Editorial | Attack on remittance front

Perhaps they are still in a vertiginous whirl from Donald Trump’s recent tariff assault why the Jamaican authorities haven’t yet addressed an unfurling American plan that, if implemented, holds, at least in the near term, even more dire implications for the island’s economy.

Among the initiatives in the budget plans Congressional Republicans unveiled last week was one that would impose a five per cent tax on all remittances sent abroad from the United States by anyone who is not an American citizen. Even green card holders would have to pay the levy.

This measure will knock on effects on Jamaica’s current accounts, the exchange rate and, possibly, domestic inflation. Which, in turn, would influence the central bank’s monetary policies and the Government’s fiscal stance.

The question is the magnitude of this impact. Which is why The Gleaner looks forward to, and indeed urges, an early response to the emerging situation from Richard Byles, the governor of the Bank of Jamaica (BOJ), as well as the finance minister, Fayval Williams, signalling to the private sector what posture it, too, might have to adopt.

Perhaps by acting early, there are ways to head off, or at least mitigate, what could be a crisis.

The development also highlights another reason for Jamaica to accelerate new strategies for economic development and seek, with its Caribbean Community (CARICOM) partners, approaches to keep more of the region’s best educated and skilled people at home.

When Mr Trump’s expanded assault on the global trading order in early April by massively raising tariffs on America’s trading partners escaped relatively lightly, up to then, over 90 per cent of Jamaica’s exports to the US were eligible for duty-free treatment under various preferential arrangements available to Caribbean countries.

Mr Trump placed Jamaica among those countries with a base tariff of 10 per cent. Many countries were placed in bands in multiples of that.

If the 10 per cent tariff had been in place in 2024, it would have applied to US$361 million worth of visible exports to the US, adding at least US$65 million to the landed cost of these products. Jamaica imported US$2.64 billion from the US, or over 36 per cent of its global imports.

BROADEN AND AMPLIFY

Remittances, however, both broaden and amplify the story. Last year, Jamaicans abroad sent home just shy of US$3.6 billion, a slight decrease of 0.4 per cent compared to the previous year,.

Notably, over 67 per cent of those inflows – more than US$2.4 billion – came from the US, the world’s largest source of private remittance, estimated at around US$100 billion in 2024.

To put this in perspective, remittances from the US were a fifth higher than what Jamaica earned from all its visible exports globally, and nearly seven times more than the value of goods it sold to the US. While the remittances received by Jamaica are a small fraction of the US$129 billion that went to India (the world largest recipient) and a minuscule portion of the US$685 billion the World Bank estimated was received by low- and middle-income countries, the amount equivalent to more than 18 per cent of the island’s GDP.

Assuming the five per cent tax was in force in 2024, it would have cost people who sent money to Jamaica an extra US$120 million (J$19 billion) to do so, not including the normal transaction fees. Since a significant portion of the people who send money do so based on discretionary income, it is reasonable to assume that the levy will affect the amounts they can now remit.

There is another reason, too, why flows might be impacted, if some Jamaicans in the US can’t find creative, and cheaper, alternatives to sending money through the formal networks. Their status!

While Mr Trump and congressional Republicans may be keen to earn the levy to help fund their broader tax reduction programme, there is a larger reason for this initiative. It is part of Mr Trump’s immigration strategy for keeping pressure on undocumented migrants.

PROVE

If they are to avoid the tax, people undertaking remittance transactions will have to prove they are US citizens. This will have the effect of keeping some illegal immigrants away.

One possible unintended consequence, of course, is that it might push some of the remittance business underground. That is to be watched, along with the volume of the flows.

Remittances play such an outsized role in the economy because Jamaicans, like citizens of other Caribbean countries, emigrate in droves.

For instance, between 1965 and 2000, according to an IMF analysis, 85 per cent of Jamaica’s labour force with tertiary-level education, emigrated to OECD (Organisation for Cooperation in Economic Development) countries, the same ratio as Grenada, which was four percentage points below Guyana. Nearly eight in 10 of these emigrants went to the United States.

Over the same period, three in 10 Jamaicans with secondary education also left the workforce for the US.

This massive outflow of the country’s best educated and skilled labour force contributed to, and, along with sub-optimal public policies, was a consequence of the low productivity and economic stagnation Jamaica has endured for decades.

The external environment has clearly changed. Jamaica has to find new ways to meet the current challenges.