A small tax with high costs

Summary

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Marketplace Morning Report

Episode: "A small tax with high costs"

Date: March 26, 2026
Host: Sabri Ben Asore (in for David Brancaccio)

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Episode Overview

This episode focuses on two main business and economic stories: the global ripple effects of political tensions on financial markets—specifically, the strengthening U.S. dollar—and the controversial new 1% tax on cash remittance transfers in the latest GOP tax and spending bill. Expert guests explain the implications of these developments for investors, everyday Americans, and global financial flows.

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Key Discussion Points & Insights

1. Market Reaction to Geo-Political Tensions

Guest: Jane Foley, Head of Foreign Exchange Strategy at Rabobank, London

• Tension Between U.S. & Iran:

  • Ongoing war and negotiation speculation affecting global markets.
  • President Trump’s claim of talks with Iran led to positive market moves, but Iran’s swift rejection caused the reverse, with oil prices rising and markets dipping.
  • Quote:

    “Well, the market, of course, now is caught between the two, the optimism of Trump and the defiance really of Iran. And right now, today, well, perhaps it's the defiant tone of Iran that has led stock market futures, for instance, into the red.”
    — Jane Foley [01:26]

  • A looming “five day deadline” from Trump injects further uncertainty for investors heading into the weekend.

• Why Is the Dollar Getting Stronger?

  • Investors treating the dollar as a safe haven amid global uncertainty due to:
    • Its deep integration in global trade and payment systems.
    • Ongoing liquidity needs—investors demand dollars in times of turbulence.
  • Quote:

    “…the dollar really has proven itself to be the safe haven of choice... it therefore remains a safe haven of choice because investors will need dollars to transact, etc.”
    — Jane Foley [02:14]

• Where Are Investments Flowing?

  • Despite rising bond yields (suggesting selling), investors are opting for highly liquid, short-term options such as money market assets to maintain flexibility.
  • Quote:

    “The most important thing is liquidity. And most of that liquidity will be going into the shorter end of the market, money market assets, so that people can put their money in and get them out again relatively quickly…”
    — Jane Foley [03:04]

2. New 1% Tax on Cash Remittances

Guest: Nara Sritharan, Research Analyst, AidData at William & Mary

• The Policy

  • GOP's recent tax and spending bill included a 1% tax on cash-based money transfers (remittances/cash-based money orders).
  • Supporters argue it could raise $10 billion and curb illicit funding; critics warn it’s regressive.

• Impact on Consumers

  • The 1% tax, though small, is on top of already high fees—rising from an average of 5.8% to 6.8% for senders.
  • Quote:

    “On paper, it really doesn't sound like much. But the key is that the 1% is added on top of existing fees. The average cost of sending money from the US according to the World bank is already about 5.8%. With the tax, that rises to roughly 6.8%...”
    — Marketplace Host [05:22]

• Who Uses Remittances?

  • It's not just recent immigrants; average Americans, businesses, and the financial industry feel the impact.

• Unintended Consequences & Criticism

  • Tax could drive transfers underground—some people will seek untaxed digital methods or informal channels.
    • Especially affects migrants, who may cut personal spending in the U.S. to maintain the same remittance amounts.
  • Quote:

    “Some will switch to digital transfers to try to avoid the tax, since it only applies to cash. Others...might cut back on their spending here in the US so they can keep sending the same amount back home because those payments are often not optional. Some will move into informal channels.”
    — Marketplace Host [06:37]

• Alternatives to Curb Illicit Transfers

  • Instead of taxing remittances, lowering transaction costs (per UN Sustainable Development Goals) could bring more activity into the formal financial system.
  • Other options: tiered scrutiny (monitoring larger transactions), and expanding banking access in receiving countries.
  • Quote:

    “...one of those goals is to reduce transaction costs for remittances down to 3%... lowering transaction cost will draw people into formal channels because it's cheaper than any other option.”
    — Marketplace Host [07:09]

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Notable Quotes & Memorable Moments

• “Perhaps it's the defiant tone of Iran that has led stock market futures…into the red, [and] seen bond yields push a little bit higher.”
  — Jane Foley [01:26]
• “On paper, it really doesn't sound like much. But the key is that the 1% is added on top of existing fees.”
  — Marketplace Host [05:22]
• “Some will switch to digital transfers to try to avoid the tax, since it only applies to cash.”
  — Marketplace Host [06:37]
• “Lowering transaction cost will draw people into formal channels because it's cheaper...”
  — Marketplace Host [07:09]

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Timestamps for Key Segments

• [00:46]—Global financial market update; intro to Jane Foley
• [01:26]—Impact of U.S.-Iran tension on markets
• [02:08]—Why the dollar is strengthening
• [03:04]—Where investors are putting their money
• [03:28]—News: Trump planning first China visit in eight years
• [04:51]—Discussion of the 1% remittance tax begins; intro to Nara Sritharan
• [05:22]—The true cost of the new tax
• [06:00]—Who is affected by remittance taxes
• [06:37]—Potential side effects and ways people adapt
• [07:09]—Alternatives for combating illicit transfers

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Episode Tone

The tone of the episode is brisk, fact-driven, and focused—combining clear, practical economic analysis with a sense of the day’s urgency. Sources provide measured, sometimes cautionary expert insight without partisan spin.

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This summary captures the essential economic news and analysis from the episode, explaining not just what’s happening but also why it matters for listeners who may be affected by market shifts or remittance policies.

Transcript

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[Marketplace Host]

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[Sabri Ben Asore]

the dollar keeps going up. From Marketplace, I'm Sabri Ben Asore in for David Brancaccio. When President Trump said there were talks to end the war, markets rallied and the price of oil fell. When Iran said there were no talks, markets sank and the price of oil went up. Iran has since rejected President Trump's recent proposal. Meanwhile, in the background, the US Dollar on the whole has been getting stronger. We've got Jane Foley to help us understand what it all means. She's head of foreign exchange strategy at Rabobank in London. Welcome.

[Jane Foley]

Thank you. Good morning.

[Sabri Ben Asore]

You know, on the one hand, President Trump says there's a plan. He wants to end the war. Iran's response has been cool. Who are markets listening to?

[Jane Foley]

Well, the market, of course, now is caught between the two, the optimism of Trump and the defiance really of Iran. And right now, today, well, perhaps it's the defiant tone of Iran that has led stock market futures, for instance, into the red, seen bond yields push a little bit higher. But as we head into the end of the week, we do coincide with that five day deadline that was announced by Trump just a few days ago ago. And if there is no real prospects of Iran coming to the table or conceding that they are at the table with respect to negotiating some degree of ceasefire, well, I would imagine investors will be getting nervous about what could happen over the weekend.

[Sabri Ben Asore]

The US Dollar has continued to gain against other major currencies this week. Why is that happening?

[Jane Foley]

Well, there are a few reasons for this. The first is that the dollar really has proven itself to be the safe haven of choice. And this is related liquidity. It's related to the fact that the dollar really is deeply embedded in supply chains and payment systems around the world. And like it or not, it therefore remains a safe haven of choice because investors will need dollars to transact, et cetera. So these aspects are seen to be protecting the outlook for the US Economy relative to perhaps Europe.

[Sabri Ben Asore]

If the dollar has been gaining strength, meaning people want it, but at the same time bond yields are going up, meaning people are not so hot on bonds. Where are they putting their money exactly?

[Jane Foley]

The most important thing is liquidity. And most of that liquidity will be going into the shorter end of the market, money market assets, so that people can put their money in and get them out again relatively quickly, if very quickly, if they wanted to.

[Sabri Ben Asore]

Jane Foley is head of foreign exchange strategy at Rabobank in London. Thank you so much.

[Jane Foley]

Thank you.

[Sabri Ben Asore]

After a delay due to the war, President Trump says he will meet with Chinese President Xi Jinping in May. It'll be his first trip to China in eight years.

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[Sabri Ben Asore]

GOP's tax and spending bill from last year included a section on remittances that is basically people sending money think money orders. The bill included a 1% tax on these transfers. Supporters say it could raise about $10 billion and help deter illicit finance. Critics argue it's regressive and could push some transfers underground. Nara Sritaran is a research analyst at Aid Data, a research lab out of William and Mary. Welcome.

[Marketplace Host]

Good morning.

[Nara Sritharan]

A 1% tax doesn't sound like a lot, is it?

[Marketplace Host]

On paper, it really doesn't sound like much. But the key is that the 1% is added on top of existing fees. The average cost of sending money from the US according to the World bank is already about 5.8%. With the tax, that rises to roughly 6.8% for those cash based transfers. So while the tax itself is 1%, it actually increases the total cost of sending by about.

[Nara Sritharan]

When we talk about remittances, we often think about immigrants sending money back home. But the reality is much broader than that. Who uses remittances and how many people could this affect?

[Marketplace Host]

Yeah, so a lot of people use remittances. We usually do talk about migrants. In particular, we talk about migrants who are coming for work purposes and they send remittances back. But in reality, a lot of average Americans send money to different places. So it's a lot of people that will be impacted by this. Regular people, businesses, and then, of course, the financial industry that now has to comply to these taxes.

[Nara Sritharan]

One argument for this tax is that it could help curb illicit activity. But on the other hand, people, I presume, can get around this by sending money in other ways. How else would they send money?

[Marketplace Host]

Some will switch to digital transfers to try to avoid the tax, since it only applies to cash. Others, this is particularly migrants, they might cut back on their spending here in the US So they can keep sending the same amount back home because those payments are often not optional. Some will move into informal channels.

[Nara Sritharan]

If ultimately what people are worried about is, you know, illicit reasons for moving money around the world. I mean, if that is the concern, are there better ways to tackle that than attacks on remittances?

[Marketplace Host]

Yeah. So for instance, back in 2015, the UN came up with these Sustainable Development Goals. And one of those goals is to reduce transaction costs for remittances down to 3%. So that's something that's internationally established. And they know that lowering transaction cost will draw people into formal channels because it's cheaper than any other option. Another option could be to do more of a tiered system. So much higher transactions get more scrutinized. And then, of course, expanding financial inclusion to the countries that are receiving money as well. Because even though we have banking access here, the people who are on the receiving end may not be able to access banks.

[Nara Sritharan]

Nara Sritharan is a research analyst at AidData, a research lab out of William and Mary. Thank you so much.

[Marketplace Host]

Thank you.

[Sabri Ben Asore]

In New York, I'm Sabri Benishore with the Marketplace Morning Report. From 8:00pm American Public Media.

[Reema Reis]

I'm Reema Reis, and this week on my podcast, this is Uncomfortable. We're looking at the rise of prediction markets where you can bet on everything from sports and pop culture to political headlines. A multi billion dollar industry that's growing at a time when more Americans are questioning the traditional paths to wealth.

[Marketplace Host]

I feel like the kind of quote unquote, American dream is sort of breaking down. Like, how could I possibly get, you know, buy a home, be able to afford having a family? And then they're also going online and seeing people that are claiming to make all this money doing these alternative paths to wealth.

[Reema Reis]

Be sure to listen to this week's episode of this Is Uncomfortable on your favorite podcast.

[Marketplace Host]

Apparently.