In late September 2025, the Trump administration announced a dramatic hike in the fee employers must pay when filing new H-1B visa applications from a range of $2,000-$5,000 up to $100,000 per new application. The increased fee is being called a talent tariff by some startup founders and critics of the new policy generally. Tariffs are the sort of thing you impose on foreign steel, not foreign software engineers. Why is the government doing this?
The official story is to protect American workers. The H-1B program has long been criticized as a way to import cheaper labor, which ends up displacing American engineers. So the idea of the new policy is to make it so expensive that companies only do it if they really need that unique foreign worker, not just because he's cheaper. Another more cynical explanation is that it raises revenue. Imagine you're the government and you've got this program that's oversubscribed every year. Demand wildly exceeds supply. That's the textbook situation where you raise the price.
So is it really about replacing U.S. workers? Well, yes and no. There are horror stories about outsourcing firms bringing in busloads of H-1B workers, paying them less, and pushing out American employees. Those exist. But then there's also the fact that, statistically, lots of H-1B workers are in fields where there aren't enough Americans to fill the jobs. Moreover, H-1B recipients have founded companies that have in turn hired lots of American talent. Google, Intel, Tesla to name a few notable ones. So if the goal is to protect American workers, great; but there's a risk you end up protecting them from jobs that don't exist anymore because the company couldn't hire the one person it needed to build the product in the first place.
Big Tech vs. Startups
This is where the impact of the new policy gets even more complicated. Google, Microsoft and Amazon can pay $100,000 per visa without blinking; they'll just expense it, maybe complain a little and move on. But for your typical five-person startup that just raised a $2 million seed round, dropping six figures just to file the paperwork for one engineer is not happening.
So what this policy really does is give Big Tech an even bigger moat. The Googles of the world can still hire the best talent globally; the scrappy startup down the street cannot. It's a tax on entrepreneurship.
And the irony is: H-1B workers don't just work at startups; sometimes they found them. The higher application fee may protect some American workers, but it will also make it a lot less likely the next Google will get created here.
Practically and cynically speaking, the administration may not mind if startups suffer, because the headline is "we're protecting U.S. jobs," and the startup lobby isn't nearly as powerful as Big Tech's.
Startup exemption?
Naturally, people are already floating carve-outs. Maybe startups shouldn't have to pay the full $100,000, or perhaps there should be a sliding scale or an exemption for hires in areas of national interest.
These are ideas worth exploring. But they also make the whole system more complicated, because now you have to define "startup" or "national interest," and everyone will lawyer up to fit themselves in. Imagine the creative arguments: "We're a startup, even though we have 1,000 employees, because our Series D is still technically growth capital."
But absent some kind of exemption, the impact is obvious: startups will either hire abroad, relocate abroad or just not hire. And that's not great for innovation happening here.
Likely Positive Outcomes
By raising the cost to hire foreign tech workers, employers might be more selective in submitting H-1B applications, perhaps increasing wages for American tech workers (by reducing undercutting). The new rules also include increased minimum salary requirements for H-1B recipients.
There should also be fewer speculative applications. Right now, lots of companies file H-1Bs just in case. With much higher application fees, the theory goes that some employers will submit fewer speculative applications, which could reduce waste, abuse and load on the H-1B lottery system. There is concern that many applications are speculative in nature. A high fee might discourage frivolous applications.
There's also the national interest argument. The administration frames part of the rationale for the change as protecting national interests by ensuring foreign talent comes under stricter scrutiny and at higher cost. This could disincentivize overreliance on foreign nationals in critical tech roles, or limit risk exposure.
Likely Negative Outcomes
Startups may be priced out of hiring internationally. For early-stage or small startups, a $100,000 application fee is potentially prohibitive. These companies often have tight cash flow, fewer employees and smaller budgets. The magnitude of the fee may prevent them from hiring the foreign talent they need, even if that talent is essential.
Many leading American tech startups have been founded or co-founded by H-1B visa holders. H-1B visa holders often play key engineering or leadership roles in startups. The new fee could thus result in a slower pace of innovation and weaken our ability to attract global talent.
Large, well-capitalized companies are much more able to absorb a $100,000 fee. That means the burden is asymmetric: large firms may pass the cost along, or budget for it, whereas small firms suffer more. This could entrench incumbents and reduce competition.
Finally, there's the risk of uncertainty. There remains ambiguity over implementation of the new fee: for example, whether the fee is refundable if petitions are denied; whether pending applications are affected; how increased minimum salary requirements will be enforced, etc. Such uncertainty can cause companies to delay hiring or making investments.
The Punchline
This is either a clever way to fix some real problems in the H-1B program by raising the price of entry, or a clumsy tax that kneecaps the very startups that drive U.S. innovation. Perhaps both. The government calls it protecting American workers; startup founders call it a "talent tariff." Both descriptions are valid.
But if history is any guide, what we might actually end up with is just another competitive advantage for the Googles, Amazons and Microsofts of the world, and fewer startups trying to be the next one.
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