"US International Student Exclusion Policy to Cause Annual GDP Loss of $240 Billion: Peterson Institute"

The implementation of international student exclusion policies by the Trump administration during its second term resulted in a one-third decrease in the number of incoming international students compared to previous levels. According to an analysis, this is expected to cause an annual gross domestic product (GDP) loss of at least $240 billion to $481 billion (approximately 360 trillion to 722 trillion won) over the next decade. This figure is comparable to the regional GDP of states like Wisconsin or South Carolina.

Michael A. Clemens, nonresident senior fellow at the Peterson Institute for International Economics (PIIE), stated this in an article published on June 23 (local time) titled “The US is driving away international students at a long-term economic cost.”

The following summarizes the main points.

For generations, students from around the world have supported US universities, which have long been the premier study-abroad destination. These students not only sustain an annual $43 billion higher education export industry; many also remain in the US after graduation, serving as a vital source of highly skilled science and engineering talent, thereby supporting innovation and growth in the US economy.

However, this system is now breaking down. The White House has implemented a series of policies aimed at massively restricting and excluding international students. If these changes persist, they will undermine the US economy in multiple ways, according to a new PIIE policy brief, “Class Dismissed: The Exclusion of International Students and Its Impact on the US STEM Workforce and Economic Growth.” I co-authored this policy brief with Amy M. Nice and Jeremy Neufeld, based on a study commissioned by the US National Academies of Sciences, Engineering, and Medicine.

International Student Exclusion Is Underway

Since early 2025, the Trump administration has ordered various measures to reduce the number of international students in the US. First, universities were instructed to cap international student enrollment, with threats to cut off federal financial support for non-compliance. In addition, student visas were denied to nationals from 38 countries.

Second, US authorities made it significantly harder for international students to enter the American labor market after graduation. They eliminated the “duration of status” provision for student visas, seeking to impose a fixed expiration date, which exposed students to uncertain renewal conditions during their studies. Furthermore, authorities adjusted the H-1B skilled worker visa lottery to favor more experienced workers, thus lowering the chances for recent graduates. They also instructed immigration officers to deny green card status adjustments for student visa holders except in extremely rare cases.

This policy program has already led to a sharp decline in international student inflow. By September 2025, the number of F-1 student visas issued by the US was about one-third lower than the typical levels in recent years. Except for the pandemic year of 2020, there has been no comparable decline in recent years. Although the government has refused to release more recent visa statistics at the time of writing, the impact will only deepen over time.

This is not a side effect of US policy but an explicit objective. US Vice President JD Vance has described international students as a threat to the American dream for “many children who want to attend good colleges but cannot lose seats to foreign students.” Joseph Edlow, Director of US Citizenship and Immigration Services, has clearly stated that making it “very difficult” for foreign students to continue living and working in the US is the goal. Students are getting the message. In a survey we conducted of 1,039 current international students and postdoctoral researchers, most in science and engineering, we asked how their decisions might have changed had they known about these new and dramatic restrictions. About half responded that they “probably” or “definitely” would not have come in the first place.

The Long-Term Cost to the US Economy

If these policies persist, they will restrict a crucial supply of science and engineering talent that the US economy needs, lowering productivity and slowing economic growth in the long term. Using imperfect but currently the best available estimates from economic research literature, we forecast the losses should the one-third drop in international student inflow continue. Over ten years, the US’s real GDP will be lower than it otherwise would have been. The estimated annual loss, based on current GDP, is $240 billion to $481 billion. This is equivalent to erasing the entire economies of states like Wisconsin or South Carolina each year.

The fact that such large numbers result from government policies targeting students may be met with skepticism. The impact on productivity is indirect, diffuse, and uncertain. In 1976, few Americans would have predicted that Sanjay Mehrotra, who barely overcame three visa denials from India to earn an engineering degree in the US, would go on to lead a $1 trillion company (Micron Technology) today. Long-term effects, by nature, are not visible at any one moment. However, economic research provides a clear analysis. We estimate the effects in three stages: from student to highly skilled STEM worker, from workforce to productivity, and from productivity to GDP.

Let’s start with the workforce. Foreign-born workers make up 30% of all US STEM workers. Among those holding doctorates, the figure is 49%. A significant portion of these entered as international students. Foreign-born, US-educated workers account for 19% of all highly skilled STEM workers, and 35% among doctorate holders. This pattern is no accident. The US immigration system offers almost no direct pipeline for recruiting skilled workers from abroad. Employment-based green cards overwhelmingly go to individuals already in the US, and the H-1B visa mostly serves to retain workers rather than recruit new ones. As one National Academies panelist put it, “The US has a talent recruitment program. It’s called graduate school.”

Now, consider the impact of exclusion on this workforce. Suppose the inflow of foreign-born STEM graduates entering the US labor market had been one-third lower each year, based on actual observed retention rates. Today, the highly skilled STEM workforce would be 6.2% smaller overall and 11.5% smaller among doctorate holders. While this calculation is mechanical, it is conservative compared to the research literature. Studies show that foreign-trained STEM workers abroad can replace US-trained workers only to a very limited extent from the perspective of US employers. In addition, reducing the number of international students leads to lower tuition revenue, which in turn reduces opportunities for US students to obtain STEM degrees at US universities.

Finally, let’s examine productivity. The best available estimate is that for each 1 percentage point increase in the share of highly skilled foreign STEM workers in the US workforce, the annual total factor productivity growth rate rises by 0.27 to 0.54 percentage points. Applying this in reverse, highly skilled STEM workers make up 4.7% of the US workforce. Reducing this number by 6.2% drops their share by 0.29 percentage points, causing annual productivity growth to fall by 0.08 to 0.16 percentage points. Over ten years, compounded, GDP would be 0.79% to 1.57% lower than it otherwise would have been. For the current $30.4 trillion US economy, this translates to an annual loss of $240 billion to $481 billion. This is a massive and permanent loss.

These estimates are conservative for at least three reasons. First, they exclude the direct losses suffered by universities, related businesses, and college towns, which alone amount to tens of billions of dollars annually. Second, the model assumes the one-third decline does not deepen. Many of the student restriction policies were implemented after September 2025, but related information had been leaking out beforehand, so the decline in student inflow depicted here is likely to deepen further. Third, limiting the ability of students to remain in the US and contribute to the economy will ultimately discourage students from coming in the first place—especially the most talented, who have more choices.

Of course, this calculation assumes that other workers do not fill the gap. In the policy brief, we tested this assumption with two possible replacement sources, but neither passed the evidence test. When the government significantly expanded employment for foreign graduates educated in the US after 2008, workers applying from abroad were not crowded out of the H-1B visa pool. There is little reason to expect that a reverse process would lead to a massive inflow to fill the gap. Additionally, studies of US-born students found displacement effects only at a handful of elite schools with fixed enrollment caps. Across the broader higher education system, tuition paid by international students expands programs available to everyone.

This content was produced with the assistance of AI translation services.