New legislation introducing a 1% tax on cash remittances sent from the United States to Mexico could result in a 25% decrease in Mexico’s household spending, the president of the National Alliance of Small Business Owners (ANPEC), Cuauhtémoc Rivera, said on Monday. 

Approximately 11.3% of Mexican households receive remittances from the U.S., most of which go towards consumer spending, Rivera said in an interview with the newspaper El Economista.

Remittances to Mexico decline 12%, the biggest drop in over a decade

Rivera expects families in the states of Chiapas, Guerrero, Michoacán, Zacatecas, Oaxaca, Guanajuato, México state, Puebla and Mexico City to be most affected by the tax.  

Chiapas, on the border with Guatemala, receives the largest amount of remittances nationwide, contributing 14.31% of its GDP. 

Although some experts suggest that migrants will accelerate remittance transfers before the tax takes effect, Rivera is not so sure.  

“With the persecutory immigration policy [migrants] are subject to in the United States, they surely don’t have the capacity to increase their dollar transfers [in the short term],” Rivera said.  

“Remember that migrants live day to day because their jobs are temporary, and they are hiding from immigration authorities.”

Members of the Confederation of National Chambers of Commerce, Services and Tourism (Concanaco Servytur) voiced similar concerns about the 1% remittance levy. 

“We cannot ignore the political undertones of this proposal,” said Concanaco Servytur’s president, Octavio de la Torre. 

“It goes beyond a fiscal issue; it is a blow to the efforts of migrants, who have sustained a significant portion of the economy for decades.”

De la Torre emphasized the significant contribution of remittances to the Mexican economy. In 2024, Mexico received over US $65 billion in remittances, equivalent to 3% of the national GDP. 

Some financial institutions, such as BBVA México, expect that remittance senders will absorb the tax to avoid reducing the amount they send to family members. Migrants may also decide to use informal channels to avoid the tax, according to de la Torre. 

During her June 30 press conference, Mexico’s President Sheinbaum said that the Mexican government planned to reimburse the 1% U.S. tax on cash remittances.

In Mexico, cash makes up 1% of all remittances received, though remittances sent electronically via cash deposit (at a Western Union, for example) may account for up to 40% of all remittances sent from the U.S. to Mexico.

The Trump administration has not clarified whether these remittances will be taxed equally.

With reports from El Economista and Newsweek en Español