Overview
Since taking office for his second term, US President Donald Trump has focused heavily on reshaping the global trade environment to better favor American workers and companies. Until recently, the administration’s trade-related efforts have centered on goods trade. But President Trump’s September 19 executive order (EO)—aimed at promoting American workforce in high-skilled fields by disincentivizing new H-1B visa petitions—has shifted attention to the services sector. Revisions to the H-1B process will create new labor and operational realities for the US workforce. On the upside, incentivizing domestic hiring could encourage firms to invest more in training and skill development for American workers. On the downside, firms may risk ceding ground in global innovation to competitors abroad by forgoing foreign-born talent.
Overview of the H‑1B Visa
The H-1B temporary (nonimmigrant) visa program was created by the Immigration Act of 1990 for highly skilled foreign workers to enter the US and address specific workforce shortages in specialty occupations that American labor could not fulfil. Every fiscal year, 85,000 new H-1B visas are available: 65,000 visas are allocated for candidates with a bachelor’s degree and the other 20,000 reserved for applicants with a US master’s degree or higher. Certain organizations are cap-exempt for new H-1B visas, including universities and non-profit research organizations.
Although H-1B workers account for less than 0.05% of the US workforce, demand consistently exceeds capacity—for FY2025, companies submitted over 470,000 entries for new applicants. These visas are primarily used by STEM industries, especially tech, which claims there is a shortage of skilled domestic professionals. Nearly two-thirds of H-1B visas go to people working in computer-related occupations, with the next largest group (9.4%) being those in architecture, engineering, and surveying (9.4%). Indian nationals are by far the largest recipient of H-1B visas, accounting for 71% of approved applications, with China a distant second at 12%.
Typically, corporations participating in the H-1B lottery pay a registration fee of a few hundred dollars, followed by several thousand dollars if their applicant is selected. Under President Trump’s “Restriction on Entry of Certain Nonimmigrant Workers” EO, however, a one-time $100,000 fee will be required for any new H-1B visa application submitted after 12:01 AM September 21, 2025. The fee does not apply to H-1B visas issued before that date and does not affect H-1B renewal fees.
The introduction of this steep fee reflects the Trump administration’s broader aim of reshaping immigration policy to protect US jobs, economic interests, and borders. The EO claims that the H-1B visa program has been systematically abused to replace American workers with lower-paid, lower-skilled foreign labor. It argues that corporations have suppressed wages and created a disadvantageous labor market for Americans, noting that some tech companies have laid off American workers while simultaneously hiring H-1B employees. Beyond economic concerns, the EO claims the program poses a national security risk by discouraging Americans from pursuing high-skill careers, thereby undermining US leadership in critical sectors. The steep fee is intended to incentivize companies to reduce reliance on foreign workers and prioritize hiring Americans.
The debate over the value that immigration brings to an economy is highly contentious and extends beyond the US. Supporters of a more liberal immigration policy argue that immigration fuels innovation, entrepreneurship, and research and development, boosting productivity and creating job opportunities that raise earnings for American workers across skill levels. In recent years, however, anti-immigration sentiment has grown, influenced heavily by large migrant surges and economic anxieties that foreign workers displace domestic employment opportunities.
Business Impacts and International Considerations
For the first time in decades, the Pew Research Center reports that more immigrants are leaving the US than arriving, and at the same time, the labor force is contracting. Between January and June 2025, the foreign-born population fell by nearly 1.5 million—likely a large portion represented by undocumented immigrants departing amid heightened enforcement and deportations. Labor market impacts are already visible. The gap in labor force participation between US-born and foreign-born workers is widening and down for both groups, decreasing 0.1% year-over-year for US-born workers and 1.2% for foreign-born workers. The August jobs report showed unemployment ticking up to 4.3% while job creation came in far below expectations—just 22,000 new jobs compared to forecasts of 76,500.
The $100,000 H-1B fee adds another layer of cost and complexity for US industries already facing labor shortages and tariff-driven trade disruptions. Large corporations may be able to absorb the costs, but smaller firms and start-ups will likely struggle—potentially widening the gap between the nation’s largest companies and smaller competitors. For well‑funded corporations, the higher fee will likely lead to a more selective approach, with companies sponsoring only those foreign workers who possess exceptional skills and deliver unique value to business operations. However, for firms heavily dependent on lower‑cost foreign talent, thousands of positions could remain unfilled in the near term. Historically, H‑1B workers have cost employers roughly 20% less than equivalent US hires, meaning that replacing them could result in millions of dollars in additional labor costs.
The ability to replace these foreign workers depends heavily on the availability of suitably skilled candidates—a challenge given that nearly half of US STEM master’s and PhD graduates in 2024 were international students. In the long run, the increased cost of hiring foreign talent could push major tech companies and other industries to invest more heavily in domestic talent pipelines, reducing reliance on overseas recruitment. While this transition may cause short‑term shortages in the services sector, it could also lay the groundwork for a stronger, more self‑sustaining US talent base. In turn, this could strengthen American innovation and competitiveness in critical fields, while also limiting the inflow of foreign workers into sensitive industries such as defense and cybersecurity. By making the American workforce cheaper than hiring foreign-workers, this policy could create a new wave of domestic innovation.
The new fee could accelerate offshoring and prompt service sector industries to shift operations abroad to retain access to foreign talent and control costs. Services dominate the US economy, contributing about 77.6% to the GDP in 2021 and representing 84% of total employment. Unlike goods trade, the US service sector consistently runs a surplus with nearly every trading partner—$293 billion in 2024. The US service sector, largely spared direct blows from sweeping tariffs on imports, will likely incur major shocks from these fees. While H‑1B workers make up less than 0.05% of the US workforce, policies like this could prompt service industries—especially tech—to expand global capability centers (GCCs) and offshore more jobs.
India, the largest source of H‑1B recipients, stands to gain. The H‑1B visa program is widely cited as a key driver of brain drain in the country, with many of India’s most skilled professionals choosing to work in the US. By 2024, Indian‑born executives led 25 of America’s 500 largest companies. While current H‑1B visa holders will remain unaffected by the new fees, India could leverage this policy shift to stem its ongoing brain drain and advance its “Viksit Bharat 2047” vision of becoming a fully developed nation by its centenary. Many multinational companies already operate GCCs in India, and the country is projected to host more than 2,200 GCCs by 2030. Such operational shifts would further strengthen India’s talent supply chain, reinforce its position as an innovation hub, and support its growing ambitions to establish a fully developed semiconductor supply chain.
Canada also stands to benefit. Like India, Canada has lost skilled tech and healthcare workers to the US. Many Canadians take advantage of the uncapped TN nonimmigrant visas to work temporarily in the US. While higher salaries and milder weather have historically drawn foreign talent to the US, Canada has seen strong demand for its own workforce—in 2023, it offered current H‑1B holders open work permits for up to three years, with the 10,000‑application cap reached within 48 hours. For companies, opening or expanding offices in Canada offers proximity, shared time zones, and continued access to the USMCA trade framework.
India and Canada are not alone. Countries that have struggled to attract or retain skilled workers are moving quickly to capitalize. The UK is debating removing visa fees entirely for leading scientists, academics, and digital experts—with discussions accelerated by President Trump’s $100,000 fee announcement. Similarly, China will roll out its new K visa on October 1, targeting young STEM‑educated talent and fostering exchange with its innovation hubs. By lowering barriers for skilled professionals, China aims to strengthen its position as a leader in next‑generation innovation. As the global race for science and technology intensifies, US restrictions on foreign talent risk ceding ground to nations eager to attract it—potentially shifting the US from innovator to adopter.
