Remittances to Mexico Decline

Rex Ballard
Dec 19, 2025
4 min read

Mexico's GDP drops due to declining remittances from the USA.

Interesting Economic Shift Happening

In a stark economic contrast across Latin America, remittances from the United States—the lifeblood for millions of families—have taken divergent paths in 2025. Remittances occur when people in the USA (including undocumented immigrants) send money earned here back to their home country. While Mexico grapples with a historic decline in these inflows, Central American nations are experiencing a surge, largely fueled by migrant fears over intensified U.S. immigration enforcement under President Donald Trump. This shift not only highlights the vulnerability of regional economies to U.S. policy changes but also underscores broader geopolitical tensions, with potential ripple effects on poverty, consumption, and GDP growth.

Mexico's Remittance Slump: A Blow to Economic Stability

Mexico, long the top recipient of U.S. remittances globally, has seen a sharp reversal in 2025 after over a decade of uninterrupted growth. According to data from Banco de México (Banxico), remittances totaled $50.374 billion from January to October. October alone saw inflows of $5.64 billion, down 1.7% year-over-year, extending a streak of seven consecutive monthly drops. The data indicates a 5.5% year-over-year reduction—the steepest in over 16 years. In the month of June, remittances were down over 16% compared to the prior year. This conicided with Trumps announcements of new taxes on remittances. This downturn follows a record $66.3 billion in remittances for 2024, which equates to about 3.5% of Mexico's total GDP.

The economic toll is significant. Remittances, which outpace foreign direct investment and tourism revenues, have lifted over 1.1 million Mexicans out of poverty in recent years. Their decline is exerting downward pressure on household spending and domestic demand, with analysts estimating a direct GDP hit of 0.1% to 0.4%. Broader multiplier effects—where each dollar in remittances generates up to $3 in additional economic activity—could amplify this to 0.4-0.5% of GDP loss. This comes at a precarious time: Mexico's economy grew just 1.8% in the first half of 2025, and forecasts for the full year have been slashed, with the IMF projecting only 1.0% growth and Banxico at 0.5%, citing constrained demand and external risks like potential U.S. tariffs.

Central America's Remittance Boom: A Temporary Windfall?

In sharp contrast, Central America—particularly the Northern Triangle countries of Guatemala, Honduras, El Salvador, and Nicaragua—has seen remittances soar by around 20% in the first half of 2025, with projections for the full year pushing totals to over $55 billion across the subregion. For these nations, remittances represent a far larger share of the economy: up to 20-29% of GDP, dwarfing Mexico's 3-4%. In Guatemala, inflows rose 19.5% in October alone; Honduras saw 24.0%; El Salvador 16.3%; and Nicaragua around 20-27% year-over-year.

This influx has bolstered household consumption, reduced poverty, and supported GDP growth amid global uncertainties. The World Bank forecasts Central America's economy to expand by 3.5% in 2025, underpinned by resilient private spending fueled by these transfers. However, experts warn this "fear-driven" boom may be short-lived, as it stems from migrants rushing to send savings home before potential deportations.

Political Commentary: Trump's Policies Reshape Migration and Money Flows

The diverging trends are no coincidence but a direct fallout from President Trump's aggressive immigration agenda, which has escalated deportations, ended temporary protected status for many, and imposed stricter border controls since his inauguration in January 2025. In Mexico, where migrants are more established and integrated, the crackdown has resulted in millions of migrants either self deporting or being deported by I CE, leading to reduced spending as workers conserve funds amid job uncertainties in U.S. sectors like construction. A new 1% U.S. tax on certain remittances, effective from December 2025, is expected to further dampen flows, potentially costing Mexico billions.

Politically, this represents a win for Trump's "America First" base, prioritizing domestic jobs and security over cross-border economic ties. However, it risks further straining U.S.-Mexico relations, especially under President Claudia Sheinbaum, who has criticized the policies as "inhumane" and economically destructive. The irony is palpable: while Mexico's economy suffers—potentially exacerbating migration pressures in the long run—Central America's temporary surge masks underlying vulnerabilities. If mass deportations materialize in 2026, these nations could face a remittance cliff. As economic conditions worsen in Mexico and Central America it could result in renewed immigration efforts from these countries, hopefully involving legal pathways for workers.

As 2025 draws to a close, the remittance divide serves as a cautionary tale of how U.S. domestic politics can reshape global livelihoods. While Central America enjoys a brief reprieve, Mexico's challenges may foreshadow broader regional headwinds if diplomacy doesn't prevail.