Trump Immigration Ban
Donald Trump has not had an easy time of it trying to enforce what was intended to be his landmark national security executive order. The Trump immigration ban was halted for the second time, now by U.S. District Judge Derrick Watson of Hawaii, but that has hardly relieved opponents of the ban. With mounting concern from tech companies that Trump will also implement stricter restrictions on workers’ permits and with dark H1-B visa news coming from the administration, many techies are eager to see how it will impact the sector moving forward.
The Trump immigration order and big tech companies intersect in two primary ways: through the H1-B visa workers program and through general immigration with documents like green cards.
First, let’s take a look at the H1-B visa news.
The H1-B visa program is a temporary work permit that allows for non-U.S. citizens to enter the country and gain legal employment. They are often filled out by the companies themselves with the intention of bringing over people with particular skill sets that the companies would otherwise be unable to find in the U.S.
Part of the program is focused on protecting American workers so that companies are not needlessly outsourcing jobs. Therefore the program has a limited run (it often receives many times more applications that it allows) and it also has stringent requirements such as mandating that the applicant have a “specialty occupation . . . that requires the application of a body of highly specialized knowledge and the attainment of at least a bachelor’s degree or its equivalent.” (Source: “H-1B Program,” United States Department of Labor, last accessed April 6, 2017.)
As you can expect, tech companies are one of the biggest drivers of the program as programming is very much in demand and finding people with the proper attributes can sometimes necessitate looking beyond your own borders. Companies like Microsoft Corporation (NASDAQ:MSFT), Google-parent Alphabet Inc (NASDAQ:GOOG), and Intel Corporation (NASDAQ:INTC) have all engaged in the process in the past, among many other big tech companies.
Each year, 65,000 H-1B visas are made available to workers with bachelor’s degrees, while 20,000 are set aside for those with master’s degrees or higher. (Source: “Visa Applications Pour In by Truckload Before Door Slams Shut,” The New York Times, April 3, 2017.)
The Trump administration is looking to create a more rigorous process by which companies can obtain the visas, and therefore potentially reduce the number of accepted applicants. This fits with much of the President’s rhetoric during the campaign trail of putting “America First” and bringing back jobs to the U.S., though there are many critics who believe this will have the opposite effect by encouraging companies to take their business abroad rather than settle in the U.S.
The Trump immigration order is the second set of Trump policies that has many tech companies worried.
The travel ban first instated back in January was struck down in the courts and sent back for revision by the administration. The new order resembles the older ban, with only a few exceptions. While Iraq was dropped from the list of banned countries and the green card bans were also lifted, much of the spirit of the original executive order remains intact. And, as you can imagine from how the last one was routinely challenged across the country, this Trump immigration ban is facing a similar set of trials in many states.
Dozens of tech companies came out against the first order—Apple Inc. (NASDAQ:AAPL), Google, Microsoft, Netflix, Inc. (NASDAQ:NFLX) Spotify, and Uber Technologies, Inc. were among some of the biggest signatories of an amicus brief. A more recent note was also filed for the second iteration of the Trump immigration ban, though this time missing all those key players mentioned above. (Source: “Airbnb, Lyft, and 56 other tech companies file brief opposing Trump’s revised travel ban,” The Verge, March 15, 2017.)
Both the Trump immigration ban and H1-B visa news show that the current federal government is seeking ways to limit the amount of foreign workers coming over, which will be a direct threat to certain tech companies and their abilities to produce (more on that below). While the Trump administration maintains that this will help bring back and secure American jobs, others are not convinced.
“The effect would end up being exactly the opposite of what Trump wants. Companies would go offshore like Microsoft did with Vancouver, Canada” to seek talent, said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, in an interview with The New York Times. (Source: “Tech Industry Frets Over Possible Immigration Changes,” The New York Times, January 27, 2017.)
The administration’s line on the issue has been static, however.
“The Justice Department will not tolerate employers’ misusing the H-1B visa process to discriminate against U.S. workers,” Thomas Wheeler, the head of the department’s civil rights division, said in a statement. (Source: “Justice Department Cautions Employers Seeking H-1B Visas Not to Discriminate Against U.S. Workers,” The United States Department of Justice, April 3, 2017.)
This all plays into the hands of the Trump rhetoric of protecting the American worker, though many tech companies are concerned that what will happen instead is that jobs will go unstaffed or understaffed, and therefore lead to a drop-off in production.
How Stocks Will Be Affected
We’ve covered what’s at stake here from a political sense, but what will the impact be on the tech industry and stock prices?
Take how Microsoft responded to the volatile political climate surrounding these Trump policies earlier in the year.
“Changes to U.S. immigration policies that restrain the flow of technical and professional talent may inhibit our ability to adequately staff our research and development efforts,” the company said in a recent filing. (Source: The New York Times, op cit.)
Big tech companies are going to have make major shifts in production if they previously relied on the steady inflow of skilled immigrants as well as benefited from the H1-B visa program.
With the H1-B visa news looking unsure at best, and both giant tech corporations like Microsoft as well as smaller companies looking to fill key programming positions, they will feel the pain of these immigration bans and reductions if they can’t find suitable alternatives.
Of course, one such suitable alternative may be to begin establishing more offices abroad, which would only complicate the matter further and almost certainly incense President Trump, who’s repeated goal has been to “bring jobs back.”
So where does that leave the stocks of some of these big tech companies? Well, in brief, not in the best position.
These companies not only rely on a steady inflow of new talent, they thrive on it. Look at Sundar Pichai, current CEO of Google. Indian-born, while perhaps not a direct beneficiary of the H1-B visa program, the ability to accept him despite his national origins causing legal trouble was key to him reaching the lofty position where he currently sits.
And that’s a very specific example of an immigrant coming into one of the world’s largest tech companies and reaching the highest position attainable. From the top down, these organizations are filled with people from across the globe who chip in every day to help get their products fleshed out, developed, and brought to consumers.
If the Trump immigration order stays in place and passes the legal challenges, and the H1-B visa news continues along its grim trajectory, we may see a strange brain drain where, instead of talent leaving the country, it’s never allowed to enter the U.S. in the first place.
Who Will Benefit from the Immigration Ban?
Politically, this makes sense for the administration as it is delivering on one of its key campaign promises. On the other hand, from a market point of view, there aren’t very many stocks that will benefit from these moves.
Microsoft Corporation, Facebook Inc, and Apple Inc. are all multinational companies that benefit off of their global appeal to the best programmers in the world. It’s one of the key drivers of their continued success and ability to innovate over the years.
With these new immigration policies coming into place, we may see, if not a severe share price impact, at the very least a deficit in innovation versus what we’re used to, and by extension a slower rate of growth.
These types of policies are more likely to stifle gains versus incur losses, but at the same time, there’s a good chance that these companies may begin to move some of their operations outside the U.S. if the climate becomes too toxic to work within. At that point, tech companies will have to shift resources away from investments and other more lucrative actions and instead focus on infrastructure expansion.
But one big caveat is how this will all shake out when the legal dust clears, especially concerning the Trump immigration ban.
If the court is able to strike it down and keep it suspended or the administration withdraws the order, we could expect to see the market right itself despite the political uncertainty surrounding such an ordeal.
The point being that right now, things are very politically volatile in this area, and big tech companies may be the ones to suffer as a result. Will we be seeing huge meltdowns in stock prices due to these immigration policies? No. But we will see a stifling of innovation, which is what these companies run on. Such an obstacle will likely have little effect on today’s share prices, but down the line, the worse could be yet to come.