In July 2025, President Trump signed the “One Big Beautiful Bill” into law. Among its provisions is a new tax on remittances scheduled to take effect in December 2025. Remittances—the funds immigrants send to family members in their countries of origin—account for a growing share of global financial flows and are now the largest source of external finance for low- and middle-income countries. In 2024, formal remittances sent from the United States alone totaled $93 billion; inclusive estimates that factor in informal channels place the figure as high as $230 billion.
The new tax could materially disrupt these flows. Supporters justified it primarily on three grounds: 1) remittances allegedly incentivize unauthorized immigration; 2) they may foster dependency in recipient economies; and 3) the tax provides a revenue– stream projected to raise nearly $10 billion over the next decade.
Foreign governments and financial industry groups have criticized the measure, warning that it will increase confusion and paperwork, push migrant workers towards informal money transfer channels, and negatively affect U.S. small businesses. Since the proposal’s introduction, Congress has twice cut the tax rate–from an initial 5% proposal to 3.5% and ultimately to the 1% rate enacted–while narrowing its scope to cash and check transfers only.
Even at 1%, the tax could significantly affect major recipient countries, especially Mexico and India, which together receive most of U.S. remittances and are the country’s largest immigrant groups.
Mexico
Mexico is the largest recipient of U.S. remittances. In 2024, migrants in the United States sent an estimated $62.5 billion to Mexico–just over 3.5% of the country’s GDP. Earlier modeling suggested that a 3.5% U.S. remittance tax would lower flows by about $2.6 billion annually; with the enacted 1% rate (limited to cash and check transfers), projected losses fall to roughly $1.5 billion. Although smaller, this remains material.
Remittances sent to Mexico are concentrated in the country’s poorest regions, and in some cases, equal up to 18% of a respective state’s gross state product, supporting poverty alleviation and investments in healthcare and education. Any reduction would therefore disproportionately affect disadvantaged regions. Layering this tax atop recent development aid cuts could intensify local economic pressures that often contribute to outward migration.
President Claudia Sheinbaum condemned the measure as discriminatory and a form of double taxation on immigrant workers already paying U.S. income taxes. Following the final rate cut, her administration announced plans to reimburse those who will be subject to the 1% levy, in an effort to mitigate any disruption to inflows.
India
India received a record $135 billion in 2024, an estimated 28% of which originated in the United States—making India the second‑largest destination for U.S. remittances after Mexico. Because India’s economy is larger and more diversified, the enacted 1% U.S. remittance tax is expected to have a more modest macroeconomic effect than in smaller recipient countries; current projections put the reduction in inflows at roughly $466 million. (Under the shelved 5% proposal, some analysts warned of a potentially weakened rupee.)
Still, the measure is poorly aligned with its stated goal of discouraging unauthorized immigration: only 7% of Indians in the United States are undocumented, and that share has been declining. What’s more, Indian immigrants have among the highest educational attainment in the country –exceeding both the native-born and the overall foreign-born populations– and in 2024 accounted for 71% of approved H-1B visas, a non-immigrant visa reserved for workers in specialty occupations.
Despite their predominantly legal status and high skill profile, these senders are not exempt. The final legislation broadened applicability so that all persons transmitting covered funds abroad—rather than only non‑citizens—are subject to the levy, limiting its precision as a deterrence tool.
Future implications
While rate reductions likely mitigate the most severe economic effects, a remittance tax remains widely viewed as poor economic policy and an imprecise immigration‑enforcement tool. Remittances function as a lifeline for households in origin countries and, when paired with complementary development and financial‑inclusion policies, can help reduce emigration rather than encourage it.
Over the coming months, systematic monitoring will be needed to see whether senders absorb the 1% cost, lower transfer amounts, or alter frequency. Tracking these behavioral responses—as well as the policy and diplomatic reactions of key partners such as Mexico and India—will be critical to assessing the tax’s true economic and foreign‑relations impact.
