What do USAID cutbacks mean for development aid?

Trump has accused the development agency USAID of wastefulness. On February 6, he wrote on his “Truth Social” platform “Looks like billions of dollars have been stolen at USAID.” He did not provide any evidence.

What do USAID cutbacks mean for development aid?

Opposition politicians in the US have accused Trump of jeopardizing the global fight against hunger, disease and conflict. “This is not about charity,” said Andy Kim, Democratic US Senator for New Jersey, on CNN. “This is about us in this very dangerous global environment right now.

“USAID is one of our best tools for countering financial and economic influence from China.”

‘China is also a good friend’

The two superpowers also use foreign aid in their competition for global supremacy. This rivalry is particularly evident in the Indo-Pacific, for example in Bangladesh. The country is of strategic importance to China, and with a population of more than 170 million it is a major market for Chinese goods.

China does not disclose its foreign aid figures, but researchers at the College of William and Mary in the US state of Virginia estimate that China has financed 138 development projects in Bangladesh since 2000, worth $21 billion (€20.2 billion).

So far, the US has been holding against this: in 2024 alone, it granted the South Asian country $393 million in aid.

“Bangladesh has been in a very good partnership with USAID and the US government for a long time,” Jashim Uddin, director of ADAB, an association of development agencies in Bangladesh, told DW in a telephone interview. He expressed his hope that the US will resume its aid soon.

His association brings together more than 1000 non-governmental organizations. The US, he said, “has been funding us from the very beginning of our independence in 1971.”

Uddin said the halt in US aid is now causing significant problems for the country, with thousands of staff already made redundant.

“It is a very big problem for us now. It will weaken civil society in Bangladesh. Social instability may come with higher health risks and increased poverty. All this will be fueled,” said Uddin, suggesting that his government should now actively seek new donors.

“We need to diversify our funding. China is also a good friend of Bangladesh,” he said, hoping that China could now expand its support to include humanitarian aid and support for social projects.

China focusing on large-scale projects

While USAID mainly works with local organizations, China Aid, founded in 2018, focuses on loans and large infrastructure projects. However, both agencies pursue similar goals: to secure the influence of their governments in key partner countries.

With its Belt and Road Initiative (BRI), China is currently trying to bind together more than 145 countries through joint major projects such as bridges, roads and ports.

A report published by the Chinese Foreign Ministry in 2024 described US development aid as “being selfish, arrogant, hypocritical and ugly, and wantonly interfering in other countries’ internal affairs for its own benefits. US foreign aid brings about seriously negative impacts on world peace and development.”

However, the battle for influence between the US and China is not a zero-sum game where one wins what the other loses, said Evan Cooper, who heads the “Reimagining US Diplomacy” project at the Stimson Center think tank in Washington.

“I do not think that the collapse of USAID, the removal of funding and firing of employees is likely to lead to US rivals suddenly gaining a tremendous amount of influence in the world,” he told DW by phone.

The freezing of funds will probably lead to the collapse of the development aid industry. “But it won’t lead to China stepping in to fill the gap,” he said.

Could Germany step in?

“Nothing better could happen to the Chinese than an American withdrawal,” said Volkmar Klein, parliamentary group spokesperson for economic cooperation and development of Germany’s conservative bloc of Christian Democrats and Christian Social Union (CDU/CSU). “Beijing is trying to secure sales markets, create dependencies and use this support to secure advantages in international negotiations.”

This would strengthen China’s position and erode trust in the United States, said Klein.

After the US, Germany is the world’s largest donor. What impact could the latest moves have on development policy in Germany? “I don’t think it will affect trust in cooperation with us. On the contrary, we are seen as a reliable partner, and that should remain the case,” Klein said.

Klein’s conservatives are leading in opinion polls. Should they emerge as the strongest party and build a new German government after the federal election on February 23, Klein wants to push for it to take on more international responsibility.

“But we could not compensate for American shortfalls,” he warned. “The Americans pay around six times as much in development cooperation as Germany. So it is a complete illusion to even think about us making up the difference.”

Almost all USAID employees laid off

According to research analyst Cooper, the concern now is that the sudden collapse of development programs could lead to more conflict and migration worldwide.

“We have seen how increased migration flows can lead to instability and the rise of populism and I think that could be destabilizing for the United States over the medium to longer term,” he warned.

According to several US media outlets, only around 300 out of 10,000 USAID employees are currently allowed to continue their work. It is unclear how many development projects Trump will allow to restart after the 90-day review.

It has been a long time since development cooperation has been discussed as heatedly as it is now — in the US and beyond.

USAID will also likely be a topic at the Munich Security Conference, which runs from February 14 to 16. Representatives from China, US Vice President JD Vance and Secretary of State Marco Rubio are expected to attend.