Are Colombian remittances at risk with Trump’s victory?

The return of Donald Trump to the White House raises fears for Colombian remittances of a stricter immigration policy in the United States. Particularly due to the announcement of a 10% tariff on remittances coming from that country, from which about 42% of the remittances received by Colombia come from.

This tax could directly hit one of the most important external revenue streams for the Colombian economy.

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Colombian remittances: a key source of income for the economy

Colombian remittances have consolidated as a highly relevant income. According to Banco de la República, the money sent by workers from abroad has shown sustained growth, even surpassing the pace of the national economy.

In 2024, remittances reached an all-time high, representing 2.8% of the country’s GDP, a significant increase compared to the 1.1% they represented a decade ago.

Although there was a slight contraction in 2020 due to the pandemic-related crisis, remittances recovered quickly, growing by 24% in 2021, driven by aid packages from recipient countries.

In 2023, these remittances exceeded USD $10 billion, became the second largest foreign exchange flow for Colombia, second only to oil, and a key source of livelihood for millions of families, especially in departments such as Valle del Cauca, Cundinamarca and Antioquia.

Threats from Trump’s policies

U.S. Vice President-elect J.D. Vance has suggested imposing a 10% tariff on remittances, which is justified as a measure to penalize illicit activities such as drug trafficking and human smuggling.

This proposal generates great concern in Colombian remittances, where the impact on households that depend on these transfers would be profound. However, it is a proposal reminiscent of the 2016 threat to withhold Mexican remittances to finance the construction of a wall separating the two countries. A promise that was not kept.

Mass deportations?

Another of Trump’s promises that has generated concern is his commitment to intensify deportations of undocumented immigrants. Enrique Patiño, Colombian writer and expert on immigration issues, in an interview with DW explains that the former president will try to fulfill his campaign promises through “shows” for his electoral base, although he notes that deporting more than eleven million people would be a task of enormous cost and complexity.

Patiño warns that this isolationist policy could have an initial “frothy effect” but is likely to lose momentum over time, similar to the failed construction of the border wall in his first administration.

According to the Migration Policy Institute, the proportion of foreign-born people in the United States has grown from 4.7% in 1970 to 14.3% in 2023. This growing migrant population makes any attempt at mass deportations a significant challenge for both U.S. domestic policy and diplomatic relations.

Moreover, unlike other migrant communities, only 19% of Colombians in the United States are undocumented, according to data from the Migration Policy Institute, which could mitigate the impact of any restrictive policies implemented. This percentage exceeds 50% in other countries such as Mexico, Honduras and Guatemala.

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What happened during Trump’s first presidency?

In his first term, Trump had already promised to tighten immigration policy, which generated concern in remittance-dependent countries such as Colombia. However, fears of a sharp drop in remittance flows did not materialize.

In 2017, Banco de la República estimated that Colombian remittances were equivalent to 1.8% of GDP, a figure only surpassed by countries such as Mexico (2.4%) and Guatemala (10.7%).

Far from falling, remittances to Colombia continued to grow steadily, accounting for 3.6% of disposable income in 2023 and contributing 3.9% of household consumption, playing a safety net role for many Colombian families.

A growing flow

The steady increase of the Colombian population abroad has strengthened the relevance of Colombian remittances. In June 2024, remittances exceeded USD 1 billion per month for the first time, and the number of people receiving these resources in Colombia has grown from less than 1 million in 2016 to 2.1 million in June 2024.

This highlights the importance of the Colombian diaspora, especially concentrated in the United States and Spain, where 45% and 25% of Colombian emigrants reside, respectively, according to United Nations figures in 2020.

The dependence on Colombian remittances generates uncertainty around Trump’s policies. However, the experience of the past presidency shows that these promises are difficult to implement and their impacts, especially on the mostly legal Colombian immigrant population, may be limited.

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