Aid on ice: How Trump’s freeze hurts the Pacific and Southeast Asia

The outlook is anything but reassuring.

Alexandre Dayant

10 February 20254 min read

The US aid freeze won’t break the Pacific, but it will create unnecessary disruptions. For Southeast Asia, the consequences are mixed, likely to hit Myanmar and Cambodia hardest, as well as those sectors more broadly across the region where US aid plays an important role, especially in support for civil society.

President Donald Trump’s pause on US foreign assistance has sent shockwaves through the global development community. Legal challenges are afoot amid fears of deeper cuts on the way given Trump’s allegation that the US Aid Agency, USAID, was “run by a bunch of radical lunatics”.

Figures drawn from the Lowy Institute’s Pacific Aid Map and Southeast Asia Aid Map – the most comprehensive tally of all development assistance to regions – is revealing as to the likely impact of Trump’s action. The outlook is anything but reassuring.

The Pacific: Limited impact amid targeted support

Over the past decade, the United States has ranked as the fifth-largest bilateral donor to the Pacific, after Australia, China, Japan, and New Zealand, contributing more than $2 billion. Most of this aid – 83% – goes to the North Pacific (Marshall Islands, Micronesia, and Palau) under the legally mandated Compact of Free Association (COFA).

The Pacific and Southeast Asia must prepare for a future where US aid, once a pillar of regional development, is no longer a given.

At first glance, Trump’s executive order won’t affect those commitments, as funding for the current compact agreements through to 2043 was appropriated by the previous Congress and signed into law by President Joe Biden in March 2024.

Yet early indications suggest otherwise. US officials revealed in a meeting with Pacific diplomats that some aid programs in COFA states have already been paused. This includes programs aimed at clearing unexploded ordnance from the Second World War.

Excluding COFA states, the United States drops to the eleventh-largest bilateral donor, contributing just 0.8% of total Pacific aid, or $37 million per year. More than half of this is managed by USAID.

The biggest sector at risk is health, where US assistance – roughly $8 million annually – primarily funds HIV/AIDS programs and basic health services in Papua New Guinea and other Melanesian countries. Outside the Compact states, Pacific reliance on US aid is negligible. Even in health, US aid's largest sector, the United States is just the ninth-largest donor, providing 1.8% of total health aid.

The bottom line? If COFA funding itself comes under threat, the consequences could be far worse.

Southeast Asia: An unfolding crisis

The United States is the fifth-largest bilateral development partner in Southeast Asia, contributing 4% of total development funding and spending $10 billion since 2015. Nearly half of this aid – mostly administered by USAID – flows to larger economies such as Indonesia and the Philippines, where aid accounts for a small portion of government revenues. In these nations, the suspension may barely register.

But freezing aid funding could weaken civil society. Governance initiatives – accounting for 22% of US aid – support civil society, law enforcement, and judicial systems in a region where democracy is already retreating.

In health, where the United States provides 10% of regional aid, the suspension threatens critical programs such as nutrition initiatives and maternal and child health. While PEPFAR, a key HIV/AIDS response program, notionally benefits from a waiver, it represents just 10% of US health aid, leaving many other programs in limbo.

Myanmar and Cambodia will bear the heaviest burden. Although US aid accounts for just 7% and 6% of total aid in these countries, it plays a key role in health and education. For vulnerable communities, the freeze isn’t just a bureaucratic pause – it’s a potential developmental setback.

One silver lining is the exemption for humanitarian aid. The United States remains the largest humanitarian donor in Cambodia, Myanmar, and Timor-Leste. If well implemented, this carveout could ensure continued support for crisis-affected communities, even amid broader aid cuts.

The most significant impact of Trump’s suspension will likely be felt at the United Nations, including agencies such as the World Food Program (50% US-funded), UNAIDS (41%), UNHCR (36%), and the World Health Organisation (15%).

For the Pacific and Southeast Asia, the UN is a relatively small development partner, providing just 0.8% and 0.6% of total aid respectively. But a quarter cut to UN funding could really disrupt support to the region’s most fragile countries.

Trump’s aid freeze has been set for 90 days, pending assessments of its alignment with his foreign policy priorities. It may be just the beginning. If he follows the advice of the “Project 2025” blueprint, it calls for US withdrawal from the World Bank and International Monetary Fund – moves that could reshape global financial flows with serious consequences for Southeast Asia and the Pacific.

As the Pacific’s largest donor, Australia will feel the pressure to step up where the United States steps back. In Southeast Asia, Japan, South Korea and European donors should also fill the gap left by a retreating America.

The key question: is this a temporary disruption or a sign of broader US disengagement? If the latter, the Pacific and Southeast Asia must prepare for a future where US aid, once a pillar of regional development, is no longer a given.

About the author

Alexandre Dayant

Alexandre Dayant is a senior economist and former Deputy Director of the Indo-Pacific Development Centre, a dedicated policy research centre within the Lowy Institute.

Topics

Aid & development United States