By Y. Tony Yang
The abrupt dismantling of the United States Agency for International Development (USAID) represents a profound strategic misstep—one with far-reaching consequences not just for global development, but for the balance of power in the Indo-Pacific and beyond. While much of the conversation around USAID’s shutdown has focused on humanitarian concerns, the geopolitical ramifications are just as significant—if not more so.
USAID has long been a crucial component of US foreign policy, advancing not only humanitarian aid but also America’s strategic interests worldwide. Its sudden dissolution hands China an opportunity to expand its global influence, particularly in regions where the United States has maintained an edge through development partnerships. Nowhere is this more consequential than in Taiwan, where USAID has played a quiet but vital role in sustaining Taipei’s fragile network of diplomatic allies. By eliminating this tool, Washington is weakening Taiwan’s international standing and opening the door for Beijing to further isolate Taipei on the world stage.
USAID as a strategic counterweight to China
For decades, USAID has served as a bulwark against China’s expanding geopolitical ambitions. While Beijing has poured over USD $1 trillion into its Belt and Road Initiative (BRI, formerly known as “One Belt, One Road,” 一帶一路), USAID has offered an alternative model of development: one that prioritizes good governance, economic sustainability, and human rights rather than debt dependency and political coercion. This distinction has been particularly important in regions where China’s influence is growing—including Southeast Asia, Africa, Latin America, and the Pacific Islands.
A key difference between USAID and China’s BRI is in the nature of their investments. USAID has historically worked through grants and partnerships with local organizations to build long-term capacity. In contrast, China’s BRI has primarily focused on large-scale infrastructure projects, many of which have been criticized for their predatory lending practices. Countries such as Sri Lanka and Zambia have found themselves trapped in debt due to opaque financing deals with China, leading to situations where Beijing has leveraged this economic dependency for political concessions.
By shutting down USAID, the United States is removing a major counterweight to this influence, effectively ceding the field to China. Analysts have warned that Beijing is seizing this opportunity to expand its soft power in regions where USAID previously provided assistance, with profound implications for Taiwan’s international standing.
The Taiwan-USAID Partnership: A vital but now jeopardized Alliance
Taiwan’s survival as an independent entity on the global stage has depended not just on military deterrence but also on diplomatic partnerships. With China aggressively pressuring governments to switch diplomatic recognition from Taipei to Beijing, Taiwan has relied on alliances built through economic and humanitarian assistance. USAID has been an indispensable partner in this effort.
In 2022, the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO) signed a Memorandum of Understanding (MOU) to expand cooperation on international development. This agreement designated USAID and Taiwan’s International Cooperation and Development Fund (TaiwanICDF, 財團法人國際合作發展基金會) as the lead agencies in joint development projects, targeting areas such as humanitarian assistance, economic development, and climate resilience.
One of the most critical programs under this partnership has been USAID’s engagement in the Pacific, a region where Taiwan maintains some of its last remaining diplomatic allies. Under the Pacific American Fund, Taiwan contributed USD $600,000 to a joint initiative supporting local civil society organizations, helping Pacific Island nations develop climate resilience and economic sustainability. The abrupt end of USAID funding puts these efforts in jeopardy, making it easier for Beijing to offer financial incentives in exchange for diplomatic recognition.
Similarly, USAID and TaiwanICDF have collaborated on a joint initiative in Paraguay, one of Taiwan’s few remaining allies in Latin America. This program focused on strengthening micro-, small-, and medium-sized enterprises (MSMEs), a crucial element in Paraguay’s economic development strategy. Without USAID, Paraguay and other Taiwanese allies may be forced to turn to China, which has aggressively sought to lure them away with promises of massive infrastructure investments and access to its market.
China’s soft power expansion: A direct threat to Taiwan
Even before the USAID shutdown, China had been aggressively expanding its influence worldwide through a combination of economic incentives, political coercion, and strategic investments. The Belt and Road Initiative has been a key tool in this strategy, with China investing in high-profile infrastructure projects that serve as both economic assets and symbols of its growing dominance.
One notable example is the Sinamalé Bridge in the Maldives, a project funded by China under the BRI. This bridge, which connects the capital Malé with its surrounding islands, is emblematic of Beijing’s approach: high-visibility projects that create a perception of benevolence while simultaneously indebting the recipient governments. Similar projects have been undertaken in countries such as Kenya, where the Chinese-funded Standard Gauge Railway has raised concerns about debt sustainability, and Pakistan, where the China-Pakistan Economic Corridor has given Beijing unprecedented economic and political leverage.
In Latin America, China has increasingly used economic diplomacy to pressure governments to sever ties with Taiwan. In 2018, El Salvador, which had been a long-time Taiwanese ally, abruptly switched diplomatic recognition to Beijing after China offered billions in infrastructure investments. The Dominican Republic and Panama made similar moves, and Paraguay is now under intense pressure to do the same.
With USAID now absent from the scene, China’s ability to expand its influence in these regions will only accelerate. Developing nations that might have previously resisted Beijing’s overtures due to US support may now have little choice but to accept China’s terms. This not only strengthens China’s position, but also weakens Taiwan’s ability to sustain its few remaining alliances.
The erosion of Taiwan’s diplomatic space
Taiwan’s diplomatic isolation has long been a key objective of Beijing’s foreign policy. Since 2016, China has successfully persuaded many countries to switch recognition from Taipei to Beijing, shrinking Taiwan’s network of official allies to just 11. Many of these shifts have come as a direct result of Beijing’s ability to offer economic incentives that Taiwan, lacking the financial resources of China, simply cannot match.
USAID’s shutdown accelerates this trend. Countries that have historically benefitted from US development assistance may now be more willing to consider China’s offers, particularly if they are struggling economically. Without USAID as a counterweight, Taiwan’s ability to maintain diplomatic relationships will become increasingly difficult.
The situation is especially dire in the Pacific, where the United States, Australia, and Taiwan have worked together to counter Chinese influence. The Solomon Islands, once a strong supporter of Taiwan, switched recognition to Beijing in 2019 after China promised extensive infrastructure investments. Since then, Beijing has worked aggressively to expand its influence in the region, signing a secret security pact with the Solomon Islands in 2022 that alarmed both Washington and Canberra.
With USAID now dismantled, similar shifts could occur among Taiwan’s other allies in the Pacific, including Palau, Tuvalu, and the Marshall Islands. These nations have been targeted by Beijing’s diplomatic overtures—and without sustained US engagement, they may eventually follow the Solomon Islands’ path.
A blow to US credibility and influence
Beyond its impact on Taiwan, the USAID shutdown undermines Washington’s credibility as a reliable global partner. Countries that have relied on US assistance now face uncertainty about whether they can trust American commitments.
This loss of credibility has broader implications for US foreign policy. Allies and partners who see the United States abruptly withdrawing from development initiatives may question Washington’s reliability in other areas, including security commitments. In the Indo-Pacific, where the United States is seeking to build alliances to counter China’s military expansion, this erosion of trust could have long-term consequences.
Meanwhile, China is actively exploiting this situation to present itself as a more stable and predictable global leader. By stepping in to fill the void left by USAID, Beijing is not only strengthening its ties with developing nations but also reinforcing the narrative that the United States is an unreliable partner.
Conclusion: A strategic blunder that must be reversed
The decision to dismantle USAID is a short-sighted and strategically damaging move that will have long-term consequences for US global influence, Taiwan’s diplomatic survival, and China’s geopolitical ambitions. By withdrawing this critical tool of soft power, Washington is not only abandoning its allies but also giving Beijing an unparalleled opportunity to expand its reach.
If the United States is serious about countering China’s influence and supporting Taiwan, reversing this policy should be a top priority. Restoring USAID’s full capacity is not just about maintaining America’s moral leadership—it is about preserving the geopolitical balance of power in a world where democracy and authoritarianism are increasingly at odds. At stake is not just Taiwan’s future but the stability of the entire Indo-Pacific region.
The main point: The shutdown of USAID is a strategic misstep that weakens Taiwan’s international standing while strengthening China’s global influence. USAID has played a vital role in supporting Taiwan’s diplomatic allies through development aid, countering China’s economic coercion. Without it, Beijing is poised to expand its Belt and Road Initiative, luring Taiwan’s remaining allies with financial incentives. Taiwan’s partnerships, such as joint programs with USAID in Paraguay and the Pacific, are now at risk. The United States’ withdrawal diminishes credibility and cedes ground to China, making it imperative to restore USAID’s role in sustaining Taiwan’s diplomatic space and countering authoritarian expansion.
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