The "America First" policy of President Donald Trump is now impacting the United States Agency for International Development (USAID) and potentially threatening the economic stability of regions such as sub-Saharan Africa. Coface, a credit insurance company, has warned that these actions could lead to serious economic consequences. In 2023, US international aid is expected to reach billion, or 0.24% of GDP, making the US the largest donor in absolute terms, though trailing behind several European nations, Canada, and Japan in terms of GDP share.

Created by President John F. Kennedy in 1961, USAID was initially part of the State Department but became an independent agency in 1998. With a budget of billion in 2023, USAID operates in 60 countries, employing around 10,000 people, two-thirds of whom are stationed abroad. However, following Trump's inauguration, he signed an executive order to freeze foreign aid for 90 days to assess its alignment with his "America First" policy. This freeze does not apply to military aid to Egypt and Israel or emergency food assistance.

USAID has faced significant criticism from Trump and prominent figures such as Elon Musk. Both accuse the agency of promoting a "liberal agenda," with Trump going as far as calling it "run by radical fanatics." Sub-Saharan Africa, which received 40% of USAID's 2023 budget, is particularly vulnerable. While aid represents just 0.8% of the region's GDP, it accounts for more than 2% in 10 countries.

The aid freeze is causing alarm across various sectors. Humanitarian and health programs, which make up 80% of USAID spending in sub-Saharan Africa, are in jeopardy. The remaining 20% of aid is now at risk of being cut or reduced following the 90-day review period. This could exacerbate existing issues such as famine, the spread of diseases like HIV and Ebola, and the rise of jihadist groups in countries like Somalia. The potential impact of the US's withdrawal from the World Health Organization (WHO), where it contributes 15% of the budget, could further strain global health initiatives, though the Gates Foundation may offset some of the loss.

Politically, the freeze could destabilize governments, particularly in Africa, where US assistance plays a vital role. This instability might provide fertile ground for extremist groups and increase the risk of military coups, which have already been prevalent in West and Central Africa. The Trump administration is also likely to leverage aid as a bargaining tool, especially in negotiations over the African Growth and Opportunity Act (AGOA), which expires in September 2025. Many African nations, particularly in the textile industry, depend on access to US markets and could find their economic interests threatened by these changes.

Following the aid freeze, Secretary of State Marco Rubio chose not to attend the G20 summit in Johannesburg, partly due to the passing of South Africa's Expropriation Act, which allows the government to seize agricultural property from ethnic minorities without compensation. This political development could pave the way for China to increase its influence in Africa, as President Xi Jinping pledged billion in aid to the continent over the next three years. Unlike the US, China does not demand political loyalty, which could limit the effectiveness of America's foreign aid strategy.

Coface, a leader in trade credit risk management, has raised concerns about the potential risks to global trade and economic stability. With over 75 years of expertise in managing trade risks, Coface helps businesses navigate the uncertain environment, offering a range of solutions including trade receivables insurance, business information, and factoring services. The company, which employs over 4,900 people worldwide, remains a critical partner for businesses seeking to manage the impact of these economic shifts.

Source:Coface