Trump’s H1-B Clampdown And Its Ordered Impacts – Analysis
By Observer Research Foundation
By Vivek Mishra and Yogesh Mohapatra
Donald Trump’s announcement in September 2025 that H-1B visa fees will rise from US$5,000 to US$100,000 has sent shockwaves throughout corporate America, India, and the world. This follows his statement two months prior, when he demanded that United States (US) tech giants such as Google and Microsoft “stop hiring in India” and bring jobs back to American soil, a concrete step in his “America First” labour push.
Reactions were immediate.
Tech investors and executives warned that these new hikes would cost companies millions and disproportionately hurt startups in the US. Indian officials also expressed alarm, as this announcement directly contradicts the celebratory February 2025 joint statement, which exalted the 300,000-strong Indian student community, contributing US$8 billion annually to the US economy.
Although the new steep fee applies to H1-B visa applicants from the next cycle, it has fuelled the political and communal rhetoric in the US, largely directed against Indians who are the largest recipients of this particular Visa category in the US. As the midterm campaign rhetoric builds momentum in the US, the H1-B visa shock is poised to become an economic and electoral flashpoint.
At the political level, these restrictions also feed into the xenophobic narrative which characterises the ‘Make America Great Again’ (MAGA) campaign, being consistently channelled against Indians in the US. The economic impact of these changes is wide-ranging, from IT firms and remittances to, skilled labour mobility in American universities.
The altered circumstances and new realities facing American immigration rules now pose new questions of how these changes would affect both economies, especially through changes in talent flows, the education landscape, and possibly even reverse migration.
Indian talent serves as a core pillar of the US tech workforce, both through direct employment and offshore services. In 2024 alone, Indian nationals received over 207,000 visas, and Indian companies secured 20 percent of all H-1B approvals, reflecting their dominance in the US visa pipeline. This presence is fueled by a growing stream of Indian students, who now represent a quarter of all international students in US universities. Many utilise the Optional Practical Training (OPT) programme to work immediately following graduation, and eventually transition to full-time tech roles. Over time, many rise to leadership positions, as witnessed via the dominance of Indian-origin CEOs across Fortune 500 companies, including Google, IBM, Adobe, and Microsoft.
From an offshoring perspective, India’s tech industry is deeply entwined with US corporate operations. In FY 2024-2025, India’s outsourcing exports in customer service, market research, IT services, engineering, and other professional services were projected to reach US$210 billion. It will also employ around 5.8 million professionals, with the US alone accounting for about 60-65 percent of this demand.
Through initiatives such as the US-India Initiative on Critical and Emerging Technology (ICET) and the Technology Resilience and US-Trusted Partners (TRUST) programme, American companies have established nearly 1,800 global capability centres throughout India, employing 1.9 million people. These include major operations such as JP Morgan Chase’s 55,000-strong workforce and Microsoft’s 18,000 employees in India, with one of its largest research and development (R&D) hubs in Hyderabad. This degree of integration means that any immediate large-scale reshoring efforts would disrupt the day-to-day functions of US firms, which rely on these centres.
While Trump’s promise to bring tech jobs back to the US sounds appealing from a US perspective, it faces significant issues. The first is that the US does not have enough qualified personnel to fill the roles of these Indian workers. Under the Department of Labour’s Permanent Labor Certification (PERM) process, employers must first advertise the position and prove that no US citizen or permanent resident is qualified before sponsoring a foreign worker for a green card. Even with these safeguards, demand for Indian talent remains high for reasons besides filling gaps. Increasing H-1B shares in an occupation sector by just one percentage point correlates with a 0.2 percentage point drop in unemployment as well as a 0.1-0.26 percentage point faster earnings growth for US workers in that field.
Furthermore, the private sector has pushed back against reshoring proposals for practical reasons. Labour cost differences are immense as Indian IT professionals often earn a fraction of what Silicon Valley tech-sector workers do. This means that forcing work onshore would raise costs, devastate profit margins, and ultimately hinder innovation. History also suggests that these kinds of measures backfire. In 2020, when Trump temporarily banned several work visas, many companies increased remote offshoring, highlighting the limits of such mandates.
For India, a hiring freeze or visa clampdown by the US would be devastating. In FY 2024, India’s IT sector contributed around 7 percent to the Gross Domestic Product (GDP) and benefited significantly from exports. 79 percent of India’s IT service revenue is export-driven, with the US being the largest market by far, responsible for 60 percent of tech export demand—nearly US$135 billion annually. This means that any kind of freeze would be detrimental to India’s GDP growth and trade balance.
Even a minor downturn in US tech spending already prompts these Indian IT firms to reduce hiring, meaning a political freeze would put hundreds of thousands of Indian jobs at risk and force far deeper layoffs. Beyond exports and employment, India is also the world’s top recipient of remittances, reaching a record US$129.4 billion in 2024 via remittances, with 27.7 percent coming from the US. Freezing work visas or employment by American companies could seriously affect these remittance flows, potentially weakening the rupee and causing strain on Indian households.
In response to US work visa restrictions, global redistribution of Indian talent could accelerate. Canada’s pro-immigration policies have already driven a 326 percent increase in Indian immigrants over the past decade, positioning them as the top source of international students, temporary workers, and permanent residents. Australia and Germany have also expanded migration programmes for those in the STEM (Science, Technology, Engineering, Mathematics) field, while Indian student enrollment in European universities rose 45 percent between 2015 and 2023. This policy-driven redistribution is not unprecedented; companies such as Wipro opened digital innovation hubs in Germany during Trump’s first term, partly to mitigate US policy uncertainty.
As migration is becoming more accessible in other destinations, US tech firms risk losing access to vital talent. Silicon Valley’s innovation capacity would be severely impacted, as 55 percent of US unicorns have an immigrant founder, and 40 percent of those founders are Indians/Indian-origin. Slashing this pipeline could risk the next Google or Artificial Intelligence (AI) breakthrough being developed in Toronto or Berlin instead.
A forced decoupling from the US could also empower a reverse brain drain, with skilled Indian professionals returning home. Currently, there are around 1.8 million Indian students abroad, and some have returned and founded companies such as Ola and Flipkart. Through initiatives such as Startup India and the Ramalingaswami Fellowship, India is integrating its talent into its expanding tech and startup ecosystem. The country’s recent push for self-reliance would also strongly benefit from this talent. However, this reorientation would take years to come to fruition, and in the interim, the loss of opportunities in the US would slow growth and strain the India-US partnership.
Restricted talent mobility between India and the US could also have an expanded impact. Collaborative initiatives such as TRUST showcase the unique vantage point of India-US cooperative potential in critical sectors. The lack of government support or worse still, manufactured hostility, is certain to slow the momentum or end programmes that rely on the exchange of ideas, joint research, and co-innovation. If sustained, shutting American doors to Indians, mixed with political resistance in the form of anti-migrant sentiments, could cause Indian talent flows to pivot to other favourable geographies or countries. Germany has already begun to woo Indian workers to gain from the talent deflection caused by US policies under the Trump administration.
Ultimately, Trump’s policy reversal to raise visa fees twentyfold is geared to restrict the hiring of foreign talent, but it will impact India the most. America’s innovation edge against the world will be hurt while negatively affecting one of its most strategically important relationships. India’s tech sector and remittance flows may witness immediate jolts. However, the longer-term challenges lie in the potential redistribution of talent toward US competitors and the acceleration of India’s reverse brain drain.
As India weighs deeper ties with other partners, cultivating decades-long people mobility chains and dependence akin to the one in its coalition with Washington will be difficult to replicate. As the world stands on the brink of another technological revolution driven by AI, quantum computing, and robotics, talent may become as critical as territory. India should strive to leverage the boon-in-disguise components of the crisis that has ensued as a result of America’s policy changes in the migration sector.
About the authors:
- Vivek Mishra is Deputy Director – Strategic Studies Programme at the Observer Research Foundation
- Yogesh Mohapatra was a Research Intern with the Observer Research Foundation
Source: This article was published by the Observer Research Foundation
ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.
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