers, many of whom lack legal status but serve as a critical source of labor for contractors and homeowners.
• Deportation fears caused in-store shopping among Hispanic consumers to fall more YoY than among non-Hispanics, with supermarkets seeing the biggest drop at over 11%, according to data from Kantar.

The big picture: While Home Depot and 7-Eleven are currently bearing the brunt of the Trump administration’s deportation efforts, stricter immigration policies are likely to affect the vast majority of US companies.

• 70% of employers surveyed by employment and labor law firm Littler expect immigration policy to have a “significant or moderate impact on their workforce,” with that proportion rising to 89% for retail and hospitality companies.
• Over 1 in 7 workers in agriculture and construction are undocumented, according to an analysis by the American Immigration Council, as well as 7.6% of those employed in the arts, entertainment, hospitality, and food services.
• Deporting those workers would likely trigger labor shortages in key areas, driving up prices for housing and groceries and fueling inflation.

The impact on consumer spending: In addition to shrinking the available labor force, the immigration crackdown is curbing spending from a group with sizable buying power.

• Undocumented immigrant households commanded $299 billion in buying power as of 2023 and paid $89.8 billion in federal, state, and local taxes that year, according to the American Immigration Council.
• Hispanics—who are more likely to worry that Trump’s immigration policies will affect them or someone they know—are pulling back sharply from discretionary purchases. That’s despite having more savings and discretionary income, and fewer concerns about the cost of essentials than the general public, per Kantar.
• Hispanic consumers reduced their purchase frequency for categories like clothing, haircare, and beauty products in Q1. Interest in staples like frozen foods, snacks, canned goods, and dairy products also declined—a problem for CPG brands that have relied on outsize spending from Hispanics to drive growth.
• Shoppers are also pulling back sharply from brands based on their (perceived) immigration stances. Coca-Cola’s North America sales took a hit in Q1 after a video falsely claimed the company was reporting undocumented workers to ICE, triggering a boycott among Hispanic consumers.

Our take: The US economy depends heavily on immigrants, documented and undocumented. The Trump administration’s aggressive deportation push could therefore deprive companies of crucial workers—and drive up costs for essentials like housing and groceries—as well as eliminate a considerable source of tax revenues and consumer spending.