Will the HIRE Act 2025 Crush Indian IT Jobs?

Did you know that Trump administration’s proposed 2025 tariffs could push an additional 875,000 Americans into poverty by the year 2026? This staggering statistic comes from a study by Yale’s Budget Lab, highlighting the real-world impact of trade policies. But even with these painful consequences, some lawmakers are pushing for more protectionist measures that could complicate things even further.

Enter the Halting International Relocation of Employment Act—or the HIRE Act—introduced by Ohio Senator Bernie Moreno on September 5. Could this bill be another setback for U.S. businesses? Let’s break it down.

What’s the HIRE ACT and Why Should Indians Care?

The HIRE ACT has one major goal: to protect American workers from the consequences of outsourcing. Outsourcing, where US companies shift jobs abroad, often to countries like India, has long been a hot topic. Senator Moreno believes that outsourcing puts American workers at a disadvantage by incentivizing US companies to seek cheaper labor overseas.

So, what exactly does this bill propose?

The 3 Key Provisions of the HIRE ACT

1. A 25% Tax on Outsourcing Payments: If a US company sends money to a foreign entity for services benefiting American consumers, they could face a 25% tax on those payments. This means any outsourcing payments would become significantly more expensive.
2. No Tax Deductions for Outsourcing: Companies that outsource would no longer be able to deduct outsourcing expenses from their taxes. This would make outsourcing a less financially attractive option.
3. Domestic Workforce Fund: The tax revenue generated from the 25% levy would be directed into a Domestic Workforce Fund, designed to support US-based workforce development programs, such as apprenticeships and retraining initiatives.

How Will This Affect US Businesses & Indian Vendors?

India’s five largest IT companies—Tata Consultancy Services, Infosys, Wipro, HCLTech and Tech Mahindra—generate between half and two-thirds of their revenue from North America, according to Firstpost. Overall, the Indian IT sector earns ~60% of its revenue from the US.

While the HIRE ACT’s supporters argue it will protect American workers, the reality is far more complex. US IT companies—who outsource much of their work to countries like India—will feel the weight of the 25% tax and loss of tax deductions.

This leaves US firms with two difficult choices: (i) pressure their Indian vendors to reduce prices—unlikely given the already thin margins Indian providers operate on—or absorb the additional tax costs themselves; or (ii) try to find alternative vendors domestically, which is largely impractical in the short term.

The Talent Gap: Can the US Replace Indian Expertise?

One of the most significant oversights in the HIRE ACT is the lack of talent in the US to replace the specialized skills that Indian vendors provide. While the bill may sound appealing as a way to bring jobs back to American soil, the US simply doesn’t have enough skilled workers to fill these gaps—particularly in the IT and tech sectors.

According to Forbes, 66% of US companies outsource at least one department, translating to roughly 300,000 American jobs outsourced annually. This outsourcing is driven not merely by cost but by a lack of available qualified candidates domestically.

Who Will Bear the Cost of the HIRE ACT & Tariffs?

If costs cannot be contained, the burden will most likely shift to consumers, mirroring the impact seen with previous tariffs. The question is—can US businesses afford to absorb these costs without passing them on to their customers?

The real victims of the HIRE ACT and other protectionist policies will likely be ordinary Americans, especially those in lower-income households. Lower-income families typically spend a larger portion of their income on goods and services and these are the products most impacted by tariffs.

So, What’s Next?

While the HIRE ACT has stirred debate, experts believe it won’t pass into law. Outsourcing has been central to U.S. competitiveness—not just for cost savings, but for tapping into global talent at scale. By trying to roll this back, the Act may push businesses further offshore, leaving the labor market weaker than before. 

For now, the bill needs to be approved by both the House of Representatives and the US Senate before it can receive President Donald Trump's assent to become law. On top of that, the proposal also faces legal roadblocks. The World Trade Organization (WTO) has strict rules preventing member countries from imposing duties on digital services.

Whether or not the proposal comes into action, one thing is clear: protectionist policies often hit hardest the very people they claim to safeguard. Protectionism may sound politically appealing, but can closing doors on global talent and collaboration ever make an economy stronger?