Another tool to get foreigners out of the USA: tax remittances.

The attention is on immigration from Mexico. Roundups. Deportations. Entry bans.

Less visible are the things the Trump administration is attempting to do to make getting money from the U.S. to Mexico more complicated and expensive.

Trump proposes a 3.5 percent tax on remittances.

Mexico seemed inexpensive to me when I vacationed there in January. My dollars went a long way. Mexican nationals working in the U.S. and sending money home to family in Mexico get to enjoy that same arbitrage. Earn it in the U.S. Spend it in Mexico. Mexico received $67 billion in remittances last year. Remittances are 4% of Mexico’s GDP.

Erich Almasy is a college classmate. His guest posts here have been from the point of view of a retired American expat living well in Mexico, but today he writes from the point of view of Mexican workers in the U.S. who send money home. The remittance tax is an element of a broad policy effort to make life harder and riskier for Mexicans -- with or without legal status -- to be in the U.S.  If things get miserable enough for them, maybe they will self deport. As with others of Trump's policy shifts of the first months of this term, there are unintended consequences.

Guest Post by Erich Almasy 

Note from México

Imagine you are a Mexican living and working in the U.S. You are your family’s breadwinner. Every month, you take your paycheck or cash to Western Union and, for a small fee, send the money home. You work 2,000 miles from your home in México, but you are a legal resident of the United States and have the right to work there. You get paid at or below minimum wage without overtime, perhaps in construction, agriculture, health care, or maintenance. In the Big Beautiful Bill now moving through Congress, a provision states that if you are not a citizen of the United States, an excise tax of 3.5 percent will be deducted from your remittance. Based on current projections, this will result in $2.6 billion less flowing to Mexican families. You can pull up stakes and come back home, but it took a while to gain legal status, and the jobs in México don’t pay as much. Ah, but there is a solution! Mexican cartels will bundle your cash and smuggle it across the border at a lower charge. This is similar to the medieval practices of “hawala” and “Hindi,” where both ends of the transaction agree to honor the transfer. And, just like that, the United States government has put the cartels into the banking business and probably bankrupted Western Union.

In El Paso, Texas Valuta, a money services and check-cashing business, is close to closing. Ashley Light, the third-generation owner of this 40-year-old business, must now report any transaction over $200. Previously, her business and any banking institution were required to report transactions of over $10,000, or smaller if deemed suspicious. The previous regulation was designed to expose money laundering, but the amount has not been adjusted upward for inflation and the general increase in corruption levels. The $200 level, going down instead of up, will supposedly catch cartel cash movements. LOL! Why move cash through banks when the Trump administration lets you buy real estate, private equity, and venture capital without revealing your name. A vindictive U.S. government is victimizing Valuta and small businesses like it to make life difficult for people along the border.

An estimated 1.6 million Americans live in Mexico, with some 900,000 Americans "expats," having permanent residence. Like my wife and me, they retired here for the lifestyle, cost, and weather. Just today, a major San Miguel de Allende bank announced that it can no longer accept United States bank checks. The reasoning is based on increased regulations and reporting requirements that they are unwilling or unable to comply with. Many, perhaps most, expats here use wire transfers to move money, but for non-profit organizations that receive medium-sized and large donations in check form for tax reasons, this will cause a serious burden. Courier services will benefit by hauling envelopes with checks to Laredo, Texas, to be mailed and deposited.

The exchange rate has dropped from 20.5 pesos to the dollar in the past two months to 19.1, a nearly seven percent decline in the U.S. dollar’s value. This drop is entirely due to Trump’s fiscal policies and Moody’s downgrading of the United States’ credit. The devaluation is an additional burden on the workers sending remittances since their dollars will buy less in México. So far, the on-again/off-again tariffs don’t seem to have caused layoffs for Mexican car (and associated) manufacturers. Labor costs are low enough that most companies don’t want to lose trained workers during such uncertainty. Similarly, agricultural workers are retaining their jobs because the United States imports 55 percent of its fresh produce from México, and there are no alternative sources of supply. Within the next month or two, the grocery prices will begin to climb, and not just for avocados. Broccoli, asparagus, lettuce, radishes, green onions, cauliflower, carrots, green beans, other beans, tomatoes, peppers, melons, grapes, oranges, grapefruits, and bananas will all become much more expensive. This morning I bought a fifteen-pound mixed bag of many of those items at my local “fruiteria.” It cost less than 300 pesos (i.e. $15), and they threw in a free bunch of bananas.

I don’t think things can stay this way. When (not if) the United States enters a recession, México will suffer along with it. The dollar-to-peso exchange rate will likely strengthen, and internally focused fiscal measures will depress the Mexican economy. China will be the biggest beneficiary as it moves manufacturing and exports into México even more.

Electric, very fast charging, nicely appointed: $28,000

The Chinese car maker BYD is now the 13th-largest car and the largest electric vehicle company in México, with 2024 sales of 40,000. It expects to sell 100,000 vehicles this year.

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