For frontier markets, the impact would most likely be through cuts to USAID and the possible curtailing of multilateral support via the IMF and World Bank. The imposition of tariffs is another potential risk, although we view this as less directly concerning for most frontier countries, given their limited trade with the US and the absence of large trade surpluses. 

Below we take a closer look at some of the key US policy areas that could have a meaningful impact on frontier markets in 2025 and beyond.

USAID

Founded in 1961, the United States Agency for International Development (USAID) is the US government’s primary civilian foreign aid agency. In 2023, USAID provided total assistance of $64.7bn, which was nearly a fifth of the total aid provided by high income countries. As such, Trump’s inauguration day decision to suspend USAID for an initial period of 90 days, will have some impact on frontier countries. However, as shown below, USAID remains a small budget contributor for frontier countries, acounting for less than 3% of GDP in most cases. The big outlier is Ukraine, but this is a special case in many ways given the current conflict, and in any case, Ukraine is not considered a frontier country.

Table 1: USAID disbursemments by country in 2023

Source: IMF, USAID, December 2024 

On the aid front, it is worth noting that during Trump’s first term a record amount of money was provided for the Developmental Finance Corporation (DFC), a US development finance agency that supports projects in mainly low income countries. In 2019, DFC lending more than doubled from $29bn to $60bn. 

An example of a DFC-funded project is the Lobito Economic Corridor project that looks to build a $600m railroad from the DRC and Zambia to Angola to allow for the export of minerals. Under Trump, rather than the perceived ‘handouts’ of USAID, funding for such projects with clear economic rationales and potential benefits for the US also, are more likely be sustained.

African Growth and Opportunity Act (AGOA)

Enacted in 2000, the AGOA gives African countries duty-free access to US markets. With the pact set for renewal in September 2025, concerns regarding this are mounting in the wake of the suspension of the USAID suspension.

The abolition of AGOA could temporarily increase risk premiums in some cases, but the overall economic fallout should be minimal. Over the last two decades, African trade has diversified, with many countries increasing their trade with China (Chart 1). 

Looking ahead, the US must consider the potential costs and lost opportunities of scrapping the AGOA. This would include the risk of Russia and especially China being afforded more space to further increase their influence in Africa. As such, it may be that efforts are made instead to reform AGOA. For example, this could be by restructuring more in line with free trade agreements, and expansion of the scope to include high growth potential areas, such digital and financial services.

Multilateral support through the IMF/ World Bank

The new US administration’s approach towards concessional financing from the IMF and World Bank remains unclear. Since it is by far the biggest funder of these organisations, any dimunution of US support could increase frontier country risk premiums by reducing both financing availability and policy credibility. Indeed, it is worth remembering that for the record number of countries currently in IMF programmes, an oft-cited benefit is the perception of more credible polices, which are often aimed at addressing economic imbalances. In turn, such ‘anchoring’ policies can also encourage private investment, including from bond markets. 

Tariffs

The US policy attracting most global attention is tariffs. However, we think frontier markets should remain relatively insulated in this respect. This is because, unlike some larger EMs, and especially China, they do not export too heavily to the US and nor have large bilateral trade surpluses with the US. 

However, this does not mean that the increasing use of tariffs could not still have some adverse secondary consequences. For example, if US inflation rises due to tariffs raising import costs, then this could push up US treasury yields, which would likely be negative for most global risk assets, including frontier sovereign bonds.

Putting everything together

Frontier countries are right to have some concerns about the new Trump administration. However, we believe the impact should be manageable. Importantly, it shouldn’t derail the overall positive trends in fiscal consolidation, improving fundamentals and credit-ratings upgrades. For frontier bond investors, while external factors still matter, the key drivers of returns will remain domestic economics, politics, and local policies. We will continue to closely monitor these factors when making our investment decisions. 

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