Donald Trump’s recent proclamation that hikes up the cost of H-1B visas by imposing a staggering $100,000 fee. This visa grants employers the ability to temporarily hire skilled foreign workers in specialized fields. This move has sent shockwaves through the state’s economists and business leaders. They further caution that this high of a fee would severely limit US economic growth and completely upend the US labor market.
This H-1B visa program really is essential to most U.S. companies. It currently offers only 65,000 visas per year, steadily limiting employers’ ability to hire temporary foreign workers. Moreover, the program sets aside an extra 20,000 visas for people with advanced degrees. Both Infosys and Tata Consulting Services rely heavily on this program to deploy thousands of Indian workers to clients across the United States.
India’s commerce minister, Piyush Goyal, commented on the situation, highlighting concerns about the US’s perception of Indian talent.
“They are also a little afraid of our talent. We have no objection to that.” – Piyush Goyal
Yet, for the last several weeks, economists have been crying foul about the possible effects that could arise from Trump’s new fee. Atakan Bakiskan, an economist at Berenberg, condemned the outcome as another Trump administration move in the direction of “anti-growth policymaking.” He warned that it would cause a “brain drain on our high skilled workforce,” in turn hurting productivity in agriculture, construction, and trucking.
Berenberg just cut its forecast for US growth in half, from 2% at the start of the year to 1.5%. Heritage did not mention that the new fee would hit hardest at sectors that rely on H-1B visas, like healthcare and education. Kathleen Brooks, an economist, said she’s worried about the broader implications of the fee.
“Although these companies have the money to afford the visas, other sectors who also rely on H-1B visas may struggle with future recruitment.” – Kathleen Brooks
Brooks was clear that luring foreign talent is an expensive proposition. This enormous cost may lead to an enormous outflow of still-valuable human capital.
“By making it very expensive for companies to attract foreign talent, and by forcing some international students to leave the country after graduation, the brain drain will weigh heavily on productivity.” – Kathleen Brooks
The proclamation may encourage companies to hire American workers. That has resulted in immediate financial consequences for those dependent on H-1B visas. Shares of Infosys and Tata Consulting Services dropped more than 3% immediately following the announcement. In 2022, India accounted for 71% of approved H-1B visas, indicating its crucial role in supplying skilled labor to American businesses.
Indeed, big tech companies like Amazon, Microsoft, Meta (formerly Facebook), Apple, and Google have all lobbied heavily for the expansion of H-1B visas. Jim Reid, an analyst at Deutsche Bank, said it was the “vagueness” introduced by the fee that made matters worse.
“It caused a huge amount of uncertainty over the weekend for those that rely on it.” – Jim Reid
Experts caution that investments in artificial intelligence may not compensate for the negative economic effects stemming from restrictive immigration policies. Bakiskan’s shot across the bow highlighted the vulnerability of the US to a coming financial crisis. He noted that decreasing faith in institutions and continuing unpredictability are two huge factors adding to this perfect storm.
“Taken together, the erosion of trust in institutions, a loss of human capital, tariffs, chronic uncertainty, and unsustainable fiscal policies can raise the tail risk of a financial crisis in the US.” – Atakan Bakiskan