This article is part of Macro Hive’s 2025 Grey Swan series, where we let our imaginations loose to try and predict low-probability, high-impact events that almost no one expects. You can read the full list here.
Promise Kept
It is December 2025 and 11mn illegal migrants have been expelled. Nobody thought it possible.
The incoming Trump administration started the preparations well before inauguration. It reached out to sympathetic sheriffs across the country, who quietly scouted for spaces that could be repurposed as detention centers.
The administration passed a budget within its 100 days (another kept promise no one believed) with substantial resources for immigration enforcement. The ICE budget was doubled and retired agents were re-hired as consultants. The administration expanded the 287(g) program that gives local law enforcement powers usually reserved for ICE, effectively multiplying agent numbers manyfold.
The national guard was deputized as immigration enforcement officers. The administration further invoked the Insurrection Act and the 1798 Alien and Sedition Act (used to intern Japanese-, Italian-, and German-Americans during WWII) to enable Federal troops to apprehend, imprison and deport illegal migrants.
Local governments were given financial incentives to cooperate and those that held out were financially penalized. Funding meant to reimburse cities and non-profits for helping newly arrived migrants was instead allocated to cooperating local law enforcement. Sanctuary cities lost billions in Federal funding.
These efforts took place in parallel with the doubling of Border Patrol agents, reinforcement at the border by National Guard and Federal troops. And, of course, the administration completed the border wall in record time, with help from the Army Corp of Engineers.
These initiatives were predictably accompanied by multiple legal challenges. While these were working their way through the court system however, the government diligently carried out its expulsion program. ICE and its proxies have been extraordinarily efficient and implemented large-scale raids wherever illegal migrants were known to be employed, which turned out to be most of the US.
Produce and meat shelves are bare. Agricultural exports have collapsed. Small businesses and farmers are going through bankruptcy in record numbers. More than half of America’s fast food joints are in furlough. In smaller American towns there have been riots over the few meat and fresh produce available. Fears of shortages have led households to stock up, thus adding to shortages.
Half of construction sites have come to a standstill, which has helped keep house prices and rents accelerating.
With the prices of basic necessities shooting up, American workers are demanding higher wages. Strikes are multiplying. Employers have no choice but to grant those demands, since migrants no longer offer a cheap alternative to American labour. Rationally, employers are trying to recoup the higher wages through higher prices.
Inflation has once more spiked close to double digits. This has left the Fed with no alternative but to raise interest rates. As Chair Jerome Powell explained, aggregate demand needs to be brought in line with a permanent contraction in aggregate supply. The shrinking of America’s productive capacity has been greater than even during the pandemic (Chart 1).
Eventually, the deep recession in the US will lower inflation. Meanwhile, real incomes have shrunk, and President Donald Trump’s approval rating has sunk to the low 20%, the lowest on record for a US president. Pollsters are expecting the Democrats to flip House and Senate in the 2026 elections. There is even talk of a filibuster-proof Democratic Senate majority.
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