A newly proposed U.S. law targeting overseas outsourcing threatens to upend India’s IT services sector, long dependent on American clients. If passed, the HIRE Act could impose steep taxes on outsourcing, rattling a $250 billion industry at a moment of economic uncertainty and technological disruption.
Washington’s New Outsourcing Crackdown
The United States Senate is weighing a proposal that could dramatically reshape global labor flows. The Halting International Relocation of Employment (HIRE) Act, introduced by Republican Senator Bernie Moreno of Ohio, seeks to penalize American firms that send jobs overseas. The legislation would impose a 25 percent outsourcing tax on payments to foreign entities, prohibit tax deductions on outsourcing expenses, and channel revenue into a Domestic Workforce Fund supporting apprenticeships and worker retraining.
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Framing the measure as a battle for working-class dignity, Moreno said:
“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.”
The bill reflects a larger protectionist agenda under President Donald Trump’s second term, which has emphasized reshoring jobs and imposing tariffs to revive domestic industries. But before it becomes law, the measure must clear both houses of Congress and win presidential approval , a process likely to ignite fierce lobbying from American corporations heavily reliant on offshore talent.
India’s Outsourcing Powerhouse at Risk
For India, the world’s largest hub for IT outsourcing, the stakes could not be higher. Companies like Tata Consultancy Services, Infosys, Wipro, HCLTech, and Tech Mahindra derive between 50 to 65 percent of their revenues from North American clients. Their services spanning cloud management, software development, analytics, and business process outsourcing are deeply embedded in the operations of U.S. giants such as JPMorgan Chase, Pfizer, Microsoft, and Citigroup.
Industry analysts warn that a 25 percent outsourcing tax could significantly increase costs for U.S. firms, forcing them either to scale back offshore operations or pass costs on to consumers. Global Capability Centres (GCCs) offshore hubs set up by U.S. corporations in India may also face disruptions, despite being critical to innovation pipelines in sectors like finance, retail, and healthcare.
This comes at a time when Indian IT firms are already facing headwinds: shrinking client budgets, AI-driven automation reducing demand for routine services, and muted hiring. Adding a new tax could further squeeze margins and weaken India’s dominant position in global IT services.
A Law That May Never Be Enforced
Yet, for all the anxiety, experts caution that the HIRE Act may not survive political and legal scrutiny. Under current World Trade Organization (WTO) rules, member countries cannot impose duties on digital services. Moreover, U.S. companies themselves may resist the law, pointing out that America lacks the trained workforce to fill roles currently outsourced to India, especially in cybersecurity, data science, and advanced engineering.
Over the past year, U.S. technology giants from Apple and Microsoft to Meta and OpenAI have deepened their footprint in India, expanding AI research, engineering hubs, and partnerships in Bengaluru and Hyderabad. Collectively, FAAMNG companies (Facebook, Amazon, Apple, Microsoft, Netflix, Google) have hired more than 30,000 employees in India in just 12 months, underscoring how indispensable the country has become in their global operations.
For now, India’s IT sector is in “wait-and-watch” mode. While the HIRE Act symbolizes America’s protectionist turn, the practical realities of talent shortages and globalized supply chains may blunt its enforcement.