President Donald Trump's "big, beautiful" bill, about to face the Senate, entails a new 3.5% tax on remittance transfers from non-citizens, drawing widespread criticism for disproportionately affecting poor migrants while failing to completely close off channels for sending money overseas.

What Happened: The United States was responsible for over $656 billion in global remittances in 2023, and the newly passed tax is applicable to all remittances made by individuals who are not US citizens or nationals, according to the Financial Times.

 While the tax was reduced from a previously proposed 5% rate, experts expect the new cost burden to fall heaviest on low-income Central American migrants. According to Andrew Selee of the Migration Policy Institute, "It is essentially a tax on the very poor." The U.S. citizens sending money wishing to send money abroad will have to provide proof of their nationality to receive a refund.

Mexico, which received $65 billion in remittances last year, entailing more than 4% of its GDP, has reacted promptly. President Claudia Sheinbaum has called the tax discriminatory and instructed lawmakers to raise concerns in Washington. However, analysts project that the economic impact on Mexico may be limited.

See Also: IMF Sounds Alarm On US Debt As Trump Eyes Tax Cut Extension: Report

Why It Matters: The tax is part of a larger effort to stop undocumented immigration and increase deportations. The effects could be felt most intensely in countries like El Salvador, Honduras, and Guatemala, where remittances make up over 20% of GDP. William Jackson of Capital Economics indicated that the new tax could lead to "lower domestic incomes and consumer spending," pressurising already struggling economies.

Experts also note that the tax could end up promoting the use of informal transfer methods, like asking citizens to send money, relying on cryptocurrencies, or opting for black-market "mule" services. These workarounds could undermine years of policy progress targeted at improving formal remittance systems, making them safer and more accessible.

The real impact of the tax may be difficult to measure, considering larger economic and policy shifts. "So long as a migrant stays in the U.S., that person will find the way to send the money because it’s their lifeline," said Ricardo Barrientos of the Central American Institute for Fiscal Studies to the FT. With deportation rates under the Trump administration still lower than under President Joe Biden, the new tax is another blow to America's migrant population.

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