Stephen Miran, in his testimony before the Federal Reserve, claimed that tightening US borders is ‘deflationary.’ He argues that deporting low-wage workers could lead to lower housing prices. This impact is similar to tariffs, which he says do not cause inflation. Miran’s views connect with earlier political discussions about immigration and the economy. He points out that removing workers could reduce housing demand, which might affect market prices overall.

Tightening Borders and Economic Implications

Some believe that tightening borders could lead to deflation by decreasing demand and possibly lowering housing costs. This raises an important question: most people think fewer workers will mean higher wages and inflation. For us, the focus should be on trading the uncertainty this debate brings rather than choosing a side too quickly. The ongoing debate indicates that market volatility may be underestimated, especially following the calm observed in August 2025. By looking at VIX futures for October and November, we can prepare for fluctuations around upcoming job reports and policy announcements. This strategy allows us to navigate the growing anxiety without trying to predict inflation’s direction. It’s essential not to overlook inflation risks, especially given the labor shortages experienced from 2021 to 2023. The August 2025 jobs report suggested weakness in construction and hospitality. This could lead to higher service costs if labor remains scarce. It makes sense to buy puts on rate-sensitive sectors like technology and homebuilders, as a hawkish Fed may persist longer than expected.

Potential Market Reactions

However, if the belief that deporting workers will lower housing prices gains traction, the situation changes. Recent Census data from Q2 2025 shows a slight increase in rental vacancies in states like Arizona and Texas, which supports this idea. In this case, we might see renewed interest in trades betting on Fed rate cuts, making long positions on 2-year Treasury note futures appealing. Another interesting trade is in currency markets, specifically the U.S. dollar against the Mexican peso. Increased border tensions and disruptions to remittances and trade could significantly affect the peso. Buying call options on the USD/MXN pair provides a targeted way to profit from the geopolitical effects of this policy. Create your live VT Markets account and start trading now.

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