High tariffs and H-1B fee hike could slow US economic growth, says Harvard economist Kenneth Rogoff

Harvard economist Kenneth Rogoff said on Wednesday that the Trump administration’s steep H-1B visa fee hike, along with high tariffs on several countries including India, could slow US economic growth.

The visa fee increase is likely to affect Indian nationals, who have received nearly 70 per cent of all H-1B visas issued in recent years.

“The new visa rules were done in a very haphazard manner and not in a very thoughtful way. Visas for high-skilled workers should be granted more liberally,” Rogoff told PTI Video.

The fee hike comes amid a downturn in US-India relations following Washington’s imposition of 50 per cent tariffs on Indian goods.

”If I were to look at factors holding back the US growth, why I believe US growth is likely to slow down, I would say the tariffs are one reason, but the restrictions on immigration are a huge reason that is going to hold back the US growth,” he said.

At present, the H-1B visa fee that companies pay to sponsor applicants ranges from about USD 2,000 to USD 5,000, depending on employer size and other costs.

”If you were to go to California and go around Silicon Valley, the number of Indian engineers, software engineers, the number of Indians who had majored in the big tech companies, it is phenomenal.

”If you cut off this super talent pool, it is going to have very big effects,” Rogoff, also a former chief economist at the IMF, noted.

He emphasised that the H-1B visa tax is a mistake and the US government should expand the number of these visas.

Rogoff, also an international grandmaster of chess, said India is going to play a larger role over time.

”And so, this idea of sort of declaring a tariff war on India and thinking you can make up later is a very aggressive move.

”So, India is fortunate in being a relatively closed economy most of the time,” he observed.

Rogoff suggested that India has to lower its tariffs and seek trade with other countries.

Asked if India should stop buying cheap Russian oil after Trump imposed an additional 25 per cent levy, he said, ”I hesitate to wade into that. That is a choice India is going to make”.

India is one of the largest importers of Russian crude. The country purchased 1.6 million barrels per day in July.

”I am an American, and we have been very supportive of Ukraine. So, from that perspective, I would like to see India purchase less, much less Russian oil.

”But if you are asking for advice, the government of India is a sovereign state, it has to find what is best for the people of India,” he opined.

Asked if India’s trade tensions with the US escalate further, then what mix of domestic reforms and external positioning would help New Delhi absorb this shock, Rogoff said India has lowered its tariffs gradually over time, but they are still high for a large country.

”The problem with having a high level of tariffs in India is that it makes it difficult to bring in goods needed in production, what we economists call intermediate goods, parts, machines that are used in production,” he pointed out.

Rogoff said high tariffs make India unattractive for any kind of manufacturing base.

”A second reform…many people have pointed out that the Indian economy has become very concentrated,” he said.

Rogoff pointed out that a small number of companies control a huge percentage of the Indian economy, but on the other hand, it has made it hard to start for the small and medium-sized businesses that are really the engine of productivity and growth, even in Europe, even in the US.

”So, over the long run, having a stronger anti-monopoly policy is important for India,” he suggested.

Responding to a question on India’s economic growth, Rogoff said India can certainly aspire to grow at 8 or 9 per cent on a sustained basis.

”There are many areas where India could grow even without big changes. The service sectors become an increasingly important part of the global economy, and India is very, very competitive in the global service sector,” he noted.

Noting that India has been the fastest-growing large economy for some time now, he said the question is how to make it even better.

Responding to a question on India-US trade negotiations, Rogoff said the Trump administration’s strategy is to pick one region or country at a time and not bargain with several nations simultaneously.

”Trump feels that by isolating economies, he can strike better deals, and he can be more aggressive.

”But, I think in the long run, one has to expect China, India, the European Union, Brazil, other countries, to have a more unified front against the United States,” he said.

As that happens, Rogoff said, the world is going to see a lot of retaliation, and hopefully, ultimately, a rollback of some of the Trump tariffs.

With inputs from agencies

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