How Donald Trump's New 1% Tax on Diaspora Remittances Will Affect Kenya's Economy, Shilling
- The US government introduced a 1% tax on remittances sent to foreign countries by individuals living in America
- The 1% remittance tax is contained in President Donald Trump's 'Big Beautiful Bill' signed into law on July 4, 2025
- Experts broke down the impact of the new tax imposed on the money sent back home by Kenyans in the US on the economy
- Geopolitical economist Ally Khan Satchu told TUKO.co.ke that the new levy will not affect the Kenyan shilling value in the forex market
Wycliffe Musalia has over six years of experience in financial, business, technology, climate, and health reporting, providing deep insights into Kenyan and global economic trends. He currently works as a business editor at TUKO.co.ke.
Kenyans will not feel the pinch of President Donald Trump's 1% remittance tax.
Source: Twitter
According to experts, the new levy introduced in the 'Big Beautiful Bill' Trump signed in July 2025, will not pose a big dent on Kenya's KSh 640 billion in diaspora remittance per year.
What are implications of Trump's remittance tax?
In an exclusive interview with TUKO.co.ke, economist Churchill Ogutu explained that the cost of sending remittances will increase, but absorbed by the senders.
Ogutu argued that most Kenyans sending money back home have acquired US citizenship and could be exempted from the 1% tax.
"The cost of sending remittances will go up, and that will be absorbed by the senders. The 1% is lower than the initial 5% cost, and can be absorbed. I don't think it will have a big dent on remittances.
"Furthermore, some of the remittance senders have acquired US citizenship, so that means they will be exempted from the 1% tax," said Ogutu.
With a similar view, geopolitical economist Ally Khan Satchu told TUKO.co.ke that the 1% tax is not as bad as the 5% that was initially floated in the 'Big Beautiful Tax'.
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How Kenyans can cut cost of sending money
However, to cut the cost of sending remittances, Satchu urged Kenyans living abroad to look for alternative channels.
"Remittances into Africa remain very expensive, already at an average of around 500 basis points. The challenge is the more intrusive regime that has been introduced around immigration status at the point of sending.
I expect people living in the US to look forward to alternative channels, particularly stablecoins, as an alternative mechanism," Satchu advised.
Will remittance tax affect Kenyan shilling
Satchu acknowledged that the US remains Kenya's largest source of remittances at 53% as of March 2025.
He, however, noted that the cost of sending remittances will not affect the Kenyan shilling in the forex market since the US dollar has been performing poorly.
"Notwithstanding that North America is a big source of Kenyan remittances, I think the shilling is not going to move because of this. The Dollar is weak overall, and I expect that trend to continue," he added.
Why Kenyan shilling remains stable
Meanwhile, data from the Central Bank of Kenya (CBK) showed that the shilling remains bullish against the greenback and other international currencies.
CBK governor Kamau Thugge attributed this to strong growth in the foreign currency reserves, which hit a seven-month high in July.
The regulator posted KSh 1.43 trillion worth of US dollars in foreign currency reserves, supporting up to 4.9 months of import cover.
Proofreading by Asher Omondi, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
