Import Tariffs and Illegal Immigration: A Strategic Analysis

Bandyopadhyay, Subhayu; Pinto, Santiago

doi:10.20955/r.2026.07

Journal Article

Import Tariffs and Illegal Immigration: A Strategic Analysis

Abstract: We examine the effects of tariffs in a two-country specific-factors model with endogenous illegal immigration. While tariffs generate the usual terms-of-trade gains in goods markets for the host country, they also raise wages and attract additional illegal immigration. Increased immigration-related costs and higher wage costs of hiring immigrants may reduce the welfare of citizens of the host country. We also show that within the context of our two-nation framework, free trade need not maximize joint welfare when illegal immigration and certain immigration-related costs are present. Finally, we analyze a sequential game in which the host nation announces a contingent tariff schedule to induce the source nation to adopt emigration-deterring border enforcement. Under a credible commitment mechanism, the host nation can achieve a free-trade equilibrium with lower illegal immigration and higher welfare compared with the baseline equilibrium without contingent tariffs.

JEL Classification: F1; F2;

https://doi.org/10.20955/r.2026.07