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Everyone's going to be happy, and we're going to be able to keep people.

In our country that are going to be very productive people, and in many cases these companies are going to pay a lot of money for that.

I'm Stephanie Flanders, head of Government and Economics at Bloomberg, and welcome to Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next.

Well.

Over the weekend, Donald Trump surprised the world by placing one hundred thousand dollars fee on the cost of an H one B visa for new employees entering the US.

The short term result was travel chaos.

Thousands of skilled employees working in the US on an H one B who happened to be traveling abroad were told to get back on US soil by midnight Sunday just to make sure they weren't stranded.

Now.

Eventually, the White House Press Secretary cleared up the confusion.

The fee would only apply to new applicants, but that still left a big question hanging over the US tech companies who depend on these skilled workers and those visas to keep America at the forefront of global tech innovation, and with India accounting for seventy percent of them, it also causes a massive headache for the Indian software companies who are a big part of Indian Prime Minister Mody's growth strategy for the country.

So that leads us to a big, quite complicated question about that one policy.

Who gains and who loses from President Trump putting a big price tag on skilled foreign talent working in the US.

Of course, it's not just the H one B change.

A few weeks ago we saw another example of a business getting caught in the crosshairs of an America first immigration policy with that ice raid a Hyundai plant in Georgia.

So do expensive visas and raids like that one actively undermine the Trump administration's effort to attract foreign investment and in the end, could they actually be good news for countries and companies outside the US, including maybe India, who can offer those skilled workers an alternative home.

Well, we have a lot of strands to unpit here and I'm delighted that we can talk about both sides of this policy today with Michael Deng geoeconomics technology analyst at Bloomberg Economics sitting in Washington today.

And Chetna Kumar are geoeconomics analyst for South Asia who's joining us from New Delhi.

And I should say, I'm sitting in New York and it's Tuesday morning, US time, But I think it's probably useful to start with some context on how important this visa has become for the US and indeed its relevance to India.

So Michael just sort of talk us through the kind of companies that have relied on this visa and how important they are to America's tech industry.

I think primarily most of the companies that have been using H one b's, I would say probably two thirds are the software and IT sectors.

So you have the IT contracting and service companies Tata, Infosits, etc.

But you also have Big Tech to a significant degree, relying on these H one b's to bring in software talent from overseas.

These companies are going to be the ones most directly hit by this H one B fee change for IT services specifically, the impact is going to be greater just because it hits their business model directly.

Big Tech in terms of software may be more capable of absorbing that hit.

But outside of these directly computer related industries, there's also adjacent, smaller but also critical industries like semiconductors, for example, which don't necessarily need to bring in a huge bulk of foreign talent, but they do need to bring in a smaller group of highly specialized engineers to support their design, equipment and materials, manufacturing initiatives, etc.

Which all kind of coincide with this huge restoring push that's going on in the US.

So across the board, you're seeing software and it computer related occupations being hit hard first, but then a lot of other more niche industries that need foreign talent to support their own growth into the future also being impacted.

The broad response that the administration might have, and I've heard even in the last few days, is these are easy ways for US tech companies to bring in cheaper foreign workers rather than pay American skilled workers, and it's undercutting American skilled workers, and that's what they're trying to prevent with this by putting this one hundred thousand dollars wedge in there.

I do think that's true to some degree.

We've started to see the market for especially junior entry level computer science software developers get a little soft.

Recently, the stat for recent graduates who are majoring in computer science and the unemployment rate is around six percent, as one of the highest in the US currently.

So I think specifically for that segment and this computer industry that this H one B policy is targeting, it is true to an extent.

I think this could help that segment specifically.

The fear is that this kind of blunt change also pulls in a lot of the other strategic industries that don't rely on this model of labor to support their workforce, and that they need the more highly specialized workforce that the H ANDEB is supposed to fulfill, and one hundred thousand is quite a big barrier in many cases they do require specialized talent, but that fee may be too big of a barrier in terms of bringing in foreign talent, and you could inadvertently harm US tech ambitions in the long run as well.

I was struct that Read Hastings, the co founder of Netflix and certainly no great supporter of Donald Trump.

He's been a sort of prominent back of the Democrats in recent years.

He came out saying he thought this was a good idea this hundred thousand dollar fee for some of the reasons that you just suggested.

But we can get into whether there might be exemptions and whether there's a way in which this could be more targeted in a second.

But I wanted to get to you because my impression from reading some of the coverage was that there was really a lot of concern around this over the weekend, and it's still raising questions about a big chunk of Indian industry.

That's right, Stephanie.

The one hundred thousand dollars fee impacts primarily Indian tech workers and Indian tech companies in the US, because we know seventy percent of the H and B talent comes from India, but traditionally it was Indian tech companies the Data Cognizant emphasis which have been the greatest beneficiaries of the H and D program, and their business model relies on being able to hire these Indian tech workers and bringing them to the US to service on site contracts.

So not being able to hire modified workforce is going to dent their pricing how they're able to offer services, and we've seen some of that impact show up in Indian stock prices and ID stock prices over the weekend and over this week particularly because of that.

I think the second concern is broader about US and your relations and what this means for the broader trajectory of the relationship.

I think we can and ignore the context within which this is happening.

Tariffs on India have been doubled to fifty percent.

There have been some other moves by the US administration attacking India, including provoking exemption leavers for India's investments in the Iranian pot of Chapahar and others, which make it seem like President Trump is tightening the squeeze on India.

Quite a bit.

There was a notion that perhaps India could withstand the fifty percent tariffs and a whole firm because it wasn't really a goods manufacturing goods exporting countries.

But targeting services is really the engine of India's economy.

So for scale, India exports about two hundred billion dollars worth of ID services every year, and about one hundred billion of that goes to the US, So targeting H and B workers is sort of seen as a strike on that entire industry.

You know, when people think of Indian outsourcing we think of inevitably, we think of call centers.

I know they've developed a lot since the early days of call centers, and there's lots of other services that these companies are providing.

But this particular policies, if it's about people all coming to the States, why are they affected.

You're just talking about the people who are helping coordinate on the ground in the US.

So that's about three hundred thousand Indian H ONEB workers in the US currently, and that's about a tenth of the total Indian diaspora.

That's a tenth of the diaspora in America.

In the US, that's right.

These Indian companies have relied initially because of the cost arbitrage of being able to hire Indian workers and bring them to the US.

But there's also some advantages culturally and being able to efficiencies to being able to bring workers from India to service.

A lot of the consulting and it contracts on site, and many of these contracts do require the service provider to be on site.

And that's why you see the surge of sort of Indian workers in the US.

It's not as much of a rude shock as it seems because Indian companies have been preparing and have been expecting the change of policy.

Now for a while, President Trump did try to ban the H one D program in its first administration.

I was not successful.

But since then, of the last ten years, we've sort of seen Indian companies actually scale back their alliance on H one D visas for workers in the US.

They're about thirty percent of the last decade, which is a sizeable reduction.

And at the same time, we've seen actually US tech companies rely more on the Indian workforce in Indian deck workers like the Meta, Google, Netflix, et cetera, to sort of bridge their own skills gaps.

So we've seen a little bit of the shift happened in the last ten years of US companies increasing their alliance on EAH one.

D's Okay, now, Michael, given that a lot of things that come out of the administration, shall we say, don't turn out to be kind of hard and fast, is there a perception that there could be quite a lot of holes in this Do you see that as being the first reaction of US companies to just see if they can get an exemption.

We've certainly seen a lot of companies looking for exemptions in tariffs, for example.

Yes, I think in the absence of clear criteria and timelines, the first instinct for a lot of companies, I would argue, with the exception of maybe the IT consulting services companies because they were cifically targeted in the proclamation.

But any other company like tangentially tech Related, STEM related is certainly going to press for an exemption first because that circumvents the entire issue for them, and I think in critical strategic industries like semiconductors, AI infrastructure, that's probably not going to be an issue for them.

The key is whether this administration, at least in these critical technology ecosystems, understands the full scope of industries and companies that would need to be exempted, and do the understand all the labor dynamics and the workforce shortages that affect all the supporting industries that aren't just the headline flagship firms.

Certainly, I don't think they're going to miss like an Nvidia or an open AI for example, But a lot of smaller companies, suppliers, etc.

Also face workforce issues, and this gets into another issue that's persisted over the past decade, and that many of these non software STEM industries have traditionally had trouble attracting domestic US graduates because they've all gone to software, and so that foreign talent pipeline has been the way that they've kept their workforce sufficient.

And what kind of job would that be?

So specialist engineers in terms of chip design, chip manufacturing, for example, I'm using semiconductors because I'm more familiar with the industry.

Why would you not attract American workers into that sector.

It seems like that would be just as attractive as some of the other sort of STEM sectors.

Mainly because software is so much more attractive in terms of the lifestyle and the salaries.

And so there's that gap there that was best filled for a while in many cases by foreign researchers and foreign graduates.

And I think the stat even for semiconductor related fields is greater than fifty or sixty percent of researchers all come from outside of the US, and so cutting off that pipeline right now would be pretty harmful for US tech competitiveness in these leading industries that really reply on a smaller pool of specialized labor, and.

Just as as obvious question.

If there is such scarcity, can't they just pay the one hundred thousand dollars The assumption of the US this administration has been in quite a lot of areas that the rest of the world is willing to pay up for access to the US in whatever form.

I do think for certain industries they probably are okay with paying it.

Unfortunately, those industries also happen to be the flagship firms and industries that are probably most likely going to get an exemption, like big tech companies are not going to have that much of an issue paying one hundred thousand barrier if they really need the talent they require.

But they could just go and have dinner with Donald Trump again and maybe sort it out.

Yes, Yes, and same thing for the headlining semiconductor firms for example.

But if you dive down more into semiconductor manufacturing, when we're trying to reshore US fabs at a time when there's already a pretty significant cost delta with Asia fabs, adding one hundred thousand dollars barriers to the sort of core engineers you need to ramp up capacity in US fabs is not very beneficial to reshoring and it's sort of this layer underneath, this middle core of engineering talent in the US is going to be most affected by this barrier.

I love the phrase that the cost delta with Asia FABS, but I guess we should sort of spell out that's just the fact that Asian companies producing chips are cheaper and US ones.

Yes, yes, yes, but we can stick with FABS.

I mean, just sort of teasing out the implications of what Michael was saying.

It suggests that in these kind of high tech areas where the US has kind of significant ambitions, it seems like either they'll pay the US companies to get this talent or they will get an exemption.

And that leaves the IT services sector, which, as you've described, is something that has been very important to some of India's biggest companies in the last few years.

So does this come down to more of a sort of underhand way to tax those Indian exports of services without saying upfront that that's what we're doing.

Definitely is hard to see a what of motivating this administration, but it does seem like it's one of the ways to tipen the squeze on India.

The fifty percentatus have not led to India keething on goods or stopping buying Russian oil.

It's not let a big change.

There's sort of policy and agricultural market access.

So targeting India's IT services, it's best performing companies and bring a lot of revenue is possibly one way of President Trump indicating the US as pharm mow leverage over India than India has over the US.

But what the impact of this is then, whether it will actually be your tax or not.

I think it's going to play out over a long term, and I think immediately though, yes, there will be a margin squeeze for some of these Indian companies.

They will have to shift and think rethink their business models and pricing strategies.

There might actually be some structural advantages for India.

India and President Trump actually might be doing India a good turn by sort of restricting H one B visas for these kinds of jobs and others.

How So, to start with fewer H one B visas means there's opportunity for a lot of these investments to go back into jobs in India.

We've seen over the last decade a boom in global capability centers, which is the newer kind of outsourcing that you were speaking to.

These are not the BPOs of the nineteen nineties.

They are more advanced captive centers that everybody from US banks like JP Morgan in Goldman Sachs to US companies and chip design companies have built and used in India and they provide everything from advanced chip designing, engineering, data analysis, and even product development.

So what started as cost arbitrage in India sort of turning into value and innovation in India.

And there's an expectation that because H and B pisas are going to become cost there, some of these jobs might find their way back to India and contribute to this booming GCC economy.

There one observation that's been made about China over the years, and particularly in response to the first Trump term and the trade war with China then, was that the initial punishment also inspires a policy reaction within China.

We've seen where there's a sort of greater determination to reduce reliance on the US, and now as we've come into the second Trump term, we've seen various ways in which China has kind of long prepared for this moment and has has ways of mitigating the effects of the very high tariffs.

You know, wouldn't we say the same thing about India?

And that's somewhat embedded in what you just said.

But is there not a slightly different Moody growth strategy that comes out of this that is actually less beholden to the US.

Possibly, And I think we're already seeing some of the signals that the Prime Minister is sending about improving india self alliance or people, or the government is seeing about wanting to support people who are losing h mend jobs coming back to India.

But I do want to say the case with India is a little bit different than China in the sense that India's technology capabilities and India's tech industry is so complementary and deeply linked with the US.

They're trying to unravel this relationship back hurts both for a considerable period of time.

Yes, India is a big value exporter to the US, but not a big market for US firms.

It's a big sort of place of operations for US companies, So I think unraveling this relationship is harder.

And I think service is a little bit trickier than goods in terms of trying to replace and build talent pools and supply chains so quickly.

Yes, and no, I think there's going to be a different growth strategy.

And yes, India's exports are somewhat diversified, its services industries a lot more maturity.

Its talent is wanted in other parts of the world, and there might be some sort of urgency in other countries trying to tap up Indian talent.

But I think in the long run, there's enough drivers and complementalees between these two industries, and these two countries trying to break away may not be beneficial to either.

Michael, I guess just pulling out on that very quickly.

Apart from that longer term point, I mean, will other countries just take advantage of this?

I think to a small degree, yes, And like we've seen small signals of the UK, Germany, Canada, for example, where skilled worker immigration isn't quite as let's say, arbitrary or difficult as the US that there's some science that small quantities may go there, But the US is really the core of this global tech talent migration.

And whatever happens on the H one B side moving forward, how they decide the exemptions, what industries they work with or what industries they don't really will shape the flow of global talent.

But I guess for those countries who worry about the brain drain of their most skilled talent, I heard Canadian Prime Minister Mark Carney talk about this earlier this week, that they have a large number of very highly trained people in advanced STEM courses in Canada and then a big chunk of them go to the US.

It's going to be easier for these countries to hold on to their skilled talent.

Yes, But I would say the reason for a lot of this brain drain is just the much higher compensation and benefits in the US in the first place, And so that doesn't fully go away even with this fee in place.

If they're still hiring roughly the same amount of H one b's per year, it maybe shift in terms of the industry that they hire through, right, and so in terms of the overall quantity.

If this H one B is properly executed, I don't see a huge shift happening to other countries, just in terms of the reasons why they come to the US in the first.

Place, Okay, and just on the sort of longer term question and we faced this issue also in the sort of Bidenomics era, that there was a great desire in the administration for speed in building up US domestic industries in certain sectors, semiconductors being one, but also a big desire to have it all be home grown and be aware a vehicle for upgrading US born talent.

And there's clearly a tension between those things.

If you want to have it all the US workers, as one person said to me, well we could do that in five years.

If you want to do it in one or two years, then there's going to be a lot of people will be bringing in from overseas.

Has that tension increased in the second Trump administration.

Yes, So above all else, what the domestic semiconductor and wider tech ecosystem needs is time to build up these workforce programs to get graduates and employees into the right industries firms.

The Trump administration nominally has promised a lot of support for workforce issues, but some of their actions had a chilling effect on supporting these industries properly, the Kanda Ice Reid being one example, just in terms of making sure foreign talent can come in as a transition to patch that pipeline and tel domestic talent can come online.

For the semiconductor space, specifically, what happened with what's known as GNATCAST or the NSTC, which was responsible for administering roughly seven to eight billion dollars in semi conductor research and development funding was also not great for workforce develment development.

There was a sizable portion of that was aimed at further building out domestic workforce initiatives.

So this sort of inconsistency at a time when we really want to accelerate this pace at getting the domestic workforce online is a little troubling.

We started off asking about who the losers and who the gainers are.

I think we've identified that the big loser is going to be integration, or at least the sort of the flow of workers from one country to another, and that Trump administration would say that's exactly the point that we're trying to have less of this kind of free flowing global labor market.

But che, I mean people in India just reading this as an attack on Modi administration.

I think President Trump has not been particularly friendly to any of his former partners and allies or US partners, so in one way, He's not treating India any differently.

But I think the fall for India has been from such a great height that it's hard to ignore.

I think this term sadden on the expectation of this relationship or mutual appreciation between these two leaders leading to less affrictions between them, or an early harbor, a straight deal even and that's not happened.

And I think the fact that primis to more these shares this close relationship or did share this close relationship with President Trump is increasing the pressure on him.

Certainly, the H one B visa sort of holders in India are a small but very visible and aspirational minority for the country.

Getting this H and B job and moving to the US and eventually a pathway to green cord.

We're seen as sort of a hallmarket success for many young Indian students, and I think that big impact.

In addition to the very tough rhetoric that we've seen from President Trump calling the Indian economy dead, or his advisors calling the Ukraine war Modi's war or in your laundromat for Russia, I think, putting it all together, it's certainly added to the census that India is not a special partner of the US anymore, and it's not expecting to be treated any differently from other partners that have in the expectation that sort of its relationship between the leaders who sort of get in their better deal and sort of faded away.

It's a reminder that you can put this one piece of grit, this charge in the wheels of the global economy, and it just tens of thousands, hundreds of thousands of people and companies can be affected for quite a long time to come.

Chetner, Michael, thank you so much.

Thank you, Thanks Stephanie, thanks.

For listening to Trumpomics from Bloomberg.

It was hosted by me Stephanie Flanders.

I was joined by Michael Deng and Chetna Kumar of Bloomberg Economics.

Trumpnomics was produced as ever by Samasadi Moses and m and Avil Brown, with help from Amy Keen and special thanks this week to Rachel Lewis Chriskey.

Sound designed for the shows by Blake Maples and Kelly Gary and Sage Bowman is Bloomberg's head of Podcasts.