The White House’s new visa fee is another tariff  

President Trump’s announcement that H1-B visas will now require a payment of $100,000 is best understood as an extension of his tariff policies. The goal, broadly speaking, is the same as a tariff: to stop American consumers from buying foreign products by making those products artificially more expensive. It’s just that in this case instead of a 15 percent surcharge, it is a flat $100,000 fee. Oh, and that the foreign product in question is workers and the consumers are US businesses. 

The fees aren’t unprecedented. A $500 fee was added to the visas in 1998, ostensibly to retrain American workers to reduce the need for the visas in the future. That was bumped up to $1,000 in 2000 and $1,500 in 2004. The current fee, however, represents a drastic escalation. 

The White House argued that the visa system, which allows companies to sponsor high-tech workers to come to the United States, has been abused by US companies and has denied opportunities to native-born workers. The administration was upfront that the goal was to make the visas uneconomical in most cases for the companies that sponsor them.  

“It is therefore necessary to impose higher costs on companies seeking to use the H1-B program in order to address the abuse of that program while still permitting companies to hire the best of the best temporary foreign workers,” the administration stated.  

The International Federation of Professional and Technical Engineers (IFPTE), a union representing 90,000 workers, applauded the announcement, noting that the reduced competition would force wage levels up. “[W]e welcome serious efforts by the Administration to award H1-B visas based on the highest pay and skill levels, raise wage levels, and require employers to only recruit outside of the U.S. when they have proven they cannot find qualified workers in the U.S.,” said IFPTE President Matthew Biggs. The IFPTE has long opposed the foreign workers, who are harder to organize given the temporary nature of the visas. 

The fee is already having the intended effect of dissuading entrepreneurs from sponsoring visas for the workers, which can be a problem for those businesses. “100K is prohibitively high,” Jonathan Awad, co-founder and chief executive of tech start-up called Baselayer, told the Wall Street Journal. “It will either slow us down or make us hire offshore and keep them offshore.” 

Trump is a huge admirer of tariffs and has often said he considers them good policy even when they are not in response to international trade disputes. The president believes tariffs boost American businesses by dissuading American consumers from buying competing foreign goods. He further argues that the tariffs also boost the federal government because the fees charged under them flow into the US Treasury. 

The problem is that a tariff never brought down prices or made anything more efficient. They only make goods more expensive and less efficient to acquire. If anything, tariffs prevent domestic businesses from offering better products and/or becoming efficient by insulating them against competition. Yes, a consumer may buy an American-made product if an imported alternative suddenly becomes more expensive, but doing so costs that consumer more. While that might be beneficial for the provider of goods or services, it’s a bad deal for everyone else. Even the union recognizes this. They are happy that the new H1-B fees will “raise wage levels” the same way tariffs on goods raise domestic prices. 

The administration asserts that the H1-B visa workers are hired at the expense of American workers because the foreigners are willing to work for less. The announcement cites numerous instances where companies hired workers through the visa program while simultaneously laying off US workers. However, the announcement provides no evidence that the two actions were linked, nor does it even provide the names of the companies, making the data impossible to verify. A Peterson Institute for International Economics report claims to know at least one of the studies that the administration is citing in its announcement – and argues the administration is misrepresenting it.  

Tech companies have long claimed that the problem is a shortage of high-skilled workers overall. Employers argue the industry is growing so rapidly that there aren’t enough workers, domestic and foreign, to fill all of the positions and that if anything, caps on the number of visas need to be lifted. A Wall Street Journal report found that multinational companies might move the tech work itself overseas.  

In short, the administration’s new visa fee has raised labor costs for US tech companies at a time of fierce international competition. Like tariffs on goods and services, this fee will weaken our economy, reduce dynamism, and hobble our ability to compete.