By FocusEconomics
In January, president Trump signed an executive order to halt USAID operations for 90 days; it remains unclear whether the agency will resume work or face a permanent shutdown. Below is an analysis of the global economic and political impact.
USAID in a nutshell
USAID accounts for 40 percent of global foreign aid, focusing on supporting low- and lower-middle-income economies. The agency has long served as a tool of US soft power, aiming to foster economic growth while simultaneously encouraging the spread of liberal Western values. Unlike China, which prioritizes infrastructure projects in overseas spending, USAID specializes in emergency and humanitarian aid.
Most affected emerging economies
South Sudan: The Sub-Saharan African country was the top recipient in per capita terms of USAID assistance in 2023, and 40 percent of its official development aid (ODA) came from the agency. The support mainly consisted of food, medical and humanitarian assistance. A permanent suspension of US funding could lead to famine, hit private consumption and government spending, and destabilize a political landscape which is already strained by civil war in neighboring Sudan.
Moldova: Moldova is the top recipient of USAID financing in Eastern Europe. The funds are chiefly dedicated to enhancing the transportation system, cyber security, promoting democracy and boosting energy independence. The interruption of US funds compounds a pre-existing energy crisis after Russia halted gas supplies in January 2025, and could lead to a rise in Russia and Chinese influence in the country.
Our panelists have revised down their economic growth forecasts for Moldova since the USAID freeze was announced
Jordan: The country is the largest per-capita recipient of USAID support in the Middle East and North Africa, with approximately 39 percent of its total ODA—about USD 1.2 billion—coming from the agency. A prolonged aid freeze risks interrupting projects regarding education, healthcare, water availability, energy security and support to refugees; a regional media outlet has already reported many thousands of job losses due to the aid freeze. The stakes are even higher given Donald Trump’s proposal to deport more than 2 million people from the Gaza Strip to Jordan and Egypt; such an outcome would increase Jordan’s fiscal burden and necessitate more foreign financial support, not less.
Impact on the US
The world’s largest economy risks trading influence in key geostrategic regions for cents on the dollar. USAID accounts for USD 40 billion, or just 0.6 percent, of the U.S. government’s USD 6.75 trillion annual budget. As a result, the agency’s shutdown will hardly affect the Federal finances, but could hurt many of Washington’s hitherto allies substantially—and create a power vacuum that geopolitical foes such as China could gladly seek to fill.
Insight from our analysts
On Jordan, EIU analysts said:
“As Jordan rejects any attempts to impose the US plan for Gaza, there is a high risk of a serious diplomatic fallout between the two countries. An extension of the existing aid freeze is a growing prospect, reducing scheduled funding of about US$1.2bn for Jordan in 2025 and possibly beyond, cutting off vital humanitarian aid and development funding and driving the budget deeper into deficit (towards our forecast of 6.9 percent of GDP without grants).”
Our latest analysis
- The French economy recorded the sharpest contraction since Q1 2022 in Q4.
- Mexico’s GDP shrank at the sharpest rate since Q3 2021 in Q4.
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