Introduction to the Issue
The Mexican President Claudia Sheinbaum has opted for a symbolic stage to address the proposal of US President Donald Trump to tax transfers in Spanish-language Latin America as "Remesas". During the construction ceremony for the Los Cabos Regional General Hospital in Baja California Sur, she emphasized that the USA "cannot tax people twice if they have already paid taxes". By choosing this environment, Sheinbaum increased the social and political dimension of the US regulation visually, which causes widespread concerns in the entire region.
The Proposed Tax Plan
Republican legislators have included the plan for a 5% tax on transfers in Donald Trump’s so-called transfers, a big, beautiful bill, a comprehensive law on several drinks that aim to drive Trump’s agenda, migration, energy, defense, and public debt. According to the annual report of the Inter-American development bank’s migration department, transfers from the USA to Latin America and the Caribbean achieved $160.9 billion – an increase of $7.7 billion compared to the previous year.
Impact on Latin American Countries
The largest recipients were Mexico ($64.7 billion) and Guatemala ($21.5 billion). According to Mexico alone, an average of around 177 million US dollars a day is transferred. Jesus Alejandro Cervantes Gonzalez from the Center for Latin American monetary science (Cemla) in Mexico City broke the figures of 2024, saying that transfers are "20% of GDP in Guatemala, 27% in Nicaragua, 26% in Honduras, 24% in El Salvador, 20% in Haiti, and 19% in Jamaica." The economic and social importance of these funds for the reception countries is immense, as they "reduce financial restrictions on millions of households and reduce poverty".
Tax and Identity Tests
According to the leading Spanish economic and financial news portal, The Economist, the governor of Florida, Ron Desantis, is considering requiring an identity examination for money transfers, which means that the senders have to prove that they are legally employed in the United States. This measure, supposed to block the transfers of migrants without papers, was criticized by Mexican Senator Antonino Morales from the ruling Morena party as "obviously discriminatory and racist".
Risk for Redirected Transfer Currents
If the transfer tax is implemented in 2026, it could significantly reduce the flow of money from the USA to Latin America and the Caribbean. For countries such as Mexico, Guatemala, Honduras, El Salvador, and Nicaragua – where transfers make up a high proportion of GDP – the effects would be particularly serious. Cemla expert Gonzalez warns that these countries would be exposed to a double blow, since the tax "would raise" in addition to the continued deportations of immigrants without papers, and at a time when there are "signs that employment among Latin American immigrants in the United States" is decreasing.
Unintentional Consequences
Gonzalez also warns of unintentional consequences, saying that the transfer tax could press transfers to informal channels through couriers or digital cryptocurrency transactions, which could increase the risk of black market activity. This could lead to a significant loss of revenue for the US government and undermine the intended purpose of the tax.
Trump’s Republicans Risk Alienating Latino Voters
The counter-reaction may already take shape, as the constant portrayal of negative messages affecting Latin American migrants has intensified the pressure on Republican politicians before the intermediate elections in November 2026. These elections will decide all seats in the House of Representatives and a third of the Senate. President Sheinbaum has expressly asked Mexican Americans to express their concerns to local US politicians. The Republican-controlled House of Representatives passed the tax reduction and expenditure calculation with a close margin, and the draft law will now pass to the Senate before President Trump can sign it into law.
