The US-India technology corridor, long seen as a mutually beneficial partnership, is facing fresh turbulence. A new piece of legislation introduced in the US Congress, the "Halting International Relocation of Employment Act" or HIRE Act, has the potential to upend the foundational model of India’s thriving IT services
industry and emerging Global Capability Centres (GCCs). Though still a long way from becoming law, the bill marks a significant escalation in the narrative that foreign workers, particularly from India, are stealing American jobs. And this time, the rhetoric is being translated into a legislative threat with teeth.
From fringe to foreground: The MAGA push against outsourcing
What was once limited to fringe MAGA commentators has now found a foothold in the political mainstream. Trump's trade advisor Peter Navarro recently retweeted far-right commentator Jack Posobiec, who called for tariffs on remote foreign workers. This was more than a symbolic endorsement. It
signaled that voices calling for a crackdown on offshoring are being taken seriously within the Trump-aligned Republican ecosystem. Though tariffs can't be imposed on services as they are meant for goods that cross borders, Navarro's endorsement of Posobiec's idea signalled that India's showpiece IT services sector can become Trump's target.
Soon after, MAGA activist Laura Loomer, who is reportedly close to Trump’s inner circle, stated that Trump is considering blocking US IT companies from outsourcing work to Indian firms. The fact that such extreme proposals are being floated and amplified by Trump’s orbit raises red flags for India’s $250 billion IT services industry and the thousands of white-collar jobs it supports.
The HIRE Act: A policy weapon with sharp teeth
Introduced by Republican Senator Bernie Moreno of Ohio, the HIRE Act proposes a 25% tax on “outsourcing payments”, defined as any payments made by a US taxpayer or company to a foreign entity whose work benefits US consumers. This will target not only Indian IT services industry and GCCs but also all work, including freelance, that Indians provide to American companies.
Additionally, the bill proposes that American companies will lose the ability to deduct such expenses for tax purposes. The bill includes anti-abuse provisions to prevent rerouting of payments through US territories. Revenues from the outsourcing tax will be used to fund apprenticeship programs and workforce development in the US.
In effect, the bill aims to penalise US companies for using cheaper overseas labour and financially incentivise reshoring jobs. The messaging from Senator Moreno is blunt. "While college grads in America struggle to find work, globalist politicians and C-Suite executives have spent decades shipping good-paying jobs overseas in pursuit of slave wages and immense profits - those days are over," Moreno told Fox News Digital in a statement.
The bill doesn’t explicitly target India, but the subtext is clear. With over 50–60% of Indian IT revenue coming from the US, and hundreds of GCCs delivering services remotely to American clients, not to mention lots of startups and freelancers providing services to American clients, the Indian technology sector seems to be the primary target of the bill.
The real and present danger for Indian IT sector
India's major IT services players such as TCS, Infosys, Wipro, HCLTech and Tech Mahindra derive more than half of their revenues from US clients. Similarly, GCCs (Global Capability Centres) of Fortune 500 firms including those in finance, insurance, healthcare, retail and tech heavily rely on Indian talent to run their global operations. A 25% surcharge on these services,
combined with the loss of deductibility, dramatically increases the total cost of offshoring for American firms.
There are a few potential paths forward, but none are without pain. Indian companies may try to absorb some or all of the 25% tax, compressing their already thin margins. If clients share the burden, service costs in the US will rise, potentially leading to inflationary pressure, especially in sectors like banking, customer support and even aviation, which rely on Indian offshoring for backend efficiency. US firms could create subsidiaries in India to bypass the tax, but the anti-abuse clauses in the bill suggest even these routes could be monitored or closed off.
The path for Moreno's HIRE Act is not easy
Admittedly, the bill faces a steep climb to become a law. As of now, it lacks White House support, and it's unclear whether even Trump, despite his rhetoric, will back this particular measure. Previous efforts like Sen. Lindsey Graham’s proposal for 500% tariffs on countries buying Russian oil failed to gain traction despite MAGA support. The Republicans only have narrow majorities in Congress, and any bill this controversial would require extensive bipartisan negotiation.
It's also possible that the proposed HIRE Act in its current form is just a new bargaining chip from Trump officials in US-India trade negotiations which are ongoing.
But despite all that, the fact that outsourcing tariffs are being seriously discussed is a clear signpost. The combination of political rhetoric, populist nationalism and rising anti-immigration sentiment has given oxygen to these ideas which were once dismissed as impractical or fringe. Carve-outs might be introduced for critical sectors but even then, the sword hangs over most of India’s IT services exports.
A core question lingers: Does the US even have enough skilled workers to replace offshore talent? American universities produce far fewer STEM graduates than India annually, and the domestic pipeline for mid-senior tech talent is shallow. That’s why US companies outsource in the first place, not just to save money, but to ensure continuity and scale in operations.
Disrupting this ecosystem through blunt-force policy tools risks not just Indian jobs, but American business competitiveness.
The HIRE Act may not pass in its current form, but it is a serious policy signal. For Indian IT services and GCCs, the risks are no longer hypothetical. India’s overdependence on the US market leaves it vulnerable to policy shocks. If nothing else, this episode should prompt India’s IT industry to diversify its client base, invest in domestic demand, focus on innovation and prepare in all ways for a less hospitable geopolitical climate. Even if Moreno’s bill fails, the protectionist agenda is in full play and Indian IT is firmly in its crosshairs.
Source Name : Economic Times