It is easy to understand why a measure like this would appeal to the current US administration. It makes migrants’ lives harder and that’s enough for it to be worth passing into law.

And it certainly will create difficulties for millions of legal and illegal immigrants in the US, as well as for their families outside. Mexico’s President Claudia Sheinbaum has been a vocal opponent, saying—correctly—that this is unjustifiable double taxation.

Her country, the largest destination for such transfers, has a lot to lose. But other countries are also worried.

Also read: Remittance tax: An idea that America should axe

India is the third-largest destination for remittances from the US, receiving about $18 billion in 2024; the Philippines and China aren’t far behind, at $14 billion each. According to Capital Economics, US-based remittances support 3% of the Philippines’ GDP.

The impact on migration-dependent areas of the world will be severe. For some countries in Central America, national income might fall by almost 1% if this proposal is implemented.

Meanwhile, some estimates suggest that even a higher 5% rate would only increase US takings by 0.1%.

For the remittance tax’s backers, that’s beside the point. Vice-President J.D. Vance, when he was still a senator, introduced a similar bill. At that time, he said that “this legislation is a common-sense solution to disincentivize illegal immigration and reduce the cartels’ financial power."

That argument is backward. What common sense actually tells you is that if less money is available in some of the poorest parts of Central America, it increases the incentives for people there to try and move to the US to join their family members already there.

As for the impact on criminal networks—well, history suggests that they’ll welcome this. The world has spent decades trying to make legal transfers cheap and efficient.

An additional levy might increase the cost of transferring even small sums four fold. This would reverse all our efforts to force this trade above ground.

If legal transfers are made too expensive, illegal and informal networks take their place. Some people have happily assumed that Bitcoin will fill the gap.

Also read: High-value, white-collar inflows have led a shift in India’s inward remittances

But, more likely, there will be a renaissance in simpler, older mechanisms for international transfers.

In South and West Asia, we call these methods ‘hawala.’ But other parts of the world derived equivalents independently. In China, for example, such mechanisms are called ‘fei-ch’ien.’

From a customer’s point of view, they’re simple to use. All you need to do is find a well-networked trader and give them the cash to be transferred. That person then calls somebody in their clan or village back home, who gives the same amount of cash to the chosen recipient.

The two members of the hawala network settle accounts between each other once or twice a year, through smuggling or perhaps through false invoices and shell companies.

Naturally, such informal mechanisms to transfer value can be used not just to evade the remittance excise, but taxes in general. Worse, they are frequently used as conduits for terrorism and drug financing—which is why governments have spent decades trying to stamp them out.

This was hard because, if enough people use these systems, they can be more efficient and cheaper than formal finance. The exchange rates that hawala traders offer are often more attractive, and their fees take less of a bite out of small transactions than many banks do.

In spite of the best efforts of regulators and cops, hawala networks only really shrank when other routes became more competitive. Informal currency traders need a large volume of transactions to be efficient and offer the best rates to their customers, so when their custom shrank, they became less attractive.

It’s this self-reinforcing loop that the remittance tax threatens to break.

Suddenly, hawala networks—and their equivalents in South and Central America—will become appealing again. And when this method returns to its former prominence, it will become easier to pay those who smuggle opiates or people.

Also read: Mint Quick Edit | America’s credit rating slip: How serious?

And, of course, criminal syndicates of various types will once again step in to run these systems and profit accordingly. The US vice-president is, not for the first time, wrong: His administration’s remittance tax doesn’t attack shady cartels, it empowers them. ©Bloomberg

Today, as in the past, the fight between Russia and the West occurs largely off the battlefield. In the 20th century, the U.S. and the Soviet Union fought each other in a roiling, decadeslong shadow war across multiple continents, as the risks of an open war compelled competition to shift into the gray zone of intelligence operations. Russia is now waging a shadow war in the same way.

It tripled its intelligence operations against the West in 2023-24 after quadrupling them in 2022-23. It has attempted to ship explosive packages to the U.S., attack Warsaw’s largest shopping center, assassinate the CEO of Europe’s largest ammunition manufacturer, attack Ukrainian-owned businesses in Western Europe, and cyberattack large-scale U.S. and European governmental institutions and businesses.

Since 2022, NATO countries have expelled 750 Russian spies under official diplomatic cover. There are other, unconfirmed instances of Russian intelligence activity, such as the leak of sensitive information on Sweden’s incoming national security adviser and large-scale infrastructure failures in France, the U.K., and Spain. The full scope of Russia’s shadow activity is thoroughly classified. But it has obviously increased since the one-off poisonings, assassinations, and sabotage attempts of the 2010s.

Intelligence operations remain a key pillar of Russian strategy because Russia doesn’t have the military capacity to conquer Ukraine. It may gain more ground at a horrendous cost, throwing soldiers forward on motorbikes and scooters in the hope that Ukraine won’t waste ammunition on individual targets. But the chances of a large-scale operational breakthrough akin to the massed tank battles of World War II’s Eastern Front are low.

Nevertheless, the Kremlin cannot just give up. It has staked far too much blood and money to extract itself before victory. Nor can Russia “unleash its reserve capabilities" on Ukraine. Such reserves don’t exist. Russia could conduct a nuclear strike. But a limited atomic attack wouldn’t appreciably change the military balance, and a large-scale nuclear strike would prompt Western intervention.

Instead, Russia hopes to disrupt Western support for Ukraine by both raising the direct sense of threat to Europe and by attacking the flow of that support through sabotage. Moscow’s hope is to force a crisis that compels Europe to prioritize its own defense over aiding Ukraine.

Yet Ukraine is waging an intelligence operation of its own inside Russia at an ever-increasing scale. Ukraine has assassinated Russian pilots responsible for shooting missiles at Ukrainian civilian infrastructure. It has attacked officials’ houses with precision long-range drone strikes, disrupted air traffic around Moscow, and allegedly got close to destroying Putin’s private helicopter. Ukrainian drones attack Russian military and energy infrastructure nightly, doing direct damage to the Russian war machine and economy.

Against this backdrop, the Ukrainian attack on Russia’s strategic bomber fleet was the most recent success in a string of increasingly effective intelligence operations. Ukrainian agents smuggled small drones into Russia in flatbed trailers, identified the Russian Aerospace Forces’ most important airfields for heavy bombers, and then attacked four airfields across Russia simultaneously. Initial estimates indicate that Ukraine damaged around 40 strategic aircraft—likely a combination of long-range bombers and airborne early warning aircraft. Russia may have lost 15-30% of its long-range strike capabilities.

Ukraine could conduct this operation in part because of divisions within Russian society. Russia is a multiethnic empire masquerading as a modern Slavic ethnostate. Per census data, 30% of Russians are non-Slavic; the true proportion is likely higher. There are long-term grievances within many of these groups, most clearly in the North Caucasus. In turn, Russia beyond St. Petersburg and Moscow is extraordinarily deprived. This has created a fertile recruiting ground for the Russian military, but has also offered Ukraine opportunities.

The more pressure Ukrainian intelligence applies within Russia, the more resources Russia must divert to policing its own population and defending its high-value targets. And Ukrainian operations aren’t restricted to Russian territory. Ukrainian military intelligence has deployed to Africa to fight against the Wagner Group and has assisted Syria’s now-President Ahmad al-Sharaa in planning his offensive against Russia’s ally, Syria’s former President Bashar al-Assad.

Ukraine still needs Western support. A coherent policy from the U.S. and Europe would go well beyond “naming and shaming" Russian attacks or holding Russian perpetrators responsible. They should instead make proportionate responses to Russian intelligence operations their explicit policy and use offensive cyber or traditional intelligence means to target military and economic infrastructure in Russia and its partner states, most obviously Belarus and Georgia.

Ukraine risks the solidification of Russian ambitions in and beyond Europe. Putin aims to divide the U.S. from Europe, harvest the remaining continental pickings, and shatter the U.S.’s global reputation as a dependable ally. As with the years before WWII, a unified, active West could avoid a greater conflagration. Ukraine continues to demonstrate how a single determined people can hold back the Russian onslaught. A purposeful and resolute West could bring about the peace and security prized by both the U.S. and Europe.

About the authors: Seth Cropsey is president of Yorktown Institute. He served as a naval officer and as deputy undersecretary of the Navy, and he is the author of Mayday and Seablindness. Harry Halem is a senior fellow at Yorktown Institute.

This applies to his support for tech-industry innovation, deregulation, lower tax rates on labor and corporations, enhanced energy production and cuts to wasteful public spending.

President Trump’s other policies, though, are stagflationary.

Protectionism and tariffs will slow growth and increase prices, as will his administration’s crackdown on immigration, cuts to scientific research funding, attacks on academic institutions, support for unfunded budget deficits, threats to Federal Reserve independence, disorderly attempts to weaken the dollar, attacks on the rule of law and so on.

The US brand has been badly damaged, and that will have costs.

Also read: Nouriel Roubini: US economic tailwinds will help it overcome tariff headwinds

Still, I have maintained that market discipline (not least from bond vigilantes) and a still-independent Fed would constrain these stagflationary policies, giving Trump’s moderate economic advisors the upper hand and leading to a de-escalation of trade frictions via negotiations.

So far, that is what has happened.

And now that congressional Republicans are negotiating a budget bill that will further increase deficits and debt ratios, the pressure from the market (through higher long-term bond yields) will grow.

Trump can either change course or face a spike in bond yields that will cause a politically damaging recession.

It is worth remembering that Trump’s early attacks on the Fed’s independence already backfired. US stocks sank, bond yields spiked and Trump stopped threatening to fire Fed Chair Jerome Powell.

Though he will be able to replace Powell in 2026, the Fed will remain independent, because the chair is ‘primus inter pares’ (first among equals). The Federal Open Market Committee’s overall stance will still reflect the views of its board members.

For now, Powell is doing Trump a favour by not cutting interest rates. The US central bank is credibly anchoring inflation expectations in the face of tariff-induced price pressures.

By abstaining from rate cuts now, the Fed preserves the option to cut them when the economy weakens towards the end of the year.

Trump has no reason to attack Powell, other than to position him as a scapegoat for a potential recession that he himself caused, just as he will probably blame US inflation on Chinese stubbornness.

Also read: Vivek Kaul: The bond market called Trump’s bluff but the coast is still hazy

The Trump administration’s restrictions on immigration—and thus on labour supply—will also backfire. The 2023-24 period brought robust growth and falling inflation because of a large increase in labour supply via (partly undocumented) immigration.

With a tight labour market, policies that reduce the supply of workers will drive wage growth and inflation, damaging the economy and Trump’s political standing.

The US needs a steady flow of (preferably documented) immigrants. Trump already sided with Elon Musk on the issue of H-1B visas for skilled workers (a programme that Silicon Valley relies on). In defying his nativist MAGA base, he showed that he is not totally clueless about the need to attract foreign talent.

Despite the broader damage Trump is doing to the US brand, America remains the top destination for the top 10% of scientific researchers and entrepreneurial talent worldwide, owing to the three- to fivefold premium in compensation offered in the US.

But cutting research funding and allowing for a brain drain is not consistent with maintaining US dominance in AI and other industries of the future. Here, too, industry feedback and market discipline will lend support to Trump’s cooler-headed advisors.

Moreover, mounting legal challenges to the administration’s deportations may eventually push it toward more sensible immigration policies. Otherwise, market discipline will again kick in with a vengeance.

The Trump administration’s efforts to boost US competitiveness and reduce the trade deficit through a weaker dollar will also probably backfire.

When the ‘Liberation Day’ tariffs announced on 2 April, threats to fire Powell and anticipation of larger fiscal deficits caused the dollar to weaken, a sharp equity-price correction and a spike in bond yields and credit spreads soon followed.

Trump duly backed down on the tariffs and Powell, and the same discipline will force a fiscal adjustment.

The idea of a ‘Mar-a-Lago Accord’ to orchestrate an orderly weakening of the dollar is far-fetched. Key trading partners (not least China) would never join and America’s own friends and allies would balk. The more that markets come to expect a sudden dollar devaluation, the spikier bond yields will become.

Proposals to convert non-residents’ short-term Treasury holdings into long-term securities wouldn’t even work in theory, let alone in practice.

Also read: India must forge its own AI path amid a foundational tug of war

Weakening the dollar through capital controls on inflows—a tax on foreign holdings of Treasuries—will almost certainly drive up long-term rates and weaken the US economy. Market vigilantes won’t let policies be pursued for long.

Finally, while the administration’s assault on the rule of law has been quite aggressive, US democratic institutions—like independent courts and judges—and civil society remain robust, and should be able to constrain the most extreme policies.

Again, one must not underestimate the power of market discipline here. In other countries like Turkey where autocrats have undercut the rule of law, the reaction from bond and other markets has been unforgiving.

Ultimately, either Trump will back down from his stagflationary policies to concentrate on pro-growth measures, or financial stress and a recession will cause the Republican Party to lose midterm elections in 2026.

One hopes that Trump does heed the market and stops acting on his worst instincts. He should recognize that homegrown tech innovations promise to increase America’s potential growth substantially. He just needs to get out of his own way. ©2025/Project Syndicate

The author is professor emeritus of economics at New York University’s Stern School of Business and author of ‘MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them’