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By Lawrence Huang, Samuel Davidoff-Gore and Susan Fratzke
The Trump administration dismantled U.S. foreign assistance in a matter of days, practically shuttering overnight the U.S. Agency for International Development (USAID), which disbursed about 60 percent of the government’s $71.9 billion aid budget in fiscal year (FY) 2023. While the United States is not the only actor cutting foreign aid, the retrenchment of the world’s largest donor leaves a hard-to-fill gap—with potentially serious and unintended consequences for how governments around the world manage migration.
Foreign assistance can dampen the instability, economic hardship, and climate shocks that force people to move, as well as help people integrate, return home, or move legally in search of better opportunities. While there have long been calls to make aid more cost efficient and effective, the abrupt unraveling of billions of dollars in funding for such critical programs may worsen global displacement crises and make it harder for the international system to respond to them.
Though the United States made the most drastic cuts in overall foreign aid—terminating an estimated 85 percent of contracts managed by USAID, worth more than $27 billion—European donors are also pulling back. France and Germany reduced foreign aid funding for the year by 11 percent and 9.5 percent respectively; and Belgium, Finland, the Netherlands, Sweden, and Switzerland are enacting multiyear cutbacks. The European Union redirected 2 billion euros from its development budget to support Ukraine and border management, while the United Kingdom is reducing its development assistance by 40 percent to invest in defense. Collectively, these decisions amount to billions of dollars more in lost funding.
The loss of foreign aid is not the only significant change, though. European countries are also shifting the scope of their migration work, refocusing from meeting humanitarian needs and supporting migrants’ contributions to an exclusive focus on reducing irregular migration along key corridors and incentivizing partner countries to accept returns of their nationals.
Global retrenchment from foreign assistance could result in three potential scenarios. In one, no one else steps in to fill the gaps caused by U.S. pullback. Or European governments may step up immediate humanitarian funding, alongside cuts to longer-term development assistance and prioritizing domestically relevant migration routes. But there is also a scenario in which a better model may emerge over time, with innovation driving a leaner, more sustainable system to manage migration with greater focus on catalytic and innovative finance and better coordination among donors.
Counterproductive Cuts in the Migration Space?
Amid the retrenchment in U.S. foreign aid spending on global public health, humanitarian assistance, education, economic and social development, governance, and security assistance, migration and displacement projects have taken a big hit—including ones focused specifically on combatting irregular migration.
Migration Policy Institute (MPI) analysis of leaked lists shared with Congress of terminated awards and grants from USAID and the State Department finds up to $2.3 billion in migration-related aid (see Box 1 in the PDF for more details). Strikingly, $200 million of these funds focused specifically on deterring irregular migration from Central America, which would seem to be in line with U.S. interests.
Though some U.S. cuts may not be permanent, they are already having an impact. The World Food Program, which gets half its funding from the United States, reduced food rations for refugees in Kenya, leading to protests and violence in Kakuma refugee camp. Ecuador has used the withdrawal of foreign aid to justify canceling its planned regularization campaign for Venezuelan migrants, which may have dissuaded some from trying to move north.
The full ramifications of the terminated funding will vary depending on how donors react. There are three scenarios that could play out, in overlapping ways:
Scenario I: The Near-Death of Foreign Assistance
If U.S. cuts play out in their most extreme form, other donor countries may not have the capacity or political will to fill the gap. European donors, in particular, are under pressure to increase defense spending and find places to trim their budgets to compensate. There is a risk that moves by the United Kingdom and other countries to shift money to defense from foreign aid will make it more palatable for others to reduce foreign assistance as well.
The costs in this scenario would be immense. Sudden withdrawal of aid would amplify instability in existing crises and displacement hotspots and force civil society and UN agencies on the frontlines to cut services and staff. Over time, potential U.S. withdrawal from multilateral institutions such as the World Bank, which committed $2 billion to support refugees and host communities in low-income countries, might mean protracted displacement situations become untenable and onward migration more likely. Host countries from Jordan to Uganda would have fewer financial incentives to maintain generous quasi-open-door policies to refugees, potentially putting refugees at risk of refoulement and reducing options for displaced people to stay in their region.
While the loss of aid-supported projects likely would not trigger mass migration, in particular to the West, it will have the effect of limiting governments’ tools to manage mixed migration, in ways that cannot be easily reversed. Instead, North American and European governments will continue to harden their borders and use what remnants of foreign aid are left (alongside tariffs and other economic sticks) to force transit countries to restrict movements. If draconian enough, these efforts could keep border numbers manageable even as instability increases abroad.
But cooperation with lower-income countries will be weakened, making them less reliable partners to manage migration and potentially more willing to instrumentalize the threat of migration to extract concessions from donor countries. By turning the screw so hard to control migration, high-income countries may lose allies they need in other priority areas, such as defense. Similarly, they may have fewer capacities to respond to future migration crises, simply because they will have lost the staff to stand up programs quickly, as seen with delays in getting U.S. assistance to Myanmar after earthquakes in March 2025.
Scenario II: Temporary Stopgaps Paper over Structural Problems
Other high-income countries could temporarily fill the gaps left by the United States by reversing or delaying some of their planned foreign aid reductions. But even if donors can stem the bleeding in the short term, they would likely still face the same pressures to reduce foreign assistance in the long term as security and defense needs become more acute and political priorities shift. As a result, their support would only paper over the structural challenges facing the migration and displacement landscape.
Filling the U.S. hole also requires more than just plugging in money—it may require shifting goals. The United States was the biggest provider of humanitarian assistance, whereas the European Union and its Member States have historically prioritized development funding. These donors would thus need to rebalance their portfolios toward meeting the most urgent humanitarian needs. They could follow the example of Norway, which has newly dedicated $170 million annually for five years for humanitarian aid organizations.
While commendable, short-term, stopgap measures may ultimately lead to greater costs. Donors will not be able to resolve the underlying drivers of humanitarian need or innovate in response to new challenges, such as those posed by climate change, because they are stuck in the humanitarian funding loop. They also will not be able to leverage an international humanitarian protection architecture weakened by the loss of U.S. backing, financial and otherwise, leading to less efficient and effective systems. Cuts to the international organizations that operate resettlement infrastructure, for example, will likely make resettlement prohibitively expensive for some smaller resettlement countries, which cannot bear the full costs of resettlement on their own—leading to a further reduction in resettlement numbers.
Scenario III: Funding Shock Opens a Window for Leaner, Stronger Migration and Development Programming
Decade-long efforts to make foreign aid more impactful, sustainable, and cost effective have demonstrated little progress, but this funding shock could provide enough of a jolt to turn this vision into reality. To succeed, the international community would need to commit to innovation over the long term and make some hard choices. While none of the ideas discussed below are new, this unsettled landscape offers an opportunity for them to become the driving imperative of all migration and displacement work.
One area of innovation is shifting the development paradigm away from a reliance on public grants, for instance:
- Employers in some cases should themselves fund livelihood and skilling projects that train migrants, rather than relying on donor-funded development programs to build their workforce. This could be part of a rethink that connects upskilling and recruitment to labor openings in destination countries as well as humanitarian needs in origin countries.
- Refugees (or refugee sponsors) could take on loans to fund their resettlement, instead of having their travel paid for by governments. Even if this adds costs to vulnerable people and their support networks, this could be outweighed by the value in building public confidence and support in receiving communities for resettlement. This could also help drive new models for refugee resettlement based on sponsorship.
- Greater efforts could incentivize diaspora investment in community development, through bonds, impact investment opportunities, and a pipeline of community-based, shovel-ready projects that could attract diaspora funding.
Another priority could be using foreign assistance more strategically to create more sustainable, long-term solutions to displacement. Donors could condition foreign assistance on partner countries’ policy reforms to provide refugees and migrants with work rights and freedom of movement. These reforms would focus squarely on sustainable solutions such as supporting refugees’ and migrants’ access to mainstream national services rather than creating parallel infrastructure and systems just for refugees.
As limited foreign aid budgets add new pressure to demonstrate efficiency and success, governments will have to make hard choices, deprioritizing the myriad humanitarian crises and instead ruthlessly using limited budgets to scale sustainable solutions.
Getting to Scenario III
Avoiding Scenario I and the long-term costs of Scenario II necessitates leadership and prompt coordination to make Scenario III a reality. Even if they could, donors should not simply fill the gap left by the United States. Rather, they should seize this opportunity to strategically cut programs that are duplicative, wasteful, or do not serve national interests.
Philanthropic funding, in particular, can draw out the innovations worth testing in this immediate crisis to prepare for rebuilding the foreign aid architecture, rather than trying to take on a quasi-governmental role. Properly tracking the cuts and their impacts on migration contexts is critical in the short term to help inform donor responses and build the empirical and political case for a leaner, more effective system to manage migration across the world.
As donors strive for this future, however, it is equally important to maintain their public commitment to development, in order to safeguard critical infrastructure and knowledge in migration programs at risk of cuts. Even if these commitments are limited, small actions matter more in the vacuum of U.S. leadership.
The authors thank Philipp Sandmann and Gabriello White, research interns with MPI’s International Program, for their work analyzing U.S. foreign aid award cancellations.
Read the analysis here.
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