We're continuing to analyze the economics of immigration as workplace raids, deportations and the protests in response continue across the country. Today, the argument for why restrictive immigration policy is as important to the economy as, say, trade policy.

Zeke Hernandez is a professor at the University of Pennsylvania's Wharton School and author of the book “The truth about immigration: Why successful societies welcome newcomers.” He spoke with “Marketplace Morning Report” host David Brancaccio and the following is an edited transcript of their conversation.

David Brancaccio: When tariff policy was enacted, the markets — especially the bond market — threw a fit. With immigration raids increasing and protests in the national headlines, markets don't seem to be as concerned. They're not focused on this policy, I don't think, in the same way as tariffs. It's almost seen as a social or cultural story, but you say it is very much economic as well.

Zeke Hernandez: Absolutely it is. I think there's a difference in that the effects of tariffs are very easy to understand. They happen quickly. They're highly visible, right? They affect the cost of both intermediate and final goods, and consumers see them when they go to the store, and the price of their groceries — or other things — has gone up. The evidence on the economic importance of immigration isn't as widely disseminated, and the effects of immigration on the economy and on your pocket are a bit more invisible and a bit harder to trace to any one immigrant or immigrant group, but no doubt that immigration is really tightly related to what affects you day to day. And we can list five ways in which immigrants affect you directly.

One is that they bring innovation. Two, they bring consumption. Three, investment. Four, talent. And five, taxes. And those numbers are pretty large. If you were an investor or someone watching the market, you would react to these things. For example, if you're contracting the labor supply, that affects businesses, that affects prices and inflation very directly. If you're watching our fiscal health, that means trillions of dollars in taxes, including the taxes that undocumented immigrants pay, which are estimated at about $100 billion per year.

Immigrants attract investment from their home countries. Immigrants start and run businesses. Immigrants have $1.3 trillion in consumption power. Immigrants are responsible for over one-third of all patents in the U.S. You add up all those five things, and that's a real hit to the bottom line of businesses, to consumers. But somehow the markets don't connect what's happening in immigration with these five things that affect us very directly.

Brancaccio: And there are people who are very focused on a piece of this, which is preserving or bolstering jobs for native-born Americans. And even that — even if that's what a person's goal is — the data is actually quite interesting about the interplay of immigration and the jobs of Americans.

Hernandez: Yeah, and it's very clear, but perhaps in the opposite way [than] sometimes politicians and the headlines communicate, which is that immigrants are net job creators, not net job destroyers. And people often, perhaps, get this wrong, because they think of an inflow of immigrants as a change only to the labor supply, but they don't realize that immigrants are bringing those other, all those five things that I mentioned. And so when you add those all up, immigrants are creating jobs, right? When they're 80% more likely to start businesses; when businesses have to contract their output, or even close, because they don't have enough workers to stay afloat; or when you're removing millions and millions of potential consumers for your business, all of that is affecting jobs for American workers, U.S.-born workers, very directly.

I think the other thing that's worth bringing up here in the context of tariffs and immigration is that both of these high tariffs and immigration reductions are a really powerful one-two negative punch to the economy. Because you are increasing the price of intermediate and final goods, and you are contracting labor supply. Those two things put together are highly inflationary, and end up contracting the economy in ways that take away jobs for everybody, including U.S.-born workers.

Brancaccio: We're not seeing that contraction just yet as we're speaking, approaching mid-summer here. It's speculative. The economy has proven quite resilient. But you're concerned that as we move forward, we're actually going to start seeing things slow down because of this?

Hernandez: Yeah, I am. One of the reasons we're not seeing it yet is that the tariffs have not really been officially implemented, right? We keep hearing rumors, and then they're scaled back, and then there's a threat, and then there's an announcement of a deal that's not really a deal. And so businesses are kind of in a wait-and-see period. The same with immigration, right? Right now, what's happening, despite all of the headlines that we're seeing, is we haven't seen mass expulsions. We haven't seen a significant change in the number of international students arriving, or we haven't seen large declines in immigrants arriving. But if the stated policies on both tariffs and immigration take place, then we will start seeing this, which might be why the markets are not reacting. But it is interesting that they're reacting more to news of tariffs than news of immigration crackdowns.

Brancaccio: Do you worry that we sometimes fail to, in a discussion like this, fully distinguish between illegal immigration and legal immigration? I mean, we've been talking about immigration in the aggregate. The objection among some Americans is to people here without permission. How do you parse that?

Hernandez: Yeah, I think that we we should make that distinction. I think we misunderstand both. To begin with, the vast majority of immigration is legal and orderly, and we need both skilled and unskilled immigrants. We have not updated our legal system since 1990, and that system that we have in place now does not provide sufficient inputs into our economy, both skilled and unskilled. And so if we don't change that system, that's going to be very bad for us. The undocumented immigrants that come into this country, strictly speaking, when it comes to the economy, they provide all of those five things I spoke about earlier, and we need those people. Of course, we want them and prefer them to come in through a legal, orderly channel.

So I am not advocating for more irregular immigration in any way, but I think once we understand that our legal system does not provide enough people, and that the illegal channel is, in some ways, a dysfunctional response to how constrained the legal system is; we see that there's a very tight relationship between the two. And so part of what troubles me is that you can talk all you want about cracking down on illegal immigration, but if you don't simultaneously change the system — which, there have been no substantive proposals to change the system, you're not going to solve the problem. You're going to only make it worse, particularly economically, for the pocketbooks and jobs of Americans.

Brancaccio: Americans like the goods that come in from overseas. They do want to preserve the domestic jobs. You say that you can't have one without the other — that there's an interplay between trade of goods and services across borders and immigration across those borders.

Hernandez: Yeah, that's right. I mean, one of the great things about the American economy is how dynamic it is, and there is an intimate connection between the two. I'll give you an interesting anecdote that I think will really make the point here. We're all familiar with the infamous Japanese internment camps during World War II. Those internment camps moved Japanese Americans— primarily from California — to remote parts of the U.S. that were on federal lands. And so you ended up having camps in places like Rohwer, Arkansas, or Granada, Colorado. When the war ended and the internment camps were disbanded, many of those Japanese Americans stayed in the location surrounding where the camps were, because they didn't really have a place to go back to. So, to this day, places around the camps have three times more Japanese Americans, or people of Japanese ancestry, than you would expect, had the camps not existed there.

And what's interesting is that businesses in those areas to this day export to Japan and import from Japan way more than expected. And that's just to show what the empirical evidence shows more generally, that where immigrants settle, they spur trade, both imports and exports, between the sending and receiving location — in part because they demand goods from their countries, but also they set up businesses, businesses locally, where they live, become familiar with how to do business in the countries those immigrants came from, and they also export there. Which helps U.S. businesses, which also increases the variety of goods that we have at our disposal. And so that's another way in which tariffs and immigration are tightly linked, is that you can't separate the movement of people from the movement of goods that make our quality of life better.