Gary Tan, CEO of Y Combinator—the world’s largest startup accelerator—was direct in his September 2025 assessment of Trump’s new H-1B visa policy: “This won’t bother big tech,” he told Fortune. “But it will kneecap startups.”
For mid-market manufacturers and emerging tech companies, the math is unforgiving. The $100,000 fee, effective September 21, 2025, applies to every new H-1B petition filed by U.S. companies seeking to hire skilled foreign workers. For a startup hiring an engineer to lead product development, that’s $100,000 on top of existing visa fees ($1,700–$4,500) and salary commitments of $130,000–$180,000 annually. For a mid-market manufacturer hiring one specialized technician, it’s what used to cover two positions.
By January 15, 2026—the deadline for 2025 H-1B lottery filings—executives made hard choices. Some moved positions to Toronto. Others accelerated automation. All reconsidered whether the U.S. remains the optimal place to build.
This is your decision point: How will your business respond?
THE IMMEDIATE SHOCK: TWO POLICY CHANGES, ONE LABOR CRISIS
The Trump administration implemented two major shifts to skilled worker immigration that will reshape hiring across tech, healthcare, manufacturing, and construction through 2026:
The $100,000 Fee
The proclamation, signed September 19, 2025, imposed a $100,000 annual fee on new H-1B visa applications. This stacks on top of existing fees and requires companies to meet prevailing wage standards. For a startup, this is typically absorbed from engineering budget. For a manufacturer, it’s a hard capital decision.
Commerce Secretary Howard Lutnick framed the policy intent bluntly: “Do we need to have a person valuable $100K a year to the government, or should they return home and hire an American?”
Wage-Based Selection
The administration replaced the random visa lottery with a wage-based system prioritizing only the highest-paid positions—”Level 3-4″ roles in USCIS terminology. This effectively eliminates entry-level specialized positions: the postdocs, junior researchers, and emerging engineers that fuel innovation pipelines.
Together, these changes will reshape the 2026 labor market. Historical precedent provides the warning: During Trump’s first term (2017–2020), H-1B denial rates reached 24% in FY 2018. If 2026 follows that pattern, visa filings will decline sharply—likely 40–50% or more as companies reassess sponsorship strategies.
SECTOR-BY-SECTOR: WHO GETS HURT, WHO SURVIVES
Tech and Software: Consolidation and Offshoring Accelerate
Large tech companies (Microsoft, Amazon, Google, Apple) can absorb the $100,000 fee. Startups and mid-market firms cannot. The result is structural consolidation: talent pools concentrate at Fortune 500 companies. Startups that previously hired 3–5 visa workers will hire zero. R&D moves overseas.
As Tan noted to Fortune in September: “This is a massive gift to every overseas tech hub. Tech hubs like Vancouver or Toronto will thrive instead of American cities. In the middle of an AI arms race, we’re telling builders to build elsewhere.”
Chetal Patel, Head of Immigration at Bates Wells, confirmed the competitive shift: “With many global tech firms already established in Britain, and advantages like the English language and proximity to Europe, the UK is well-positioned to attract a surge in high-skilled visa applications.”
Manufacturing: Double Squeeze Begins
Manufacturers face a dual crisis. Tariffs have increased the cost of imported materials by 15–20%. Labor shortages from immigration policy will increase the cost of domestic workers or force automation investments. The equation doesn’t work.
ISM Manufacturing Survey respondents, interviewed in November 2025, painted a clear picture. A transportation equipment executive reported: “We are beginning to implement more lasting changes due to the tariff environment. This encompasses workforce reductions, new directives for shareholders, and the establishment of additional offshore manufacturing that would have previously catered to U.S. exports.”
A petroleum and coal industry executive was similarly stark: “As we move towards 2026, we anticipate substantial shifts in cash flow and workforce size. The company has divested a significant portion of its operations that produced free cash while offering voluntary severance packages.”
The ISM Manufacturing Employment Index fell to 44.0 in November 2025—the lowest level since August—as 67% of panelists reported “managing head counts” rather than hiring.
Healthcare: Specialist Shortage Emerging
Hospitals and physician groups depend on foreign-trained specialists to staff underserved areas. The fee eliminates this pathway. Rural hospitals already facing capacity crunches will face acute physician shortages. Research institutions lose international postdocs. Medical school innovation slows.
Construction: Labor Shortage Meets Affordability Crisis
Construction imports roughly 12–15% of its workforce. With the $100,000 fee and existing deportation enforcement, construction firms will face acute labor shortages. Home builders already warn of project delays and cost pressures.
THE WAGE PARADOX: WHY THIS POLICY MAY BACKFIRE
The administration frames this as “protecting American workers.” But economic evidence suggests a different outcome.
When you reduce the supply of skilled workers without reducing labor demand, those workers don’t get hired—the work moves overseas. A 2017 NBER study examined the 2004 H-1B cap reduction and found: “The reduced pool of foreign workers did not lead firms to hire more Americans.” Instead, firms offshored the roles.
Conversely, Stanford research (2020) found that startups with higher H-1B visa ratios were more likely to secure VC funding, generate patents, and achieve IPO or acquisition. This suggests H-1B workers don’t substitute for American workers—they complement them, driving broader innovation and job creation.
The paradox is sharp: Immigration restrictions intended to protect wages may accelerate the exact offshoring they oppose.
THE COMPETITIVE LANDSCAPE: WHO WINS?
Winners:
- Large tech incumbents (who can afford the fee and absorb costs)
- Automation and AI companies (now incentivized to invest heavily)
- Offshoring firms and international tech hubs (Canada, UK, India)
- Consulting and outsourcing providers
Losers:
- Startups (priced out of global talent access)
- Mid-market manufacturers (facing labor shortage + tariff squeeze)
- Healthcare systems in rural areas (loss of specialist pipeline)
- U.S. innovation ecosystem (brain drain, offshoring of R&D)
- American workers in dependent industries (losing jobs as companies offshore responses)
WHAT EXECUTIVES SHOULD DO NOW
For Tech Firms: The window is closing on 2025 H-1B filings (deadline: January 15, 2026). Make your hire/no-hire decisions immediately. If you’re keeping roles in-house, file now. If you’re considering remote work or offshoring, accelerate planning. Explore wage-based reclassification (O-1 visas for extraordinary talent) as alternatives.
For Manufacturers: Model two scenarios: (1) labor costs rising 15–20% due to shortage, or (2) automation investments beginning now. Neither is cheap. Both should begin in January planning. Don’t assume offshoring is fast—establish alternative supply chains now.
For Healthcare Systems: Audit your foreign-trained workforce and retention plans. Prepare for specialist shortages in underserved areas. Budget for wage increases to retain talent.
For All Firms: Expect a tight labor market in 2026 driven by constrained supply, not strong demand. Compensation competition will intensify despite slower economic growth. Offshoring and automation investments will accelerate.
BOTTOM LINE
Trump’s immigration policies will reshape the 2026 labor market. The $100,000 H-1B Visa fee creates instant competitive advantage for large firms and incentivizes offshoring for everyone else. Manufacturing faces a compounding crisis of tariffs plus labor shortage. Healthcare and construction will experience capacity pressures.
The policy irony cuts deep: Designed to protect American jobs, it may accelerate the exact offshoring it opposes.
The decision point is now. Your business strategy for 2026 depends on whether you move roles, automate, or absorb costs. Executives who decide this month will move faster than those who wa
