President Donald Trump signed an executive order on Friday mandating a $100,000 application fee for “highly-skilled” foreign workers entering the country on HB-1 visas, causing panic and confusion as companies urged traveling employees to race back to the U.S. before the ruling goes into effect.

The H-1B work visa is typically used by technology companies to hire highly skilled foreign workers in “specialty occupations” such as data science, software engineering and other science, technology, engineering and mathematics fields.

With the hefty new fee, Trump said he’s trying to curb abuse of the H-1B program, ensuring only the “best of the best” will be able to enter the country and take employment this way. Prior to the order, companies were only required to pay an official fee of $215, although additional fees would mean that the costs in reality could rise to a few thousands dollars. But the new $100,000 is far in excess of this.

In a statement to the press, U.S. Commerce Secretary Howard Lutnic explained that the idea is that “big tech companies” will stop training foreign workers and instead look to hire Americans. “They have to pay the government $100,000, then they have to pay the employee, so it’s just not [economical],” he said, before claiming that “all of the big companies are on board.”

H-1B visas have long been singled out by Trump as part of his clampdown on immigration. The visas are widely used by companies in Silicon Valley to hire engineers, data scientists and coders from foreign countries such as India. They’re also used by companies in specialist industries, such as healthcare providers and accountancy firms.

Some Trump supporters have expressed support for the H-1B visas, with one of the most prominent being his largest donor Elon Musk. But others, such as the former White House strategist Steve Bannon, have called for the program to be abolished in order to protect American workers.

Anyone entering the U.S. on a H-1B visa must hold at least a bachelor’s degree, but critics argue that this doesn’t set the bar high enough. They say companies exploit the scheme to hire cheap foreign labor at the expense of American workers, paying them as little as $60,000 per year.

To back up its claims, a fact sheet published by the Trump administration shows that the number of information technology workers with H-1B visas has risen from 32% in 2003 to more than 65% in recent years. Meanwhile, the White House says unemployment among U.S. computer science graduates stands at 6.1%

According to Lutnick, the new fee will mean there are far fewer H-1B visa applicants than what the current 85,000 annual cap allows, because it’s no longer economically viable for companies. “If you’re going to train people, you’re going to train Americans,” Lutnick said. “If you have a very sophisticated engineer and you want to bring them in… then you can pay $100,000 a year for your H-1B visa.”

Impact on startups and questionable effectiveness

However, many were quick to criticize the new fees, saying that their imposition would cause enormous problems for U.S. startups that struggle to find affordable U.S. workers to fill specialized roles. Musk, who previously held a H-1B visa before becoming a naturalized U.S. citizen, has said the program is essential for American companies to fill talent gaps and remain competitive.

In a post on LinkedIn, Y Combinator Chief Executive Garry Tan said Trump’s decision is a mistake that “kneecaps startups” and represents a “massive gift to every overseas tech hub,” including Toronto and Vancouver in Canada. “In the middle of an AI arms race, we’re telling builders to build elsewhere,” Tan said. “We need American Little Tech to win — not $100K toll booths.”

Deedy Das, a partner at the venture capital firm Menlo Ventures, said on X that the fees “creates disincentive to attract the world’s smartest talent to the U.S.,” and that it will “drastically reduce its ability to innovate and grow the economy.”

Others have questioned if the policy will even help to protect American jobs. In the case of specialists such as data scientists, the amount may only represent a fraction of their signing bonus, said Rob Enderle of the Enderle Group. He said he fees are really just a “tariff” on human labor. “It’s a one-time fee that goes to the government, and after paying it, the company can still underpay the foreign worker as a means of recouping that fee, which means they can still displace local talent,” the analyst said. “Really, all it’s going to do is generate money for the government.”

The fees may also increase the exploitation of foreign labor, because employers may well even lower salaries to offset the costs of the visa, Enderle said. Also, by paying the fee, it means employers effectively control their employees’ visas and can threaten to cancel them if the employee complains about their reimbursement or working conditions. So exploitation may become even more pronounced, the analyst believes. “Paying this kind of money for a human worker feels a bit like modern slavery, as it means the employer effectively owns the employee,” he said. “I don’t think history will recall this policy fondly.”

Another issue is that U.S. companies won’t necessarily have to hire local talent instead, for they still have the option to hire foreign workers remotely and pay labor rates consistent with their country of origin, Enderle said.

“A better fix that would properly address the problem of companies bringing in cheap labor is to enforce labor equality and ensure that foreign workers are not underpaid,” Enderle said. “If companies are made to pay foreign workers the same salaries as they do to domestic workers, then it’s going to be less risky and cheaper overall to hire someone who is local, because they are native.”

However, some analysts are more optimistic that Trump’s policy may at least have the desired impact of boosting hiring in the U.S. Nevertheless, Ray Wang of Constellation Research Inc. told SiliconANGLE there may also be unforeseen consequences of this move.

He said that simple economics dictates that there will be far fewer petitions for H-1B visas, and that instead, American firms will look for local talent. However, he predicts enterprises will also look to solve the talent shortages by accelerating automation and expanding their reliance on global capability centers, or strategic offshore entities set up by corporations to reduce the need for outsourcing.

“In the short-term we’ll see an increase in GCC’s in India especially and more hiring of U.S. citizens, but at the same time there will be growing pressure to deliver AI automation,” Wang said. “We’ll also see far fewer H-1B workers and less job mobility. Unfortunately, in the long term, the new world order on services economics may have devastating effects on the ability of U.S. companies to attract the best and brightest talents, especially at a time when Middle East countries like Saudi Arabia, Qatar and the UAE are ramping up the talent war.”

Tech firms panic-stricken

Trump’s proclamation initially sparked panic and confusion, with companies such as Amazon.com Inc. and Microsoft Corp. issuing emergency guidance to H-1B visa holders, urging them not to leave the country until the new rules were clarified. They also asked employees currently overseas to return to the country before the new measures came into force on Sunday. The two companies are among the biggest beneficiaries of the program, and had more than 15,000 H-1B visa applications approved in the most recent fiscal year, according to the U.S. Department of Homeland Security.

“If you have H-1B status and are in the U.S.: Stay in the country for now, even if you have travel planned for the immediate future,” Amazon told employees in an email, according to Business Insider. The guidance also advised H-1B and H-4 holders currently outside the U.S. to return to the country as soon as possible. H-4 visas are for spouses of H-1B holders.

Panic ensued as thousands of H-B1 and H-4 visa holders – fearing they would be subject to the new fee – reportedly raced to get back to the U.S., in some cases just hours after leaving the country.

On Saturday, White House officials sought to end the confusion, clarifying that the new fee would only apply to new H-1B visa applicants, not existing holders or those renewing their visas. Moreover, the new fees will only kick in during the “next cycle” of applications.

“Those who already hold H-1B visas and are currently outside of the country right now will NOT be charged $100,000 to re-enter,” White House Press Secretary Karoline Leavitt said in a statement. “H-1B visa holders can leave and re-enter the country to the same extent as they normally would.”

Her comments were in direct contrast to Lutnick’s, who said on Friday that the fee would apply “annually.”

Photo: White House