Do you think expertise is going to get cheaper or more expensive in the near term? I certainly hear it both ways right now.
On one hand, we have AI systems that can digest great swaths of recorded knowledge and give us quick and easy insights. Bill Gates, while promoting his new memoir, talked about this at Harvard, saying he believes we’re entering an age of “free intelligence,” where the expertise we once relied on specialists for will now be more readily accessible.
On the other hand, why would we expect it to be free? Will these systems remain open as they continue to improve their capacities? Even now OpenAI is working hard to transform into a for-profit company, under pressure, like the rest of the AI powerhouses, to generate real and sizable income from their investments.
And more to the point of today’s article, how are government policies in the US and around the world going to impact this flow of knowledge and experience? One of the less-discussed aspects of outsourcing is how it circulates ideas and know-how.
The global outsourcing market is enormous ($1.09 trillion in 2025 per Mordor Intelligence), and a majority of it is IT. Deloitte estimates that 37% of all accounting and IT tasks currently get outsourced, and I see varying projections for the IT global market, but all point for it to be nearing a trillion dollars annually by itself by the end of the decade.
The reasons for this surge are many, from available skills to cost to coverage, but there’s no doubt that current government policies, including tariffs, are making businesses that outsource anxious.
I think it’s safe to say no one in the private sector is sure what will come next. (Case in point: since I wrote this article yesterday tariffs changed overnight. See below.)
In today’s newsletter, I want to consider the impact of tariffs and this uncertainty on talent sourcing—how it is already being impacted, how it might get more costly, and how different regions are likely to be affected.
The US Trade Policy Tech Impact: Now
I’m guessing most readers don’t need me to recap the tariffs that were enacted by the US this past week and modified again last night. The extremely short form is a blanket 10% on virtually all imported goods (the 20% levied on the EU, and escalating numbers on many other countries, including Japan, South Korea, India, Taiwan, Vietnam, and more, were dropped late in the day on April 9th).
But as of today, China’s sit at 125%.
While this impacts the tech supply chain immensely due to its global reach, services, technically, are not included. (Another exception is semiconductors, which, while essential for AI companies, do not exist in a vacuum.)
There are ongoing negotiations, reprisals, and threats of reprisals, and services are getting thrown in with some of these.
Given the administration’s stated desire to reshore as much of everything as possible, I believe future tariffs on services cannot be wholly discounted.
Around the world, countries are taking action, whether they’re negotiating with the US or not. The EU, for example, has made their own partnerships for goods and services alike, so as to not be unprepared if another shoe drops.
The Impact on Tech Services
As of now, the current tariffs don’t hit services directly. And while this may of course change, there are also other ways outsourced services are being impacted.
These include:
- Pauses on Planned Growth: Companies that were looking to move into affected regions may be halting or slowing plans in response to the costs of materials and goods. This can also impact domestic projects that require outside materials, and of course this can also impact various tech labor solutions in support of these.
- Contract Scrutiny: The increased tensions are triggering re-evaluations on various sides, and this can impact even long-term agreements.
- General Uncertainty: The fluctuations of the market may impact cash flow and how bold organizations will be in the short term with expansions. This undoubtedly impacts labor, though the calculus between short-term and long-term, and on-site and off, is unique to circumstances.
While bringing offshore jobs back to America is a stated desire of the administration, it’s impossible to know the extent to which this will also mean reshoring tech jobs.
The president has publicly backed the position of Elon Musk, for example, on the use of the visa program for foreign tech workers, calling the H-1B a great program.
Trump Media has used nearshore sourcing for their own development work, as well. As described in our PTP Report on recent nearshore impacts, board member Eric Swider stated:
“President Trump maintains an America First policy, which includes prioritizing American workers. Trump Media, however, is a global multi-media company. For a global multi-media company to utilize subcontractors, which in turn may utilize coders located in a foreign country, is a practice common to the industry.”
The US-Mexico Tech Trade: A Look at Nearshore’s Benefits and Risks
There are certainly real benefits, and risks, in considering nearshoring tech solutions like Mexico at this time. With its proximity and overlapping time zones, it’s a much easier lift, and offers greater flexibility to companies than traditional offshore regions.
There’s also a great deal of concern around the southern border, and Mexico has not been spared tariffs. But they do still enjoy a privileged status.
President Claudia Sheinbaum expressed gratitude to have avoided the round of blanket tariffs, expressing optimism that the United States–Mexico–Canada Agreement (USMCA), negotiated in Trump’s first term, would preserve this special relationship.
As specialist in foreign trade at the Mexican Institute for Competitiveness Oscar Ocampo told the AP:
“The United States is closing off to the rest of the world and in relative terms closing off less with Mexico and that is an opportunity.”
And with more than $20 billion in annual IT service exports, Mexico has several rapidly developing tech hubs and an increasing volume of college engineering graduates and technical training programs.
Their Plan México is attempting to attract $277 billion in investments to reduce Asian imports and bolster domestic and North American production. This is part of an ongoing effort to improve their domestic infrastructure, labor readiness, and partnerships abroad.
Nearshore, Reshore, or Distributed: The Prospects for Tech Labor Shifts
Changes in trade policy also include opportunities, and a number of firms are leaping at the chance to help companies adapt.
As reported by Lauren Goode in Wired, Palantir almost immediately unveiled their own AI-driven solutions to help companies smartly manage tariffs, and Mexico City’s Nuvocargo, which sells software to help companies navigate borders, has seen a large spike in business.
The variability of some tariffs, which may be re-negotiated, added again, or removed entirely, has seen a drive for such smart solutions to help companies adapt.
I wrote recently on my Substack about adaptability, and that’s the name of the game at present.
In terms of tech sourcing, this means flexibility, which can mean different approaches for different companies.
No doubt many are investigating AI solutions to lessen the burden on offshore coding needs, for example, and though the technology is improving fast, it’s not there yet, still far better at helping improve quality and efficiency than significantly reducing headcounts.
Offshore remains viable at this time and has the biggest talent pool and greatest potential savings, but if there are tariffs on services, many of the leading nations would be among the first impacted.
A blanket tariff on services would of course cut into the savings everywhere.
Mexico, of foreign nations prime for offshore sourcing, is likely the least dangerous at the time of this writing. Nearshore in general, with its physical proximity, is more appealing than ever for those unable to fully staff their needs at home.
But the most prudent approach might be a more widely distributed one, and many companies with global reach are avoiding putting all eggs into a single basket for this reason.
The PTP Allshores Advantage
At PTP we do tech talent, and have for more than 27 years, including onshore, nearshore, and off. And over the years I’ve seen the advantages for each vary by company and situation.
During the COVID period, we ramped up our nearshore immensely, and the talented individuals we work with have continued to impress me. It really is an ideal mix of proximity, time zone, and cost for many needs, especially for Agile workflows, in this age of AI integrations and improved automation.
But that doesn’t sugarcoat the uncertainties all businesses are facing. We need to stay ahead of the game, and I think that makes it prudent to stay on top of current costs, talent availability, and needs to remain as flexible as possible.
Conclusion
I opened discussing recent considerations about the flow of knowledge, and whether it’s getting cheaper or more expensive in the short term. It’s truly a unique time, with AI promising to accelerate, if not widen, our access to knowledge of all kinds while also feeling increased pressure to generate profit. And of course it’s also at the center of international competition.
In the world of tech labor, I see this already having an enormous impact. But considered against the backdrop of tariffs and ongoing tariff threats, with increased international tensions overall, it’s harder to know what it will mean for organizations in the years to come.
Some things are certain: AI will be part of the solution for those that succeed. And so will adaptability.
References
Bill Gates on AI and Innovation, Harvard Magazine
Trump tariffs list in full: Every country hit and the surprising exemptions, The Independent
Mexico celebrates dodging latest US tariffs but feels the effects of global economic uncertainty, AP Business
Trump’s Tariffs Could Reshape the US Tech Industry, Wired
Mastering Tariffs with Palantir, Palantir blog on Medium
Enhancing supply chain resilience in a new era of policy, Deloitte
