Remittance Tax: Who Will Pay the Real Cost of Trump's Law?

Beyond the political debate, the implementation of the 1% tax on cash remittances by the United States raises a crucial economic question: who will actually bear the cost, and what will be the net impact on the already fragile economy of millions of Mexican households?

The Trump administration's new tax on remittances, although limited to 1% and limited to cash transactions, impacts one of Mexico's most important sources of income. With a flow that reached $64.7 billion in 2024, remittances are a macroeconomic pillar that sustains domestic consumption and stabilizes the balance of payments. However, the true impact is measured in the microeconomy of nearly 4 million households that depend on this money for subsistence.

The analysis of the economic impact of this measure has generated an interesting debate among specialists, with two main theories on how the burden will be distributed.

Some analysts, such as Gerónimo Ugarte of Valmex Casa de Bolsa, maintain that the impact on the amount of money arriving in Mexico could be limited. They argue that migrants in the United States, whose primary goal is to support their families, will adjust their own consumption patterns to offset the tax and continue sending the same amount of money.

Implication: Under this scenario, the real cost is borne by the migrants themselves, reducing their already precarious quality of life in the United States to protect their families in Mexico. This would primarily affect the 4.1 million undocumented Mexican migrants estimated by BBVA Research.

On the other hand, experts like Genoveva Roldán, a researcher at the UNAM Institute of Economic Research, warn of a more serious risk. They believe that the measure, rather than reducing migrants' purchasing power, could encourage the use of informal and unregulated channels for sending money.

Implication: This scenario is doubly dangerous. First, it could reduce the official flow of remittances recorded by the Bank of Mexico. Second, and more importantly, it would expose migrants and their families to fraud, theft, and the influence of money laundering and organized crime networks.

"The fact that there has been so much cooperation between the two countries... may encourage future documented migration and, above all, prevent the informalization of capital flows," concluded one analyst, stressing the importance of not deteriorating bilateral relations.

Regardless of which theory prevails, it is a fact that the tax will not affect everyone equally. By focusing on cash transactions, the law directly targets the most vulnerable segment of the migrant population: those who are unbanked, often undocumented, and working in the informal economy.

The reality will likely be a mix of both scenarios. Some migrants will make sacrifices to send the same, while others, out of necessity or misinformation, may fall prey to informal channels. The only certainty is that the law, while economically insignificant for the U.S. treasury, represents a new layer of pressure and precariousness for millions of Mexicans on both sides of the border.