Trump “Pulls the Plug” on Washington’s Foreign Aid

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We welcome you to the Greater Caribbean Monitor (GCaM).

In this issue, you will find:

•Trump “Pulls the Plug” on Washington’s Foreign Aid

•Mexico Wonders How to Navigate the Trump Era

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Ricardo González
Trump “Pulls the Plug” on Washington’s Foreign Aid
745 words | 4 minutes reading time

True to his style, Donald Trump’s first day back in the White House was marked by dramatic and decisive actions.

• The president signed at least 46 executive orders just hours after being sworn into office—a historic figure. 

• Among them, several align with his America First agenda, addressing issues such as border security, energy, and his announced reform of the federal civil service.

• For Washington’s allies abroad—especially in Latin America—EO 14160 holds particular significance, as it marks the beginning of the anticipated shift in U.S. foreign aid funding.
  
  

Overview. Trump ordered a 90-day pause on all allocations and disbursements of U.S. foreign aid, aiming to allow his team to conduct a comprehensive review of all existing assistance programs. 

• The executive order stipulates that no aid program shall be pursued unless it is fully aligned with the President’s foreign policy directives. Trump and his team undoubtedly wish to end programs they deem unduly ideological and wasteful.

• This signals a significant shift in foreign aid programs under Trump’s administration, reflecting his vision of Washington’s role on the geopolitical stage and his ideological convictions, which stand in stark contrast to those of his predecessor, Joe Biden. 

• For Trump’s inner circle and his most loyal voter base, U.S. foreign aid in recent years has not aligned with their interests. A notable example is the persistent criticism of Biden’s support for Ukraine, which allocated approximately $175 billion from 2022 until the end of his administration.
  
  

Between the Lines. The decision to resume disbursing funds or finance new projects will ultimately rest with the State Department, now led by Marco Rubio and a significant number of Hispanic officials with extensive experience in Latin America. This implicitly underscores the region’s importance in Trump’s second term, particularly in light of China’s relentlessly expanding influence.

• In the 2024 fiscal year, Latin America and the Caribbean ranked as the fourth-largest recipient of USAID funds, receiving $2.2 billion. Among the top beneficiaries were Haiti, Colombia, Venezuela, and Guatemala, which collectively accounted for more than 50% of the total allocated to the region. 

• With Trump in the White House, aid is slated to fall. However, the most significant change will be the elimination of hundreds of ideologically driven programs implemented during the Democratic administration.

• In Guatemala, for example, the Biden administration invested over $770 million during its tenure, including funding for programs promoting gender reassignment surgeries, education focused on gender identity, and critical race theory. Trump evidently looks askance at such initiatives.
  
  

Why It Matters. Trump’s resounding victory in November reflected widespread discontent among Americans. While the economy and immigration were foremost in voters’ minds, some criticized the allocation of billions of dollars abroad—funds that, many argue, could be better spent addressing domestic challenges.

• Beyond this, the way Washington has managed foreign aid in Latin America over the past decades often appears to contradict its own interests, particularly on issues such as immigration and its strategic rivalry with Beijing.

• In 2024, República reported that the Biden administration was funding programs promoting unionization in the textile and agricultural sectors of Central America’s Northern Triangle—a region that has accounted for roughly one-third of migrant encounters with U.S. border security forces since 2021.

• Textile and agricultural exports represent a significant portion of the GDP in Northern Triangle countries. By implementing such programs, Washington undermines the competitiveness of the few sectors in these economies with growth potential, which also provide employment to thousands. This not only hampers potential economic growth, but also encourages immigration to the United States by limiting job opportunities in the region.
  
  

The Bottom Line. Trump’s 90-day “shutoff” of foreign aid will provide significant insight into the direction and priorities that U.S. foreign policy will take over the next four years. 

• Washington faces the significant challenge of redirecting its foreign policy efforts in a region increasingly aligned with Beijing. This trend should come as no surprise. While the United States has allocated resources to projects that do little to foster development and promote ideas misaligned with the region’s priorities, China has concentrated its efforts on strategic initiatives, such as the recently inaugurated Chancay megaport in Peru.

• During the presidential campaign, now-Vice President J.D. Vance addressed this issue, emphasizing the need for a shift in Washington’s approach. He stated: “We have built a foreign policy of hectoring, moralizing, and lecturing countries that don’t want anything to do with it. The Chinese have a foreign policy of building roads and bridges.”

• Promoting economic development in Latin America aligns with Trump’s interests, both in addressing immigration and curbing China’s influence. The first steps have been taken, but many more remain ahead.

Alejandro Menéndez Martí
Mexico Wonders How to Navigate the Trump Era
859 words | 4 minutes reading time

Donald Trump’s return to the White House marks a new stage in relations between the United States and Mexico. On his first day as president, Trump reinstated the Remain in Mexico policy, threatened 25% tariffs on Mexican goods, and designated cartels as terrorist organizations.

• President Claudia Sheinbaum has struck a calmed, determined pose, insisting on the defense of Mexican sovereignty while seeking to maintain bilateral cooperation.

• Faced with this scenario, Mexico faces the challenge of mitigating the risks of these policies and exploring opportunities to strengthen its strategic position. 

• Trump has reintroduced many of his signature policies. He appears to have returned to the White House with increased vigor and zeal. Nonetheless, it must be recalled that during his first term, he was able to reach a modus vivendi with Mexico, for whom a Trump presidency need not be apocalyptic.
  
  

Remain in Mexico. The reintroduction of the Remain in Mexico policy leaves thousands of migrants stranded in Mexican border cities, which are already facing resource scarcity after the closure of the CBP One platform.

• According to 2020 data from the American Immigration Council, this program forced more than 70,000 asylum seekers to wait in Mexico, often in precarious conditions.

• Yet Mexico, although it is loath to admit it, often acts quite strictly on the repatriation front. Faced with a humanitarian crisis on its northern border, it will ramp up deportation efforts for foreign migrants stuck in its territory. 
  
  

Trade. Trump has threatened to impose 25% tariffs on Mexican goods to push for a renegotiation of the USMCA ahead of its 2026 review. In doing so, he is endangering $800 billion in annual trade, on which Mexico relies for around 80% of its exports. 

• The Mexican peso fell 1.4% immediately after Trump issued his threat, which he may act upon by next week. For Mexico, 25% tariffs could lead to an annualized loss of up to 1.5% of GDP, with damages being particularly severe across the automotive sector.

• Trump is well-aware of U.S.-Mexico trade’s importance. Such tariffs would be far more damaging to Mexico than to the United States, which would not emerge entirely unscathed. An agreement of some sort, perhaps after inflicting some pain on Mexico, is likely.
  
  

Cartels. To complete Mexico’s panoply of risks, the designation of cartels as terrorist organizations introduces the genuine, albeit still far-fetched, possibility of unilateral interventions in Mexican territory, a serious concern for the country’s sovereignty.

• Mimicking her predecessor, Andrés Manuel López Obrador (AMLO), Sheinbaum has responded with a message of calm, saying, “Beyond rhetoric, it is important to keep a cool head and refer to signed orders.”

• Trump is rather more dismissive. When pressed on the matter while signing executive orders in the Oval Office, he affected a tone of conscious ambiguity: “It could happen. Stranger things have happened.”
  
  

Mexican Standoff. Mexico is not completely defenseless. It has incentives, and some means, to reach agreements with the United States. The most obvious avenue, already on display during Trump’s first term, is coordination with Canada. With some concessions, Trump can likely be persuaded to avoid an intra-North American trade war.

• Beyond this, although the Remain in Mexico policy imposes unwanted duties, Sheinbaum could acquiesce and push for increased U.S. funding to improve border infrastructure and address the needs of migrants. In any case, if Trump’s strategy succeeds, immigration pressures will subside. 

• Although it involves risks, Mexico could take advantage of cartels’ terrorist designation to insist on greater intelligence sharing and security funding from the United States. This would allow Sheinbaum to save face, while addressing Trump’s chief concerns.

• In a more confrontational manner, Mexico may also opt in favor of diversifying its trade via a pivot to Asia. Some Mexican analysts suggest that agreements like the CPTPP will reduce economic dependence on the United States in the long term. 
  
  

Yes, But. These responses are all fraught with peril. Tying the Remain in Mexico policy to financial aid may not suffice to relieve pressure on border cities. In addition, the perception that Mexico acts as a “safe third country” could provoke internal discontent, with advocates for immigration restriction in Mexico becoming increasingly prominent.

• On the security front, U.S. officials are already hesitant to collaborate with their Mexican counterparts, whose commitment to the anti-drug cause they occasionally doubt. Internally, Sheinbaum also risks being seen as subordinate to Trump.

• Finally, if Mexico wishes to guard its own national interest, it must diversify its trading partners, but this constitutes a slow, decades-long process; it will not reduce Mexico’s short-term vulnerability to Trump’s economic threats. Perceived proximity to China may also further incense Trump. 
  
  

The Bottom Line. Donald Trump’s return to the presidency raises new challenges for Mexico. These challenges are complex, from economic pressures to the risk of intervention in security issues. However, they also offer an opportunity for Mexico to redefine its position in the region.

• Claudia Sheinbaum has, despite her internal ideological associations, sought to be cast as a moderate, pragmatic leader on the global stage. From a U.S. perspective, this may have a salutary effect on Mexican politics, reducing Sheinbaum’s ability to advance her internal ideological agenda.

• While her success in dealing with Trump is unlikely to be as resounding as AMLO’s, Sheinbaum is poised to establish a real, albeit turbulent, working relationship with the White House.