The Unseen Cost of Dismantling USAID: A Strategic Setback for U.S. Tech Leadership
The Trump administration has framed AI as the next industrial revolution—a force that will define global power for decades. At the Paris AI Summit, Vice President JD Vance made it clear: “The United States of America is the leader in AI, and our administration plans to keep it that way.” Yet, even as Washington fixates on safeguarding semiconductors and frontier models, it is quietly dismantling one of its most effective tools for securing that very dominance: USAID. Far beyond humanitarian aid, USAID has been a driver of economic statecraft, embedding U.S. standards for digital and financial systems into emerging markets through programs like the Digital Ecosystem Country Assessment (DECA) and the USAID Digital Strategy. These initiatives laid the regulatory and technological foundations that allowed U.S. firms to thrive—before Chinese state-backed systems could take hold. Now, that groundwork is eroding. And those markets won’t wait.
USAID’s role in shaping digital environments was more than a tool of economic development—it was a form of economic statecraft, ensuring that emerging markets adopted policies that made it easier for U.S. firms to expand and operate competitively. This has been particularly true of USAID Digital Policy, critical in the financial technology (fintech) sector, where USAID-backed programs ensured that U.S. payment networks such as Visa, Mastercard, and PayPal were embedded into the financial infrastructure of Latin America. These programs promoted transparent financial ecosystems, international compliance standards, and open-market access—and made it more difficult for Chinese fintech giants like WeChat Pay and Alipay to dominate. Without USAID’s continued engagement, nations looking to modernize their digital financial systems may turn to Chinese models—not necessarily out of preference, but because there is no longer a structured U.S. alternative.
Private companies cannot replace this role. While U.S. firms remain globally competitive, they still require regulatory stability, investment security, and reliable market access to expand into developing economies. Without a coordinated effort to ensure these conditions exist, companies face greater risk, higher barriers to entry, and increased costs—challenges that China has fewer issues with due to state-backed financing and coordinated regulatory integration throughout its Digital Silk Road. While China still faces legal and reputational risks in foreign markets, its ability to enter new regions with pre-written regulatory frameworks and state-funded infrastructure projects gives its firms an inherent structural advantage.
The consequences of U.S. disengagement are already emerging. The Digital Transformation with Africa (DTA) initiative, launched in December 2022, was designed to promote U.S.-Africa digital cooperation, expand broadband access, and support financial technology development. In its first year, $800 million was pledged to accelerate digital investments across Africa, including support for data center expansion, internet infrastructure, and mobile network upgrades. However, much of DTA’s implementation relied on USAID’s partnerships and its institutional capacity to coordinate across multiple agencies. It is unclear whether DTA will be able to function at the same level with USAID gone, raising questions about whether the U.S. can sustain a coherent digital engagement strategy without it.
The absence of USAID’s DECA assessments, which provided strategic insights into how foreign governments were structuring AI policies, cybersecurity regulations, and digital investment priorities, leaves a critical intelligence gap. These reports gave U.S. firms a competitive advantage over cyber adversaries like China and Russia by allowing them to anticipate policy shifts and align their business strategies accordingly. Without that visibility, American companies now face greater uncertainty when entering emerging markets.
While it would be premature to say that China’s Digital Silk Road will immediately dominate global digital governance, the loss of USAID’s institutional support increases the likelihood that foreign governments looking for digital infrastructure, cybersecurity guidance, and AI regulation will default to China’s packaged solutions. Chinese-backed digital initiatives, including smart cities, fintech, and AI governance models, have already been embedded in governments across Africa and Latin America. While the U.S. still has influence through diplomatic engagement and private sector investment, it no longer has a comprehensive, institutionalized mechanism for ensuring that its technology leadership translates into sustained global standard-setting.
If the U.S. intends to maintain leadership in AI, cybersecurity, and financial technology, it must replace the function that USAID once played. The Development Finance Corporation (DFC) could expand its mandate to provide digital regulatory assistance, ensuring that U.S. businesses continue to benefit from government-backed engagement in foreign markets. Alternatively, the State Department could take a more active role in digital regulatory diplomacy, reinforcing U.S. technology leadership by shaping global AI and cybersecurity standards. But simply removing USAID without a viable alternative is not a strategy—it is a retreat.
The global digital economy is not just about who has the best technology—it is about who defines the rules for how that technology is used. The U.S. once had an institution that helped write those rules. Now, it does not. And in the absence of structured engagement, competitors will quickly move to fill the void.
