Los Angeles riots continue to ferment. What is the impact on the US economy and the crypto market?

Deng Tong, Golden Finance

The United States has a tradition of summer protests, but this year it seems to have come especially early.

(Golden Finance Note: The Civil Rights Movement from 1954 to 1968, the anti-Vietnam War protests in the late 1960s, and the Tea Party Movement in 2009 all took place in the summer. Some analysts believe that this is related to the hot weather that easily ignites emotions and holidays.)

On June 6, 2025, the U.S. Immigration and Customs Enforcement (ICE) arrested more than 40 illegal immigrants in Los Angeles. Trump's move can be seen as the beginning of the Los Angeles riots. Trump sent 2,000 National Guard soldiers to the city, sparking anger among Democrats. Subsequently, the situation continued to ferment, and Trump ordered 2,000 army soldiers and 700 marines to be sent to the city. At present, the mayor of Los Angeles has declared a state of emergency in Los Angeles and a curfew has been imposed in downtown Los Angeles.

Why did the riots break out in Los Angeles? Do foreign immigrants really take away American jobs? What tough measures did Trump take? What impact does the riot have on the US economy? Will it affect the cryptocurrency market?

1. Review of the Los Angeles riots

1. Why did the riots break out in Los Angeles?

The riots actually stemmed from the "largest deportation operation" in US history implemented by Trump, and more than one-third of the population of Los Angeles was born outside the United States, so it has always been the focus of this operation. For example, the Westlake and Paramount districts in Los Angeles-more than 82% of the population in the area is Hispanic.

In early May, the Immigration and Customs Enforcement (ICE) announced that it had arrested 239 undocumented immigrants in a week-long operation in the Los Angeles area, but the overall number of arrests and deportations fell behind Trump's expectations. The following month, the White House raised ICE officials' goal of arresting at least 3,000 people a day. Authorities gradually expanded their search to include workplaces such as restaurants and retail stores.

2. What happened during the riot?

On Sunday, vehicles were set on fire and police accused protesters of using incendiary devices against a mounted police patrol. Meanwhile, police in riot gear used flash grenades and pepper spray to subdue the crowd. The riots temporarily paralyzed Highway 101 and there were reports of looting.

The federal building in downtown has become a focus for allegedly holding ICE prisoners. ICE accused "more than 1,000 rioters" of surrounding and attacking the building on Saturday.

A Home Depot store in Paramount, about 20 miles (32 kilometers) south of downtown Los Angeles, became another major protest site. Protesters who gathered on Saturday were attacked with tear gas and flash bombs, and armed National Guard troops were stationed at a nearby business park on Sunday.

The Los Angeles Police Department (LAPD) said it arrested 29 people on Saturday. Another 27 were arrested on Sunday.

San Francisco police said the riots on Sunday led to about 60 arrests and three officers were injured.

Protests continued on Monday, with police firing stun grenades to try to disperse the crowd. The riots gradually subsided later in the day, with fewer violent incidents and fewer people on the streets than on the weekend.

3. Multiple responses

The mayor of Los Angeles has declared a state of emergency in Los Angeles and a curfew has been imposed in downtown Los Angeles.

Trump said he would use all resources to quell the violence in Los Angeles. Trump gave a speech at Fort Bragg, calling the Los Angeles riots "a full-scale attack on peace, public order and national sovereignty by a group of thugs waving foreign flags" with the goal of continuing a "foreign invasion" of the United States. Trump said that people who burned the American flag should be sentenced to one year in prison. Trump said that if he had not deployed the guard, Los Angeles would have been "burned down." The guards deployed to Los Angeles were protecting U.S. Immigration and Customs Enforcement agents and were preventing the invasion. Trump said that the governor of California and the mayor of Los Angeles were "incompetent" and that the Trump administration would "liberate Los Angeles."

Local time on the 10th, the U.S. Northern Command said that 700 Marines had arrived in the Los Angeles area. The U.S. Northern Command issued a statement on the 9th that about 700 Marines have completed their mobilization. They will "seamlessly connect" with the National Guard deployed in the Los Angeles area of ​​California to protect federal agencies and personnel in the Los Angeles area. CNN reported that sending an entire battalion of Marines to Los Angeles marked a significant escalation in the Trump administration's use of military force to show force against protesters.

The latest poll results released by the polling organization YouGov on the 10th showed that nearly half of the Americanpeopledo not support the Trump administration's deployment of Marines and National Guard to the Los Angeles area of ​​California. In a poll completed on the 10th, 47% of respondents opposed sending Marines to the Los Angeles area to support federal agencies' law enforcement actions against illegal immigrants, while 34% were in favor. Opposition and support for deploying the National Guard to the Los Angeles area accounted for 45% and 38% respectively.

Some analysts believe that the speed of Trump's response shows that this is a fight his administration is ready for and even eager to fight.

The White House believes that law and order and active immigration enforcement will win Trump a victory. His actions will inspire his core supporters and may influence political independents who care about public safety.

Democrats said the government's use of immigration officers wearing masks and military equipment to arrest civilians in restaurants and stores was inflammatory, and that the president's rush to deploy trained soldiers was unjustified.

The president did this without being asked, breaking generations of tradition, which will only exacerbate the situation and make things worse," said New Jersey Senator Cory Booker. "Many peaceful protests occurred because the president of the United States arrested people who attended immigration hearings and tried to abide by the law, creating chaos and confusion."

Second, do foreign immigrants really take away American jobs?

The root cause of this riot is the increasingly tightened immigration policy formulated by Trump.

On January 20, 2025, the Trump administration issued a number of executive orders related to immigration, focusing on border security, the withdrawal of humanitarian programs, the upgrade of visa applicants, and attempts to end birthright citizenship. In addition, a number of executive orders issued by Biden have been repealed.

Are foreign immigrants really detrimental to the development of the US economy?

According to demographers’ estimates, there are currently about 8.3 million illegal immigrants working in the United States, accounting for about 5% of the total workforce. Economists warn that deporting all workers in these key industries could lead to higher food prices and housing construction costs. Existing staff shortages in nursing homes and home health agencies will be exacerbated, leading to reduced services and higher costs.

In fact, current economic analysis can hardly prove that foreign immigrants have taken American jobs, and the economic impact of foreign immigrants is mostly positive for native residents and the overall economy, according to a research report from the United States Congress.

Figure 1 shows that the foreign-born population has grown rapidly in recent decades, from less than 5% of the US population in 1970 to 13% in 2013. Although immigrants make up a larger share of the U.S. population today than at any time since World War II, the current share of the foreign-born population is roughly the same as it was in the late 19th and early 20th centuries, when about 15% of U.S. residents were foreign-born.

Figure 1: Foreign-born share of the U.S. population, 1850-2013

Has the surge in immigration led to slower wage growth for native-born workers since 1970? Academic research doesn’t offer much support for that claim. Evidence suggests that when immigrants increase the labor supply, firms increase investment to offset the reduction in capital per worker, thus preventing a long-term decline in average wages. Moreover, immigrants are generally not perfect substitutes for native-born workers in the U.S. labor market. This means that they do not compete for the same jobs and exert little downward pressure on native-born workers’ wages. This may explain why competition from new immigrants has primarily affected earlier immigrants, whose wages have fallen sharply in response to the immigration surge. In contrast, the study finds that over the past few decades, immigrants have actually raised the average wages of native-born workers.

Immigrants are at the forefront of innovation and creativity in the United States, making up a disproportionate share of patent applications, tech graduates, and senior positions at top venture capital firms. According to a 2012 report by the National Science Board, foreign students earned 27 percent of science and engineering master's degrees in 2009. In 2011, 76 percent of patents from the top ten universities in terms of U.S. patent production had at least one foreign-born author. More than three-quarters of the growth of the U.S. economy over the past 150 years can be attributed to improved education and research-driven innovation. In addition, the presence of immigrants often creates opportunities for less-skilled native workers to become more specialized in their jobs, thereby increasing their productivity.

Immigration also generally improves the fiscal situation of governments, since many immigrants pay more in taxes than they consume in government services over their lifetimes. However, in states with a high concentration of less-educated immigrants, natives may face a greater tax burden, since these immigrants pay less in taxes and are more likely to send their children to public schools.

Most empirical research shows that immigration has long-term benefits for natives' employment and wages, although some studies suggest that these gains come at the expense of short-term losses in the form of lower wages and higher unemployment. Standard economic theory suggests that while the increase in labor supply from immigration may initially depress wages, over time firms increase investment to restore capital per worker, and thus wages. A steady increase in the capital-labor ratio prevents a long-term decline in the average productivity of workers.

Figure 2 shows the trend in the capital-labor ratio before 1980 and extrapolates it to the next few decades—a period of accelerated immigration to the United States. Consistent with theory, the actual capital-labor ratio has not deviated significantly or permanently from this trend after 1980.

Figure 2: U.S. logarithmic capital-labor ratio, 1948-2013

Table 1 shows that immigration mainly increases the supply of the lowest-skilled and highest-skilled workers.

Table 1. Distribution of educational level of the population aged 25 and above in 2012

Table 2 presents the results of two academic analyses of the impact of immigration on wages over the past few decades. The two studies considered the investment response of enterprises and the imperfect substitutability between immigrant workers and native workers. They found that immigration had a small but positive impact on the average wages of native workers, about half a percentage point. One of the studies showed a slight decline in wages for those without high school or college education, while the other found only positive wage growth. In sharp contrast, both studies found that the wages of early immigrants fell by an average of 4% to 7%, mainly concentrated among the most and least educated groups.

Table 2. Estimated impact of immigration on long-term wages

In summary, foreign immigrants are actually beneficial to the development of American society. Trump's increasingly tightening immigration policy may have a counterproductive negative impact on the United States.

Third, Trump's immigration policy is affecting the US economy together with the tariff policy

A study by the Brookings Institution pointed out:

In the short term, the sharp decline in the number of net immigrants will suppress the growth of real GDP. This is because such a reduction implies a smaller labor force, resulting in fewer people producing goods and services. Specifically, if net immigration falls from a significantly positive value in 2024 to -650,000 in 2025, the reduction in immigrant output would reduce GDP growth by 0.2 percentage points next year. Consistent with slower labor force growth, monthly job growth is expected to be much lower in 2025 than in 2024. Specifically, the reversal from positive to negative net immigration would reduce monthly job growth by nearly 100,000.   

In addition, lower immigration leads to lower consumer spending, which would cause businesses to cut investment and hiring, further reducing GDP growth by 0.1 percentage points. Finally, even if the massive deportations implied by the campaign are not achieved, implementing an aggressive deportation policy would likely reduce spending by immigrants who remain in the United States, which would further reduce GDP growth. If net immigration in 2025 is even lower, the economic impact would be even more negative.   

Perhaps a total of 3 million people would be deported over four years, far below the deportation target set out in Trump's campaign rhetoric. Higher deportation rates would have more adverse macroeconomic consequences and would disrupt labor markets, supply chains, and civil society.

In fact, it is not just immigration policy that is laying mines for U.S. economic growth. Trump's wavering tariff policy is also casting a shadow over the U.S. economy.

According to the World Bank, as the impact of Trump's tariff policy gradually emerges, the global economy will experience the slowest growth since the 1960s - the global economic growth rate in 2025 will be only 2.3%, 0.4 percentage points lower than the forecast in January, and the forecast growth rate in 2027 is 2.6%. As the tariff stick wavers, affecting investor confidence and private consumption, the World Bank has also lowered its growth forecast for the United States in 2025 and 2026.

Musk pointed out that Trump's tariff policy will lead to a recession in the second half of this year; the OECD warned that Trump's tariff policy will damage US economic growth; Bank of America analysts pointed out that the negative impact of the tariff policy on the US economy and the US dollar is more significant; hedge fund tycoon Steve Cohen believes that the probability of a US recession is about 45%...

Deutsche Bank even warned that the negative impact of immigration policy on the US economy is even greater than Trump's tariff stick.

Fourth, how will the crypto market go in the future?

The Los Angeles riots are still ongoing. At present, we can regard it as an emergency that will last for a short time, or we can regard it as an appetizer for larger riots in the future.

However, according to foreign media reports, protesters in Los Angeles have organized a "No Kings" event, which will be held on June 14th at the same time as the military parade commemorating the 250th anniversary of the founding of the US Army. Therefore, it is not ruled out that the current Los Angeles riots may continue to escalate in the next few days.

In the short term, market panic may lead to temporary selling pressure. As the risks of the US economy increase, investors need to re-evaluate their holdings of risky assets such as stocks and cryptocurrencies. If social instability in the United States worsens and further affects economic growth, investors will tend to prefer assets with more stable values, and cryptocurrencies may face the risk of increased price volatility.

However, in the long run, the trend of the crypto market is still positive due to factors such as the continuous improvement of crypto regulatory policies, the "digital gold" attribute given to BTC by "de-dollarization", and the increase in national and institutional allocations. And it may further increase the demand of ordinary people for decentralized assets.

Source: Golden Finance, US Congress, BBC, RFI, Brookings Institution, Seacoastonline, etc.