McLeod Group blog by Pamela Branch, April 28, 2025

On January 20, the United States suspended virtually all its international development spending for 90 days, citing concerns with corruption and effectiveness. Other cash-strapped countries have followed: The United Kingdom is reducing its aid budget by 40% to boost defence and France plans to cut a similar-sized chunk. Germany had already axed billions of euros from the aid budget and the new centre-right coalition is likely go even further. On the election trail in Canada, Conservative leader Pierre Poilievre has promised a “massive cut” in foreign aid.

These cuts are having devastating impacts on the millions of people in the world’s poorest countries that rely on USAID-funded programs. On April 2, the Trump administration compounded the hit to developing countries by announcing across-the-board tariffs of 10% on exports to the United States and much higher “reciprocal” tariffs on many countries. Vietnam, for instance, would face a crippling rate of 46%. Cancelling USAID and increasing tariffs will increase poverty rates in the world’s most vulnerable countries.

Currently, the worst of the tariffs have been “paused”, although the 10% tariffs remain. Before the end of April, the 90-day review plus one month extension of USAID should be complete and we can reassess the damage. Restarting programming would take significant amounts of money and time. This is an opportune time to look at the claims being made about aid and trade more closely.

Is development cooperation rife with corruption? US Congressman Glenn Grothman claims that “The World Bank estimates that 20% of foreign aid is lost to corruption each year.” Although corruption does exist, there is no evidence for this number. Development assistance financial flows are very closely tracked and carefully accounted for. Investigations, surveys about bribes, expert perceptions of the value of aid lost to corruption and measuring missing outcomes all support the conclusion that very little aid is lost to corruption.

Nor, contrary to some claims, will spending US foreign aid funds in the United States have much impact domestically: foreign aid represents less than 1% of the federal budget, while social security takes up 22%, interest payments 14%, and health and Medicare each consumes 13%.

Although development assistance is a complex and collaborative process that sometimes fails to deliver as planned, it is effective. Over 100 million lives have been saved by humanitarian assistance, vaccinations, and efforts to combat HIV/AID and maternal and infant mortality. Donor-financed vaccines and clinics have helped child-mortality rates in Africa fall by three quarters since the 1960s, for example.

Economic research recognizes that the relationship between trade openness and growth is complex (see “Trump, Tariffs and Free Trade”). But no country in recent decades has achieved substantial increases in living standards for its people without being open to trade. Reducing trade barriers was thus included in the Millennium Development Goals and its successor, the Sustainable Development Goals. While the benefits have not been shared equally, the World Bank has found that “overall, trade has generated unprecedented prosperity and helped to lift some 1 billion people out of poverty” between 1990 and 2017, a period in which developing countries’ share of global exports almost doubled, going from 16% to 30%.

The US government’s cuts to development assistance and its imposition of tariffs have been described in the press as “giving Russia a golden opportunity,” and “a gift for [the US’s rivals as they] vie for soft power”. China is now presenting itself as an advocate for free trade and President Xi is visiting Southeast Asia, promoting China as a better partner than the United States. But neither China nor Russia will replace American funding, which provides some 40% of humanitarian assistance, health and education programs globally. Russia, whose economy is about the same size as that of Texas, simply could not afford to fill the gap and neither country prioritizes investments in these areas.

Foreign aid and trade both help create a more stable and richer world. By applying tariffs indiscriminately, Trump is alienating old friends and potential allies. Concerned about the US’s reliability, traditional allies in Europe and beyond are increasing defence spending, and some are openly wondering if they are still covered by the American nuclear umbrella or need their own nuclear weapons.

All of this is making the world less secure and poorer, which will make the United States less secure and poorer. Yet, the criteria the State Department is considering for all programs and policies are: “Does it make America safer? Does it make America stronger? Does it make America more prosperous?” On all of these measures, the cuts to USAID and the introduction of tariffs on international trade fail.

Canada’s is a small open economy with a high ratio of trade to gross domestic product (GDP). While imports and exports make up over a third of our GDP, they are highly dependent on the United States. All political parties included trade diversification in their 2025 electoral platforms. Foreign aid fosters stability, promotes economic growth, reduces poverty, helps control the spread of disease and helps to create good will and influence. Radically cutting Canadian aid, as proposed by the Conservative Party would threaten the well-being of Canadians, as well as that of the world’s poorest people.

Pamela Branch is an international development professional with over 35 years of experience largely spent working on economic development in Africa. She is a founder, in 1993, of the Canadian Association of International Development Professionals and served as its president from 2014 to 2018. Image: Nick Youngson, Alpha Stock Images.