Globalisation and the free movement of people have been an integral component of the growth of world economies. Some of the world’s most dominant companies including Apple, Google, Tesla and Intel would cease to exist without immigrants. However, recent global issues and negative media coverage have resulted in immigrants and refugees coming under scrutiny from political leaders, particularly due to threats of terrorism and security.
As a response to this, President Donald Trump recently attempted to ban visitors from seven Muslim countries that included Iraq, Syria, Iran, Yemen, Sudan, Libya and Somalia, which is likely to hurt the U.S. economy in the near future.
This led to severe anger, criticism and hostile responses from millions of people around the world, including humanitarian administrations, religious groups, major institutions and governments. Among those who have publicly spoken out against the President’s order include Facebook CEO Mark Zuckerberg, Google CEO Sundar Pichai and Lloyd Blankfein, the CEO of Goldman Sachs.
The affected countries condemned Trump’s stance, with Iran claiming that it is a ‘gift to extremists’ and an insult to the Islamic world.
Their comments are signs of fears and anxiousness amongst corporations as the ban could hinder their ability to conduct business in other countries and attract talent and investors, which could motivate people to axe the U.S. as a place to pursue business and investment opportunities, especially at a time where economies such as China and India are propping up as attractive and safe places for investment and trade.
As a result, protests sparked all around the world, from the West to the East, which eventually led to the Supreme Court ‘banning the ban’, which may have turned Trump’s face from a pale orange to a fiery red.
The ban could lead to major issues such as political and social unrest amongst the country, while also affecting the economy and American businesses. If successful in the near future, the ban could dampen the countries’ reputation as a profitable haven for businesses and investors.
Impact of Immigration on Business & Economy
The ban has prevented half a million legal U.S. entrants from coming home while also effectively banning over 200 million people from entering the country.
Upon hearing the news of the potential restriction, financial markets immediately fell while the value of the dollar declined, citing fears of the general progression and stronghold of the U.S. in the years ahead.
The matter of fact is, these bans only instill further fear into the minds of the citizens and affect businesses drastically as consumer and investor sentiment changes worldwide.
Legal immigrants have contributed significantly to the economy of the U.S. and have come to take the country as one of their own.
They are certainly a ‘Brain Gain’ for the economy as millions of businesses around the U.S. run on human capital, without regard to where they are from or their nationality. Some legal immigrants, who are from developing countries, are also a source of cheap labour for American businesses as working at minimum wage is potentially more than what they could earn in their home country.
Furthermore, according to the National Foundation for American Policy (NFAP), more than HALF of American businesses valued at more than $1 billion have been started by immigrants, including the fact that approximately 70% of immigrants are part of management teams and product development.
Think about the value they have added to the economy in terms of hiring millions of Americans and paying corporate tax to the government.
Additionally, massive corporations around the county, which are keen to promote diversity & inclusion and attract a global presence, see overseas markets as a key profitability driver. As a result, the immigration ban heavily loosens the ties the U.S. would have with other such countries. These economies would naturally retaliate to such a ban and would make it difficult for U.S. businesses, as trade would be dramatically affected.
Affected countries and those who have good relations with the affected countries could slam tariffs on America such as import duties, while also restricting the entry of U.S. citizens in their home soil. A bit immature but tit for tat!
Furthermore, residents of foreign countries can boycott goods and services provided by American companies. Such trade conflicts lead to a major selloff in financial markets and with U.S. being one of the largest economies in the world, markets would react negatively to any such trading restrictions and American companies cannot conduct business with ease as a result of immigration restrictions.
It is important to note that the seven banned countries are not U.S.A’s major trading partners. They contribute only 1 percent of US imports and 0.25 percent of US exports of goods, according to US data. However, the ripple effect of this on other neighbouring countries could be fatal on the economy.
Reactions from U.S. businesses
The corporate world responded quite rigorously and swiftly to Trump’s stance.
Goldman Sachs’ CEO, Lloyd Blankfein, stated that the ban will “hurt diversity in recruiting” whereas the CEO of Starbucks, Howard Schulz pledged to recruit 10,000 refugees by 2022. Furthermore, effective responses were made by Mark Zuckerberg, who stated that “everybody benefits when the best and brightest from around the world can live, work and contribute”, while Uber’s CEO left Trump’s advisory panel as a response to this backlash.
The way these companies have reacted can hopefully be seen as encouraging signals for the future of the country.
Safer or Fearful?
The immigration orders have alienated Muslim countries and it is possible that the ban could make U.S. citizens feel insecure, rather than enhance safety. The case that the President needs to make is, is it ultimately good for businesses? Do consumers, citizens and investors feel safe and happy and does this ban lead to the world being a happier and peaceful place? These questions need to be answered immediately by the higher order and only time will tell as to what would be the aftermath of such a decision, on the global economy.