President Donald Trump’s move to curb skilled visas for foreigners adds a fresh blow to US-India ties that only last week appeared to be on the mend, creating new hurdles for a speedy trade deal.
Trump’s $100,000 fee for new H-1B applications will predominantly affect Indians, who’ve made up more than 70 per cent of the visas in the past. The US president’s order has rattled India’s $280 billion tech services industry, threatening their business outsourcing models and putting thousands of jobs at risk.
Trump has upended decades of US diplomacy by slapping 50 per cent tariffs on Indian exports in August, part of which is to penalise the country for buying oil from Russia. Tensions appeared to ease last week when trade talks resumed and Trump called Prime Minister Narendra Modi on his birthday. The abrupt move to curtail immigration puts that detente in doubt.
“This is a big nail in the coffin for India-US relations,” said Biswajit Dhar, a professor at the Council for Social Development, a New Delhi-based research institute. “A $100,000 fee is like a non-tariff barrier equivalent in services sector and is aimed at blocking out Indian professionals, dealing a body blow to the relationship.”
The H-1B news came on the eve of Commerce Minister Piyush Goyal’s visit to the US this week to negotiate a trade deal. External Affairs Minister Subrahmanyam Jaishankar will also hold talks with US Secretary of State Marco Rubio in New York on Monday, where the visa issue is likely to be addressed.
The Trump administration wants India to stop buying oil from Russia, saying the purchases are helping to finance President Vladimir Putin’s war in Ukraine. Indian officials last week pressed US negotiators to scrap the additional 25 per cent tariff penalty, although Modi’s administration has said it won’t halt Russian energy purchases.
The US has also pressured Group of Seven leaders to raise tariffs on India and China to penalise them for buying Russian oil.
Sonal Varma, an economist with Nomura Holdings Inc. in Singapore, said years of India-US strategic relationship so far has not led to any concessions for New Delhi. Trade talks are getting increasingly intertwined with geopolitical objectives, complicating the “ability to resolve frictions,” she added.
Until now, India-US trade talks have centered on goods, not services such as IT and finance. Trump’s visa overhaul changes that, pulling India’s service-driven economy into the trade conflict. The policies also raise medium-term growth risks for the South Asian nation and increase pressure on the government to spur domestic demand, Varma said. Services account for about 55 per cent of the gross domestic product, compared with 17 per cent from manufacturing.
“India has long raised the issues of services trade and, especially, the importance of the movement of people to deliver these services in any trade talks,” Deborah Elms, head of trade policy at Singapore-based Hinrich Foundation. “While these have not been priorities for Trump, in the US-India talks these issues will now be front and center.”
Economists have warned the visa changes risk cutting remittance inflows, and could weaken the local currency, which has already been among Asia’s worst performers. Indians form one of the largest immigrant groups in the US, making up about 1 per cent of the population, and skilled workers send home nearly $35 billion annually, according to Citigroup Inc.
The pressure on the services sector “pushes India further into a corner from where it would become very difficult for it to resist US demands,” said Amitendu Palit, senior research fellow at the Institute of South Asian Studies.
Analysts say tighter visa rules will intensify pressure on Modi, as his government struggles to create enough jobs at home while many Indians seek higher-paying opportunities in US technology and professional services.
Despite being the world’s fastest-growing major economy, India’s pace of expansion is still not rapid enough to create jobs for its 1.4 billion people. The youth unemployment rate remains stubbornly high, hovering around 40 per cent, according to private data provider Centre for Monitoring Indian Economy Ltd. The IT services sector remains a key employer, adding about 125,000 new jobs last year and bringing the total direct employment in the industry to nearly six million.
India’s opposition parties have criticized Modi’s relationship with Trump, saying that the Indian prime minister has failed to take a firmer stand against the US. The Communist Party of India (Marxist) has said the US actions amount to bullying, while Rahul Gandhi, a leader in the Indian National Congress party, said Modi’s silence makes him a “weak PM.”
“I don’t think Mr Modi has faced this kind of pressure ever before,” said Indrani Bagchi, chief executive officer at Ananta Centre, a New Delhi-based think tank. For most Indians, it appears the country is “being singled out for a sort of sustained attack by the Trump administration,” she said.
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Published on September 22, 2025