Instead of the regular Newswire last week, we brought you deep dives into some of this year’s key development topics. Today is our last deep dive, and in this edition, we’re focusing on the future of U.S. foreign aid — in a post-USAID world.
On July 1, the U.S. Agency for International Development formally ceased to exist as America’s bilateral foreign aid agency.
It still feels unreal to write that sentence. But the fact is, it happened. And the question is: What happens now?
Last week, my colleague Elissa Miolene wrote about the Trump administration’s dismantling of USAID — how it unfolded, how it felt to those inside the agency, how the development community tried to fight back. If you haven’t read her deep dive yet, I suggest starting there.
While the last six months were shocking, the next six months are rife with uncertainty.
It is hard to keep track of the many moving pieces:
• Within weeks of formally taking control of U.S. foreign assistance programs, the State Department announced mass layoffs of its own, eliminating entire bureaus and offices and removing large numbers of technical experts just as it seeks to assume massive new responsibilities.
• The White House convinced Congress to approve an $8 billion clawback of foreign assistance funding it had already approved — while lawmakers mounted a last-ditch effort to save PEPFAR, the U.S. flagship HIV/AIDS initiative.
• Although PEPFAR ultimately got a reprieve, Trump officials are reportedly drafting plans to wind it down — turning up the heat on a long-simmering conversation about “sustainability” in the global AIDS response.
• Many of Trump’s nominees to lead on foreign policy and development have yet to take up their posts. When they do, they could bring Silicon Valley and Wall Street with them.
• Budget battles are nowhere close to the rearview mirror, and Congress may be seizing its own opportunity — finally — to shape the future of U.S. global development engagement.
Let’s dive in.
Can the State Department do development?
With its decision to shutter USAID and transfer its remaining programs to the State Department — along with a few hundred personnel — the Trump administration is placing a big and risky bet. USAID was the epicenter of U.S. global development engagement, backed up by procurement teams, monitoring and evaluation experts, and a large global presence that has been decimated since Trump took office.
The State Department does not have that same capacity to manage and oversee billions of dollars in foreign assistance contracts, grants, and cooperative agreements. It has undertaken an alarmingly rushed transition process — according to independent watchdogs — all while carrying out its own reductions in force.
In congressional testimony in May, U.S. Secretary of State Marco Rubio told lawmakers that the goal of subsuming USAID’s programs under his department is to make foreign aid “part of a cohesive, coherent foreign policy” that will be “driven by our embassies and our regional bureaus.”
For many, that is much easier said than done.
“I don’t see long-term development doing very well in this context,” Brian Atwood, the USAID administrator during President Bill Clinton’s administration, told me earlier this year, citing the State Department’s focus on short-term diplomatic crises over long-term partnerships.
“What are we going to do about this impending train wreck?” asked Jim Kunder, former acting USAID deputy administrator, during a Devex Pro Briefing. He added that the State Department is going to have to relearn how to manage development programs, and predicted “a two-year absence of U.S. soft power from the world stage” as a result.
The stakes could hardly be higher. According to a recent study in The Lancet, USAID programs have saved roughly 90 million lives over the last two decades. The same study found that if Trump’s aid cuts become permanent, roughly 14 million people could die by 2030.
Read: State Dept takeover of USAID is an 'impending train wreck,' experts say (Pro)
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For Pro members, I’ve recently launched a limited-time special Saturday edition of our Pro Insider newsletter, where I examine some of the biggest questions about the evolving realities of U.S. aid.
Rescissions: Round 1
The dismantling of USAID was just the beginning of a fight for the future of U.S. foreign aid — a fight that is playing out on multiple fronts and testing the development community’s ability to muster support.
Last month, the Trump administration and Republican allies in Congress pushed through a $9 billion rescissions package that slashed spending on programs lawmakers already approved during the last two fiscal years. Foreign assistance comprised the bulk of those programs.
The rescissions mark a key turning point in the balance of power between the White House and Capitol Hill over decisions about the foreign aid budget. During Trump’s first administration, he tried — and failed — to carry out a similar foreign aid rescission. This time, the dynamic is different, and the White House got its wish.
The cuts targeted development assistance, global health, and humanitarian programs — but ultimately spared PEPFAR. In a recent edition of the Devex Pro Insider newsletter, I spoke to one PEPFAR advocate about how the program’s supporters managed to convince key lawmakers to come to its defense. TL;DR come prepared with specifics, not just big projections — and don’t assume congressional staffers always speak for their bosses.
The White House has openly signaled that there will be more rescissions to come, and these could be strategically timed so that funds expire before they can be spent.
In the meantime, lawmakers have to hammer out a budget agreement for the next fiscal year, which starts in October.
So far, the House of Representatives has released its budget proposal, rejecting many of the cuts that the White House has sought — particularly for historically popular sectors such as global health. But that blueprint has yet to be approved, and the U.S. Senate still has to follow suit.
As always, it could be a long road to any kind of clarity about what the future of U.S. global development spending will look like.
Read: US Congress clears Trump's $9 billion rescissions package
Plus: Trump budget proposes unprecedented, 'reckless' cuts to foreign aid
Learn more: What we talk about when we talk about foreign aid (Pro)
PEPFAR’s endgame
Even with PEPFAR’s carveout from the latest round of cuts, the program faces an uncertain future — and a deeply compromised present.
“Yes, PEPFAR lives to see another day, but it's doing it with at least one — if not a couple — of hands tied behind its back,” Mitchell Warren, the executive director of the AIDS Vaccine Advocacy Coalition, told my colleague Sara Jerving.
PEPFAR is still operating under a waiver issued in February that imposes restrictions on certain programs. For example, pre-exposure prophylaxis, or PrEP, can only be offered to pregnant and breastfeeding women, meaning that other high-risk groups — such as men who have sex with men, drug users, and sex workers — are blocked from accessing a key prevention tool.
On top of that, the broader global health architecture has been severely undercut by USAID’s dismantling and Trump’s proposals to pull back from multilateral health initiatives such as Gavi, the Vaccine Alliance and the Global Fund to Fight AIDS, Tuberculosis and Malaria. It adds up to enormous pressure on keystone institutions that are responsible for preventing millions of deaths — and has hastened a long-simmering conversation about what the future of global health cooperation should look like.
For PEPFAR, that means a heightened focus on “sustainability” — which has become shorthand for shifting leadership and funding responsibilities from the U.S. government and its partners to country governments. A draft State Department plan reported by The New York Times — which sources say is very preliminary — would see PEPFAR wind down its programs over variable time frames in different countries over the next several years.
Read: How the Senate saved PEPFAR — but still greenlit billions in aid cuts
Read more: Senate blocks $400M cut to PEPFAR, but it's a shell of its former self
ICYMI: Trump budget request and rescission plan slashes global health funding
Watch: What should a responsible PEPFAR transition look like? (Pro)
Move fast and break aid
It’s not hard to decipher the core elements of the Trump administration’s approach to foreign aid during the last six months: funding cuts, firings, and bureaucratic downsizing. It’s harder to predict what the White House, Congress, and future-focused development thinkers will try to build in place of what has been dismantled. If they channel the Reagan-era mantra that “personnel is policy,” then the future could look very different.
In a recent edition of the Devex Pro Insider, I looked at the network of Silicon Valley and Wall Street power players who are exerting growing influence over U.S. foreign policy and where they might be taking global development. These are people who come from outside the established “development community” and bring a different worldview with them — one that puts strategic technological competition first, and fighting global poverty a distant second.
A key nomination to watch is Ben Black, whom Trump has tapped to lead the U.S. International Development Finance Corporation. Ten days prior to Trump’s inauguration, Black co-authored a blog post titled “How to DOGE US Foreign Aid” for the personal Substack of Joe Lonsdale, a co-founder of the data intelligence company Palantir Technologies.
Their main argument was that the bulk of USAID’s budget should be shifted to a scaled-up DFC in pursuit of investments that advance “a long-term U.S.-centric development strategy,” rather than “pandering to the interest group-driven issue of the moment.”
DFC looks like a rare winner among foreign aid agencies in the Trump 2.0 era, with plans to build out a New York office that will put its staff closer to financiers and dealmakers, and proposals in the works to expand its investment capacity.
Read: Trump's DFC nominee stresses 'dual mandate' of US development finance
Know more: Trump has big plans for DFC as reauthorization deadline looms
Check out: The new kings of American soft power (Pro)
When recess is over
This August, as Congress takes its annual recess, the break feels like an interlude between six months that shook the foundations of U.S. development engagement and the inevitable, yet uncertain fallout from that historic period.
When Congress returns to work in a few weeks, it will mark the resumption of a cramped legislative calendar in which lawmakers must pass budgets, confirm key nominees, and reclaim their oversight responsibilities of a State Department-led foreign aid enterprise that is riddled with risks and unanswered questions.
The looming end of the 2025 fiscal year will put the State Department under increasing pressure to spend the money it has absorbed from USAID — even as it tries to build the internal procurement, monitoring and evaluation, and programming capabilities to do so.
Former USAID partners will now find themselves with a short window and a steep learning curve for State Department implementation.
Catch your breath. The next chapter of U.S. foreign aid is about to be written — and it’s happening very fast.
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