Page 12 - The Indian EYE 082225

The Indian Eye
OPINION AUGUST 22, 2025 12

Tariffs and protectionist policies: Impact

on the IT industry and outsourcing

cerns in the future.
It may be a temporary sign of re-
lief but can haunt the IT services com-
panies in the future. However, the kind
of technology professionals India pro-
duces and the kind of projects that In-
dian companies do for US companies
will be difficult to replicate by other
companies including the US technolo-
gy companies. However, only time will
tell how things shape up in the future.
Experts say that, however, a se-
rious trade war owing to reciprocal
H S PANASER tariffs could lead to indecisive periods
of business for a couple of quarters
ecent developments suggest for Indian IT services companies be-
that the global IT industry, leading to increased labor costs and automation and AI to mitigate risks fore the shocks and aftereffects are
Rand specifically the outsourc- a possible skills gap in certain areas. associated with geopolitical shifts absorbed leading to a slower rate of
ing sector, is grappling with significant and protectionist policies. growth as the possible outcome.
changes stemming from the re-imple- 3. Impact on outsourcing • The long-term impact will depend As US President escalates trade
mentation of tariffs and a potential to India on the evolution of trade policies, tensions with India, analysts warn that
shift towards more protectionist poli- • India has historically been a leading the ability of companies to adapt a more critical challenge may be ap-
cies in the US. to changing environments, and the proaching US work visas. While tariffs
destination for IT and engineering strategic choices made by both gov- on Indian goods have grabbed head-
services outsourcing due to its large
1. Tariffs on goods and their pool of skilled professionals and ernments and businesses. lines, India’s long-standing access to the
ripple effect cost-effective delivery models. Note: The information above represents American job market—especially for
• While tariffs primarily target physi- • While tariffs are not directly im- a snapshot based on the provided search tech professionals—now appears vul-
nerable to shifting US Political winds.
results. The situation remains dynamic
cal goods, their impact extends indi- posed on services, the broader and subject to ongoing developments and India has been a major recipient
rectly to the services sector, includ- economic impact and protectionist policy changes. of US work visas, notably the H-1B
ing IT and outsourcing. policies could indirectly affect the
• Businesses may face pressure to cut Indian outsourcing industry. • U.S. President Donald Trump is program that powers its $250 bil-
asking Big Tech and manufacturing
lion IT services industry. These visas,
costs in the face of rising expenses • Clients may exert pressure for low- giants to stop “hiring in India.” along with the offshoring of business
from tariffs, potentially leading to er costs and faster outcomes, poten- • The USA has unveiled an aggres- and software services, have enabled
reduced spending on IT services tially compressing profit margins for sive new AI Action Plan, to make Indian firms to scale globally. But they
and outsourcing contracts. Indian IT firms.
the US the “#1 leader in AI”.
• For example, tariffs on hardware • However, experts suggest there • What does USA want? To bring AI are also politically sensitive in the US,
where Trump’s base has long criticized
components and tech products isn’t a predicted mass exodus of jobs, factories, and innovation back to them for taking away American jobs.
could drive up operational costs for outsourced work from India, but U.S. soil, and not give it to outsiders. While trade disputes may be negoti-
cloud and fintech firms, who may rather incremental adjustments like It is currently a wait-and-watch ated, visa access is harder to insulate
in turn pass those costs to clients or increased nearshoring and captive policy for Indian IT services compa- from political pressure, especially
seek alternative sourcing strategies. operations. nies regarding the new tariffs and visa during an election cycle in the US.
• Indian IT firms are adapting by fo- policies being embarked upon by the With immigration, jobs, and foreign
2. Calls for American focus cusing on digital acceleration, AI US President. Experts point out that technology partnerships becoming
and visa policies implementation, and workforce many companies are treading very flashpoints in domestic debates, In-
• The US administration has been vo- restructuring to maintain competi- cautiously especially and are observ- dia’s pathway to the American labor
tiveness and offer specialized exper-
cal in its demand for American tech tise beyond just cost advantages. ing how things shape up as the United market could come under fresh scru-
giants to prioritize hiring American States keeps unfolding its policies. tiny. What began as a tariff dispute
workers over overseas outsourcing, Undoubtedly most of the reve- could now turn into a broader realign-
particularly to countries like India. 4. Considerations for nue for Indian IT services companies ment—one that challenges not just
• This stance, coupled with potential the future comes from the US market and thus it trade ties but the human capital link
shifts in visa policies (like stricter • The IT industry faces increasing is one of the most important regions that has anchored US-India relations
H-1B regulations), could signifi- geopolitical tensions, technological for them. Corporates in the US might for decades.
cantly impact the pipeline of skilled advancements (including AI), and go slow in technology adoption which
Indian professionals entering the the need to navigate complex global in turn might slow down new deals for H S Panaser is the Chair, Global
US tech workforce. supply chains and regulatory envi- the Indian IT services companies. Indian Trade and Cultural Council l
• This could force US companies to ronments. Currently though, not much has Consultant: Business Development,
re-evaluate their outsourcing strate- • Companies should proactively build been touched upon by the US Gover- Pharmaceuticals, IT, Healthcare and AI
gies and potentially explore options resilient strategies, explore alterna- ment with regard to the immigration l EDP I Project Management I President,
like nearshoring or domestic hiring, tive sourcing models, and invest in of professionals, there could be con- Global Indian Diaspora Alliance .

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