Navigating Uncertain U.S.–India Relations: How Foreign Companies Can Still Hire in India with Ease

The 2026 update: a trade framework, and hiring decoupled from tariffs

Since this article was first written, the picture has moved on materially — mostly in employers' favour. In February 2026, the United States and India announced a framework for an interim trade agreement, with reciprocal tariff rates on Indian goods reduced from their 2025 peak and both governments committing to negotiate a broader bilateral trade agreement, targeting a sharp expansion of two-way trade by 2030. The direction is towards stabilisation rather than escalation.

More important for hiring decisions is a distinction many boards miss: tariffs apply to goods, not to employing people. A US company employing engineers, analysts or support staff in India pays no tariff on that arrangement — the cost of an India-based team is untouched by trade measures. The friction that does exist (goods duties, visa costs) actually strengthens the case for building teams inside India rather than moving Indian talent to the US or exporting finished goods. Employment-based India strategies have proven to be the most tariff-resilient form of India exposure available, and they can be started through an Employer of Record in India without waiting for any treaty to conclude.

H-1B costs are accelerating the shift to India-based teams

The steep new H-1B fees announced in late 2025 changed the arithmetic of relocating Indian talent to the US: for many roles, the visa cost alone now exceeds a full year of the equivalent India-based salary. The market response has been rapid and visible. Rather than absorbing six-figure visa costs per head, US companies are expanding Global Capability Centres (GCCs) in India or establishing new ones — and the work moving to these centres is increasingly high-value engineering, product management, architecture and digital roles, not just back-office processing. Hiring has also spread beyond the metros: Tier-2 cities such as Coimbatore, Kochi and Ahmedabad now take a meaningful share of GCC hiring, supported by state policies like Maharashtra's dedicated GCC framework. For a US employer, the same talent that was priced out of relocation is available — often with lower attrition — as an India-based employee.

Three ways to build an India team in 2026

The right structure depends on scale, permanence and how much compliance you want to own. The table below compares the three routes foreign companies actually use, verified against current practice by the TMS compliance team.

These routes are sequential, not mutually exclusive: the standard 2026 playbook is to start with an EOR to get productive quickly, and migrate the team to your own entity once headcount and confidence justify it. Whichever route you choose, hiring in India now happens under the four Labour Codes in force since November 2025 — mandatory appointment letters, a uniform wage definition, and consolidated statutory compliance obligations — so the partner you select should demonstrate Labour Code fluency, not just payroll processing. For sourcing the talent itself, a dedicated talent acquisition capability shortens time-to-productivity considerably in a market where good candidates hold multiple offers.

Frequently asked questions

Do US tariffs affect hiring employees in India?

No. Tariffs are duties on goods crossing borders; they do not apply to employing staff in India or to services delivered by an India-based team. The 2026 interim trade framework has in any case reduced tariff rates from their 2025 peak, but even at the peak, employment costs in India were unaffected.

Is it still safe for a US company to hire in India in 2026?

Yes. The February 2026 trade framework signalled stabilising relations, India's Labour Codes have made employment rules more uniform and predictable, and thousands of foreign companies continue to hire through GCCs and EOR arrangements. The main risk is compliance execution, not geopolitics — which is managed by choosing the right local employment partner.

Do I need an Indian entity before hiring?

No. An Employer of Record employs your selected candidates on your behalf, giving you a fully compliant team — appointment letters, PF, insurance, payroll and filings — without incorporation. Entity setup can follow later if the team grows to a scale that justifies it.

How does the H-1B fee increase change India hiring strategy?

It shifts the economics decisively towards employing talent in India rather than relocating it. Companies that previously sponsored visas are redirecting those budgets into India-based roles — the same person, employed compliantly in India, typically costs less than the visa fee alone, with none of the immigration uncertainty.

Planning an India team amid the current trade environment? Speak to TMS about the fastest compliant route in.