Biden's Immigration Executive Order impacts labor markets and supply chains

President Joe Biden's new executive order tightening asylum limits at the U.S.-Mexico border could have the dual economic effect of tightening labor markets, while easing supply chain bottlenecks between the two countries, economists and trade analysts say.

The measure will temporarily prevent illegal immigrants who enter the United States at the southern border from obtaining asylum, except in certain cases, and will make it easier for US Border Patrol agents to quickly deport these people.

“The simple fact is that there is a global migrant crisis,” Biden said at the White House on Tuesday. “If the United States does not secure our borders, there will be no limit to the number of people who may try to come here.”

Biden confirmed Tuesday in a call with Mexican President Andres Manuel Lopez Obrador that he had approved three new permits to build delayed bridge projects along the Texas-Mexico border. This new bridge infrastructure can further ease freight congestion and accelerate trade between the two countries.

Asylum restrictions are triggered when the average daily number of migrant encounters exceeds 2,500 people over the course of a week. The restrictions are then lifted two weeks after the government determined that the daily average of migrant encounters had fallen below 1,500 for seven consecutive days.

Currently, the average number of encounters with migrants is about 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 would “take effect immediately.”

But the temporary closure will not hinder trade or travel. Immigrants who enter the United States legally will still be allowed to apply for and obtain asylum.

“For those who say the steps I've taken are too strict, I say to you, be patient,” Biden said in his remarks on Tuesday, which appeared to be in part an acknowledgment of anger over the new restrictions. From progressives.

But economists and industry representatives say the measure has potential impacts on the labor market, trade, supply chains and inflation in the United States.

“This is a modest step in terms of changes related to immigration, so I think it will only have a small impact on job growth and economic expansion,” said Ernie Tedeschi, director of economics at the Yale Budget Lab. Tedeschi previously served as chief economist for the White House Council of Economic Advisers.

The order was also designed as Biden's political response to public anger over a wave of illegal immigrants. That frustration has become a burden for voters ahead of Biden's potential rematch in November against former President Donald Trump.

But border policy also affects the way businesses conduct trade, employ workers, and price consumer goods — all of which affects the health of the American economy.

So far, experts say the short-term economic impacts will be relatively small. Specifically, the new asylum limits could slightly affect labor market growth in the United States. But it could also help solve supply chain bottlenecks at the border and simplify trade with Mexico.

If the new border measure hurts the economy at all, experts say the pain point will likely manifest itself in the labor market.

If the border temporarily stops accepting new asylum seekers under Biden's executive order, a slowdown in immigration could slightly impact the robust U.S. labor market, which has already shown signs of slowing.

“I expect the (jobs) numbers to calm down a little bit,” Tedeschi said. “I also expect many impacts that cannot be measured: for example, a company has difficulty finding the workers it needs to open a new location.”

Since 2019, immigration has added 2 million workers to the U.S. labor supply, according to an analysis by Tedeschi in April. Without immigrants, Tedeschi estimates that the US labor supply would have shrunk by 1.2 million during that period.

“The continued influx of immigrants is critical to ensuring that the American workforce continues to grow,” said Tara Watson, an economist at the Brookings Institution.

Migrants have also helped boost the country's post-pandemic economic recovery, which, despite many obstacles, has bypassed developed countries around the world.

Tedeschi estimated that immigrants account for one-fifth of the pandemic growth in U.S. gross domestic product.

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

“Immigration has an ambiguous effect on inflation because immigrants increase supply but also bring additional demand,” Tedeschi explained.

Some experts say the executive order could lower costs by streamlining the supply chain between the United States and Mexico.

Shipping at the border is sometimes clogged by restrained Customs and Border Protection (CBP) agents as they try to process an overwhelming number of migrants.

“When you slow down that logistics chain, it costs everyone money,” said Jerry Pacheco, president of the Industrial Frontier Association, a New Mexico trade group that represents more than 100 companies that rely on Mexican producers.

These high production costs can affect the entire economy.

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

Biden's executive order could help remove some of these supply chain bottlenecks. By placing limits on the number of migrant crossings, CBP agents will have more time to facilitate faster shipping with Mexico.

“It probably should have been done a year or two ago,” Pacheco said.

Despite some potentially positive economic aspects of Biden's border policy, Pacheco said the best border policy for the economy and workforce would be one that provides a long-term solution to the country's “broken immigration and visa system.”

Brookings' Watson agreed. “The best way to manage the border situation is to create more regular legal pathways,” she said.

Meanwhile, Biden's new executive order is expected to have more moderate economic and humanitarian impacts than the wholesale border closures and aggressive deportation strategies proposed by Trump and some Republicans.

Experts say that strict immigration policies could fan the flames of inflation that the Biden administration is working to eliminate.

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

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

In response to CNBC's request for comment on how Trump's immigration proposals would affect inflation and the cost of goods, the Trump campaign pointed to its statement generally attacking Biden's border policy.

“The border invasion and immigrant crimes will not stop until crook Joe Biden is removed from the White House,” the statement read.