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For years international policymakers have pushed to make it cheaper for migrants to send remittances home. As with so many of Donald Trump’s interventions, the US president has turned that logic on its head: he wants to make it more expensive. Contained in the 1,000-plus pages of the “big, beautiful bill” going through Congress is a mean-spirited measure to tax money sent abroad by non-US citizens, including visa holders and permanent residents.
The average fee to transfer $200 abroad is 6.4 per cent, according to the Migration Data Portal. The US levy would push that to nearly 10 per cent, making the US — the world’s top source of remittance flows with annual transfers of at least $80bn — the most expensive G7 country from which to transfer money.
Claudia Sheinbaum, president of Mexico, which receives remittances worth 4 per cent of GDP, has called the levy a tax on the poor. Countries in Central America, including Nicaragua, Guatemala and Honduras, which rely on remittances for as much as a quarter of GDP, are likely to be far harder hit.
Coming on top of savage cuts to aid and the threat of punitive tariffs against some of the world’s poorest countries, such as Lesotho and Madagascar, the proposed levy on remittances is a further blow to countries in desperate need of capital.
Trump’s remittance tax, of course, is not a design flaw, but part of a deliberate strategy to flush out immigrants, legal or otherwise. Americans sending money abroad will have to prove they are citizens to avoid the levy.
That could plausibly deter some illegal migration to the US. More likely, remittances will be pushed into crypto and stablecoins or through underground hawala “trust” networks, making flows harder to monitor by tax and law-enforcement authorities.
The proposed levy is part of a broader Trump strategy to weaponise the tax system against perceived foes, whether groups such immigrants or, institutions such as Harvard University.
Senators ought to oppose a punitive tax on hardworking people who send part of their wages home, especially at a time of tax giveaways for the rich. Countless studies have shown that such flows improve health and education outcomes in recipient countries.
In 2024, remittances hit $685bn, dwarfing aid flows of $212bn that year, a gap that will only widen with cuts to overseas aid. Such flows have proved resilient to global shocks such as the 2008 financial crisis and the Covid pandemic. In the 10 years to 2024, according to the World Bank, remittances rose 57 per cent while FDI fell 41 per cent. In 2019, they overtook foreign direct investment to developing countries for the first time.
From the perspective of recipient countries, remittances then are a vital source of finance. The most remittance-dependent countries include Tajikistan, at 45 per cent of GDP, and Lebanon, at 27 per cent. Liberia receives about $800mn in remittances a year, nearly the same as its entire budget.
Faced with swingeing debt repayments and an exorbitant cost of commercial capital, many developing countries have come to rely on these transfers. That does not make remittances a viable development strategy. Developing economies should do everything to create the conditions for sustainable investment, the only long-term route out of poverty. Sending the best and brightest abroad can only take an economy so far.
Still, the reality is that, in an environment of shrinking access to capital, remittances are a global safety valve. Trump’s levy is part of a much bigger squeeze on capital flows to the poorest countries. Little good is likely to come of it.
