TL;DR
This blog examines the impact of U.S. H-1B visa restrictions and the proposed HIRE Act on the technology sector. Historically, visa restrictions have failed to increase domestic STEM employment. Instead, they have driven remote hiring, offshoring, and the growth of GCCs. In this context, the HIRE Act seeks to promote local hiring by imposing an excise tax on foreign service providers. Contrary to its objectives, the Act risks raising costs for American companies. It would hit small and mid-sized firms the hardest. These firms rely on outsourcing because the domestic talent pool cannot meet demand at sustainable prices. The added tax burden would inflate costs without addressing the underlying labour shortage. The U.S. risks losing competitiveness in the technology sector as countries like China lure global talent through initiatives such as the K-visa. Meanwhile, non-U.S. companies, particularly from Europe and Japan, are adopting U.S.-style GCCs and remote work models, capturing 60–70% cost savings. Together, H-1B restrictions and the HIRE Act threaten the very workforce the U.S. needs to remain competitive in the digital economy. Unless the U.S. realigns its policy with how the modern workforce actually operates, it risks trading short-term political optics for long-term erosion of its competitive edge in the technology sector.

On September 19, 2025, the Trump administration issued a proclamation sharply restricting H-1B visas and raising application fees for high-skilled foreign workers. The Immigration Act created the H-1B program in 1990 to help U.S. employers fill specialized technical jobs when domestic supply falls short.[i] Initially, only 65,000 H-1B visas could be issued in a year. However, this limit was systematically increased during the dot-com boom as the demand for skilled workers increased in the technology sector.[ii]

The Trump administration claims that the new restrictions will protect American jobs. However, it is hard not to interpret this move as a salvo against India, not least because it disproportionately impacts Indian tech workers, who are the largest demographic to benefit from the H-1B program.[iii] Either way, certain trends indicate that the proclamation is likely to do very little to increase the number of Americans working in STEM in America or adversely impact the fortunes of the Indian sector.

First, the proclamation seems to ignore the preponderance of remote work in the technology sector. The technology sector now operates through a global workforce that is no longer bound by national borders. The limitations of such measures have already been made evident by the Trump administration’s immigration restrictions in 2020. In 2020, when the administration temporarily stopped issuing H-1B visas, companies did not flood the American market with new jobs. Instead, U.S. firms expanded abroad, hired remote workers, offshored freelance projects, and accelerated the creation of Global Capability Centres (GCCs). The COVID-19 pandemic further normalized the shift to remote work. Indian IT firms in the U.S. have also adapted. These firms had historically depended on H-1B visas. However, with the creation of remote delivery centers and GCCs they are able to work for U.S. clients from India.[iv]

Second, the acceptance of remote work has also facilitated a new policy innovation, the digital nomad visa. Digital nomad visas formalize a trend that technology and the pandemic had set in motion, i.e., professionals residing abroad while continuing to work remotely for foreign employers. These temporary permits allow professionals to live in one country while working for an employer elsewhere. More than 50 countries have introduced some variation of these visas to attract mobile, high-income professionals who could work remotely while contributing to local economies. Estonia pioneered the model in 2020 to offset the economic loss experienced by the country due to a decline in tourism following the pandemic.[v] Since then, countries from Portugal and Spain to Indonesia, Croatia, and Germany have launched similar programs. For these countries, the goal is not only to capture the shift towards remote work but also to attract talent, ideas, and foreign capital. For Indian workers who might have considered the U.S. as their inevitable destination, these visas open new avenues for mobility in which the job follows the worker and not the other way around.

Third, the advent of GCCs furthers workforce mobility and safeguards business continuity for US and other global technology companies, despite visa restrictions.[vi] Despite recurring claims that automation and generative AI will render GCCs obsolete, current evidence points to the opposite. AI is reshaping GCCs, not replacing them.[vii] Most centres continue to depend on human oversight for judgment-heavy, high-context tasks that AI struggles to execute reliably. Indian and global GCCs are expanding their AI adoption while simultaneously increasing hiring for roles in data governance, model supervision and enterprise workflow engineering.[viii][ix]

In this context, a US Senator proposed the Halting International Relocation of Employment (HIRE) Act. The bill imposes a 25 percent excise tax on payments to foreign service providers and removes the tax deductibility of these payments. It aims to push companies towards hiring locally and deter GCC expansion. However, it is likely to backfire and increase operating costs for American companies.[x] The HIRE Act would hit small and mid-sized firms the hardest. These companies outsource IT support, accounting, cybersecurity, and customer operations because the domestic talent pool cannot meet demand at sustainable prices. The added tax burden would inflate costs without addressing the underlying labour shortage.[xi] While the US risks hurting its own industry with poorly thought out legislation, the rest of the world is accelerating GCC expansion. India, in particular, is poised for a 15-20% surge in GCCs from non-US companies, especially from Europe and Japan, leveraging the blueprint established by US firms and capturing 60-70% cost savings.[xii]

Fourth, both the HIRE Act and the recent proclamation restricting H-1B visas ignore a critical shift: Americans themselves are beginning to migrate abroad for the same political and economic anxieties that once drove immigrants to the U.S.[xiii] The administration’s anti-immigration posture and erosion of educational and research institutions has triggered an early-stage “brain drain”, pushing U.S.-based scientists, engineers, and founders towards jurisdictions that offer stronger academic freedom, stable research funding, and clearer protections for global talent.[xiv]

Moreover, American workers are not immune to the cultural shift towards remote work. According to a recent study,[xv] 11 percent of U.S. workers identify as digital nomads. Another 21 million plan to join them within three years, while 45 million more are considering the digital nomad lifestyle. Since these workers remain in-demand, companies are increasingly adapting their policies to allow employees to work remotely from any location.[xvi] At the same time, the geopolitical stakes are also rising. As the U.S. raises barriers to trade, China is lowering its own. In October 2025, China launched the K-visa, a new immigration pathway designed to pull in foreign STEM talent. Unlike the H-1B, this visa does not require employer sponsorship. Qualified applicants can enter and live in China without securing a job offer first. The K-Visa was announced only weeks after the U.S. announced its H-1B restrictions, drawing warnings from American lawmakers that U.S. self-imposed barriers were becoming a strategic opportunity for China.[xvii]

Together, H-1B restrictions and the HIRE Act threaten the very workforce the U.S. needs to remain competitive in the digital economy. Distributed teams, cross-border services, and remote engineering now define the technology sector. Visa caps and excise taxes cannot reverse that reality. Unless the U.S. realigns its policy with how the modern workforce actually operates, it risks trading short-term political optics for long-term erosion of its competitive edge in the technology sector.

[i]Immigration Law: American Employment-Based Immigration Program In A Competitive Global Marketplace: Need For Reform, 35 Wm. Mitchell L. Rev. 38

[ii] Immigration Law: American Employment-Based Immigration Program In A Competitive Global Marketplace: Need For Reform, 35 Wm. Mitchell L. Rev. 38

[iii] https://www.bbc.com/news/articles/ce3yy58lj79o

[iv]https://www.dqindia.com/news/is-the-h-1b-squeeze-setting-the-stage-for-indias-remote-work-revolution-10547472

[v]https://timesofindia.indiatimes.com/life-style/spotlight/work-meets-wanderlust-digital-nomad-visas-are-powering-a-global-escape/articleshow/124447042.cms

[vi]https://www.dqindia.com/news/is-the-h-1b-squeeze-setting-the-stage-for-indias-remote-work-revolution-10547472

[vii]https://economictimes.indiatimes.com/tech/artificial-intelligence/indias-gccs-turn-key-testing-ground-for-agentic-ai-ideas/articleshow/125678088.cms

[viii]https://www.ey.com/en_in/insights/consulting/global-capability-centers/india-s-gccs-are-leading-the-shift-to-intelligent-ai-native-enterprises

[ix]https://www.business-standard.com/industry/news/india-gcc-workforce-ai-jobs-growth-2030-125111800876_1.html

[x] https://taxfoundation.org/blog/hire-act-outsourcing-tax-global-business

[xi]https://www.livemint.com/industry/infotech/hire-act-us-outsourcing-tax-indian-it-sector-it-services-exports-bernie-moreno-h1b-visa-tcs-infosys-wipro-11757408807396.html

[xii]https://economictimes.indiatimes.com/tech/technology/india-may-see-15-20-surge-in-non-us-gccs-in-the-next-two-years/articleshow/117581774.cms?from=mdr