US/Mexico: Trump 2.0 serious about deportations, but will still face hard limits

• In announcing Thomas Homan as “Border Czar” and Stephen Miller as Deputy Chief of Staff, President-elect Trump is signaling his intention to follow through on his hardline immigration policy campaign promises.
  • That said, logistical, budgetary, political, and legal hurdles will likely narrow the scope of planned deportations. This note attempts to tease out those nuances.
    • Ultimately, we assess Trump 2.0-era deportation levels (by which we mean removal of undocumented immigrants already in the US) to land around 300k-500k per year (compared to 178k in 2023) – with a focus on:
      • Criminals (~ 650k)
      • Chinese undocumented nationals (~ 100k)
      • Those easily tracked, including:
        • CHNV asylum seekers (~ 500k)
        • CBP One applicants (~ 800k)

• Some of the challenges to a mass deportation policy include the following:
  • Logistics:
    • The US government currently has the capacity to house ‘only’ around 41,000 detainees at any given time.
    • The US currently lacks enough immigration judges to process an increased volume of cases.
  • Economics:
    • Direct policy cost: the aforementioned current housing capabilities come at a current annual cost of USD 3.5 billion. Any mass round up of illegal immigrants “in the millions” would require a massive increase in funding and space.
      • The estimated cost to house and deport one million detainees is around USD 90 billion annually,
      • more than the all of the discretionary spending allocated to the Department of Homeland Security in FY2024 (USD 61.8 billion).
    • GDP and inflation:
      • The Peterson Institute, modelling a ‘minimalist’ policy deporting 1.3 million migrants and a ‘maximalist’ policy deporting 8.3 million migrants found (here): “US real GDP declines from baseline by 1.2 or 7.4 percent” depending on which policy path is taken,
      • and that in the same minimalist and maximalist scenarios, inflation would rise by an additional 0.5% or 3.5% by 2026,
    • Lost revenue:
      • One study (here) found in that 2022 alone, undocumented immigrant households paid $46.8 billion in federal taxes and $29.3 billion in state and local taxes.
      • A separate study (here) found that illegal immigrants contribute an estimated $96.7 billion annually in federal, state, and local taxes.
      • Meanwhile, undocumented immigrants also contributed $22.6 billion to Social Security and $5.7 billion to Medicare.
  • Politics:
    • Trump’s plans rely on cooperation from state and local law enforcement agencies. The six states with the largest undocumented populations (California, Texas, Florida, New York, New Jersey, and Illinois) have, with the exception of Texas and Florida, Democratic governors who are unlikely to cooperate with federal deportation efforts.
    • Meanwhile, despite campaign rhetoric, we assess that Trump will be sensitive to “horror stories” of families being torn apart.
  • Legalities:
    • Standing US law requires a due process legal hearing to determine a migrant’s status and rule on grounds for removal.
      • As mentioned above, the US lacks the legal infrastructure to process that many hearings.
      • The Trump administration will very likely attempt to minimize the number of hearings necessary via ‘expedited removal,’ allowing for deportation without a hearing for particular classes of migrants.
      • However, even then, human rights-focused legal groups will challenge immigration restrictions and deportations, especially those conducted via expedited removal.
    • Meanwhile, Trump’s first term policy of separating children from parents proved controversial and ended up being ruled illegal by federal judges, with a ban imposed on any similar policy until 2031.

• To gain a sense of absolute potential numbers of upcoming deportees, it can be helpful to look at the rough breakdown of illegal immigrants’ demographics:
  • All: ~ 11 million
  • Workforce participation: ~ 8 million (here)
  • Living in states likely to comply with mass deportation efforts: ~ 5.5 million (here)
  • Are ‘anchored’ by (here):
    • a US-citizen spouse ~ 1.5 million and/or
    • a US-citizen child ~ 3.5 million

• Meanwhile, to gain a sense of potential ‘flow rate’ of potential upcoming deportations, it can be helpful to look at the degrees of plausible expansion in capacity the Trump administration could resort to:
  • Current rate:
    • During Trump’s first term and President Biden’s term, deportations (i.e. removals) averaged roughly 220k per year.
  • Current ‘max’ rate:
    • Current federal capacity is 41,000 detainees at any one time. If the government were able to detain, process, and expel those people in a one-month window, the administration could feasibly (though highly unlikely) process and deport just under half a million people per year.
  • Potential expanded civilian capacity:
    • The government could theoretically “command” civilian facilities and space to create “emergency” detention camps, though not without costs and potential legal challenges. The more the government outsources this work, the higher the costs.
    • Potential expanded cooperation with states:
      • For example (here), in Texas, which:
        • is “home to an estimated 1.6 million undocumented persons,”
        • has “surged resources to the state’s […] border security mission, Operation Lone Star, that has so far cost $11 billion,”
        • and to which Trump promised to “send […] reinforcements.”
  • Potential use of military capabilities…
    • as was discussed (but not adopted) during Trump 1.0 (here):
      • “[A] Department of Homeland Security draft proposal to use the National Guard to round up unauthorized immigrants […] called for mobilizing up to 100,000 troops in 11 states”

• The key question is whether Mexico will comply with Trump’s demands to avoid tariffs.
  • We are more optimistic than some observers, believing that Mexico is indeed likely to avoid tariffs at the outset of a second Trump administration, for two main reasons:
    • 1) President Claudia Sheinbaum is expected to cooperate with most demands.
    • 2) Trump and his team are likely to prioritize other issues, pushing substantive trade talks with Mexico to the USMCA review in 2026.

• Trump’s threats fall in two main categories:
  • Immigration and border security:
    • Securing the border:
      • Mexico’s migration policies have already reportedly reduced migrant flows by 76% since December 2023.
      • We expect Mexico to further increase enforcement of its migration policies from the former President Andres Manuel López Obrador era, such as relocating non-Mexican migrants by bus or flight to the southern border of Mexico, increasing deportations, and dismantling migrant caravans.
    • Deportations of Mexican nationals:
      • Mexico maintains an open-door policy for all Mexican nationals, and will consequently ‘agree’ to ‘take back’ any number of Mexican currently illegally in the US as the Trump administration demands.
    • Reinstating the Remain in Mexico policy (also known as the Migrant Protection Protocols - MPP):
      • Mexico agreed to this during the first Trump administration, i.e. allowing asylum seekers to wait in Mexico while their US immigration cases are processed in US courts, and still has the infrastructure to reinstate it if needed.
      • Our basecase is that Mexico will likely agree to reinstate the policy in the former selected ports of entry, particularly if it includes funding for deportations and migrant camps in Mexico, as was done during Trump’s previous term.
    • Drug control:
      • Mexico has expanded military and National Guard operations at the border for drug control, increasing coordination with US agents.
      • The recently approved reform that places the National Guard under the Ministry of Defense further increased the latter´s capacity to increase drug crackdown.
      • We expect increased border patrol efforts, particularly on the western border, given rising organized crime violence within the Sinaloa cartel.
      • Additionally, Mexico is likely to pass a reform granting the Ministry of Security investigative authority and enhancing coordination with subnational governments increasing drug crackdown.
  • China:
    • Tariffs on steel and aluminum (of 25% and 10%, respectively, in the first Trump term):
      • To keep the US exemption on these tariffs, Mexico has imposed tariffs on Chinese steel and aluminum since April 2024 (as well as other 544 products ranging from 5% to 50%) and required importers to provide information on national content and countries of origin. Currently, only 13% of steel and 6% of aluminum imports of Mexico come from outside North America.
      • We expect Mexico to increase duties on Chinese steel and aluminum over the coming years and to extend existing tariffs when they are up for renewal in April 2026.
      • Mexico is also likely to tighten monitoring of product origins and may begin providing data on the melt and pour origins of its steel and aluminum exports.
    • 200% tariff on Chinese cars produced in Mexico for the US market:
      • This issue is unlikely to impact Mexico beyond bluster, as no Chinese automakers currently plan to export to the US.