This is Part III of a three-part series, A New Landscape for Development, that examines the context, current state, and early impacts of the dramatic changes to U.S. foreign assistance in 2025.

Part I – The Ground Has Shifted
Part II – Examining Impacts, Capabilities, and Opportunities

The second Trump administration has brought sweeping changes to U.S. capabilities for engagement with developing countries. These changes have generated confusion and fundamentally disrupted long-standing systems, instruments, and approaches to international development support. In many cases, these disruptions had severe impacts on the programs and people associated with U.S. foreign aid and its delivery.

But those previous structures and systems were often most insightfully critiqued by those directly involved with U.S. international development and humanitarian assistance—as beneficiaries, partners, implementers, program managers, or policymakers. In the coming years, there may be an opportunity to replace once-entrenched systems with novel, effective, and innovative approaches.

The United States still needs ways to successfully partner with developing country governments and communities. Foreign assistance will continue to play a key role in those partnerships, contributing to international security and economic growth. This new landscape presents opportunities to shape the U.S. development engagement of the future.

Innovation and reform can be championed by stakeholders in Congress, the administration, other governments, the private sector, and beyond. The recommendations below reflect the importance of building out from the focused, transactional inclinations of the second Trump administration to help ensure U.S. foreign policy success amid an era of intensive geostrategic competition.

I. Scale up commercial diplomacy in
developing countries.

The U.S. government should facilitate and enable investments in sectors such as energy, critical minerals, pharmaceuticals, and infrastructure, including digital infrastructure. The United States has strategic interests and capabilities in these areas that align with the needs of potential partner countries across the globe, including in the Global South. U.S. agencies can leverage development assistance, but in many cases, support needs to shift from grant-focused models to blended finance approaches. Through government-to-government agreements with strategic countries, a greater share of U.S. programs should combine government aid with commercial capital and coinvestments from other governments and local partners.

• Enhance business engagement.
  A scale-up will require building upon the capacity of the U.S. International Development Finance Corporation (DFC), but it will also require stronger private sector engagement skill sets and instruments within the State Department.

• Improve coordination.
  Better whole-of-government coordination across agencies engaged in economic development will be essential to improving efficiency and ensuring policy coherence. This will necessitate better linkages between the efforts of the existing groups of functional bureaus within the State Department; In turn, the State Department will need to be working in concert with the Departments of Commerce, Treasury, and Agriculture, as well as with specific agencies, particularly the DFC, the U.S. Trade and Development Agency, the Export-Import Bank of the United States, and the Millennium Challenge Corporation.
  
  Because it necessarily spans multiple departments and agencies, the agenda for economic engagement with developing countries ideally requires coordination from the White House’s National Economic Council and its National Security Council (NSC). Commercial diplomacy in emerging markets and developing economies warrants such attention, but the current administration’s steps to shrink the NSC by more than half while reducing the role of White House coordination in “the interagency process” may make that infeasible in the near term. In the absence of such active coordination, the White House should empower the undersecretary for foreign assistance, humanitarian affairs and religious freedom at the State Department to coordinate across departments and agencies to marshal foreign assistance in support of such economic engagement.

• Support implementation.
  The U.S. government must prioritize implementation in dealmaking, in both the commercial and peacebuilding spheres. With the elevation of humanitarian and commercial diplomacy as a mode of international engagement, the complex requirements after a deal is signed become ever more important. After the dismantling of the U.S. Agency for International Development (USAID) and the reorganization of the State Department, relevant offices and bureaus intended to support peace agreements and provide guidance to companies operating abroad have been eliminated or are now understaffed. Additionally, development programs to financially support such efforts have been cut. The State Department will have to be creative in mustering the resources and staffing to formulate and manage detail-oriented implementation plans.

II. Do not underestimate the importance of an enabling environment.

In the absence of sustainable development, commercial deals will fall apart, investments will be wasted, and envisioned profits and development gains will fail to materialize. The United States can and should marshal its assistance in various ways to support critical underlying factors for sound investment partnerships with developing countries.      

• Shape the playing field.
  Grant-based technical assistance provides the U.S. government’s ability to support policy and regulatory reform—an essential element to attract and sustain both domestic and foreign investors. Assisting with reforms such as improved banking or mining legislation, or the development of institutions that facilitate licensing and permitting, is imperative for shaping a business-friendly environment into which U.S. companies can invest.

• Support good governance.
  As U.S. diplomacy aims to expand opportunities for American companies to invest and expand abroad, the value of good governance, limited corruption, and respect for human rights cannot be overstated. Without core governance functions, the infrastructure required for operations is unsustainable. Corruption is a scourge on corporate continuity and profit. Lack of respect for human rights foments civil strife and unpredictability. Even as the private sector is asked to play a greater role in development efforts in parallel to investments and operations, there are areas of critical support that they will not be able to act upon directly without jeopardizing business operations. Where the private sector cannot address an issue, grant-based development work through the U.S. government should be used to strategically help fill the gap.    

• De-risk investments at greater scale.
  As physical risks from extreme weather and humanitarian crises become more frequent and catastrophic, it is in the geopolitical and economic interests of the United States to help its partners respond and build resilience to future disasters. Assisting partners in specific investment zones to build a base layer of catastrophic risk protection can help to mitigate damage and attract further investments. By promoting and leveraging insurance (beyond the political risk insurance it already provides through the DFC), the United States could demonstrate a different model of engaging with developing countries that can showcase cost-effectiveness, financial predictability, and market-oriented private sector partnerships.
  
  If, for example, the U.S. government were to utilize existing public-private mechanisms to expand disaster-related macro insurance in developing countries by using even just 2 percent of the $14.5 billion the United States was recently spending annually on international humanitarian response, that would more than double the amount of pre-arranged financing recently reported by donor countries to the Organisation for Economic Co-operation and Development. Such a step would mark a new direction for the United States while also challenging other governments to step up in ways that are foundational for the capital stack, economic growth, resilience, and investor confidence.

• Invest in workforce development.
  The United States has historically invested in education, skilling programs, and workforce development in low- and middle-income countries as a part of its foreign assistance partnership model. In the new landscape for engagement with developing countries, U.S. investments in youth-focused workforce training could be strategically reoriented as a supportive pillar for commercial investment deals, particularly in the context of rapid technological change and the rise of artificial intelligence. Private sector investment and engagement can play a key role in piloting these efforts, but long-term sustainable workforce development requires government policy and development leadership.

III. Pursue opportunities to work through local businesses and civil society organizations.

The upheaval of long-standing systems for delivering strategic support is likely to have side effects for U.S. businesses, investments, and economic engagement. Calls by developing countries, foundations, international nongovernmental organizations, and many others across the international development community to accelerate a “power shift” by directly partnering with and investing in local organizations have abounded within dialogues on aid effectiveness and development reform for many years. Multiple administrations, including the first Trump administration, have put forth efforts to prioritize local organizations and new partners in the provision of foreign assistance. With the dismantling of much of the U.S. aid system this year, including certain incentives, dependencies, and rote ways of programming aid, the forthcoming environment provides an opportunity to move past the previous model that often made partnering with smaller, local organizations bureaucratically impossible.

• Consider cost effectiveness.
  The reality of lost funding for foreign assistance means doing more with less. In addition to providing deep contextual understanding, local organizations can offer cost efficiency when compared to larger international implementing partners.

• Bolster buy-in.
  The strategic value that foreign assistance offers for building alliances and partnerships requires buy-in from both the United States and the host country. Prioritizing local partnerships creates a greater likelihood of such buy-in.

• Resist reliance on old procurement approaches.
  Working with local organizations in developing countries is key to strengthening enabling environments that support U.S. economic and commercial investments. With fewer staff handling allocations of U.S. foreign assistance, there could be significant pressure to provide larger tranches of aid through established U.S. and international implementing partners. This would be a mistake. Local businesses and organizations across the Global South that can survive and even thrive amid the upending of traditional international aid are resilient partners that can efficiently and effectively advance mutually beneficial objectives.   

IV. Measure and communicate about progress (or lack thereof).

Foreign assistance initiatives that center around business and economic engagement must prioritize measurements—data, evidence, and results—to understand whether efforts are effective and efficient. Measuring progress (or lack of progress) is key to effectively communicating with Congress and the public for sustained support.

• Track results.
  Measurements should be aligned to overarching strategies, and the metrics themselves should be streamlined, credible, and, where appropriate, collected by independent third parties. In the case of economic engagement, such indicators might relate to supply chain resilience or levels of resource mobilization, for example. While its dismantling activities have damaged or discarded a slew of resources, programs, and systems that methodically generated and aggregated this type of data, the second Trump administration can still build on tools that should align with its priorities, such as the Millennium Challenge Corporation (MCC) scorecard and the Journey to Self-Reliance metrics that USAID established under the first Trump administration.

• Report transparently.
  Successfully utilizing foreign assistance to advance policy priorities requires sustaining political will for the resources and engagement required. Because foreign aid has been at the center of a recent political maelstrom, it is understandable that a high degree of mistrust about related decisionmaking abounds among members of Congress and their constituents. Transparency and reporting efforts such as those that resulted in ForeignAssistance.gov were created precisely to contend with these challenges, and Congress and the Trump administration should continue to support and build mechanisms for clear public information sharing on how much foreign assistance is being spent where, and for what.

V. Balance short-term and strategic goals.

With USAID no longer a presence in developing countries, the State Department, through its embassies, bears an even greater burden for monitoring, messaging, and shaping long-term strategic partnerships. The ability of the United States to operate unilaterally across almost all geographies and topics has receded dramatically over the last two decades; as a result, careful consideration is required to prioritize regions, countries, and issue sets. This reality is compounded with the removal of policy and engagement tools within foreign assistance. Choices about where and how to engage must be weighed not just against short-term demands but against the long-term backdrop of emboldened competitors such as China and Russia, as well as more active middle powers such as Turkey and the United Arab Emirates.

• Cultivate trust.
  Trust and reliability play a key role in creating and maintaining preferred partnerships. The erratic nature of U.S. engagement with the Global South, in particular over the course of 2025, has created a trust gap between the United States and its allies and partners. Long-term genuine partnerships are key to countering strategic competitors. They serve as robust connective tissue even when national interests do not directly align on all sides. Working to nurture those relationships requires an array of policy tools and forward thinking, rather than responsiveness to fleeting or rapidly changing priorities.

Visit A New Landscape for Development to find the full context, analyses, and recommendations for the future of foreign aid.