Submit your Article

In his first tenure as President of the United States, Donald J Trump’s familiarity with Nepal was, at best, minimal. During a 2017 meeting, he reportedly mispronounced Nepal as “nipple” and humorously referred to Bhutan as “button.”  These incidents, while seemingly trivial, underscored a broader lack of US’s engagement with small nations. However, as Trump began his second term on 20 Jan 2025, his approach to Nepal appeared to shift.

This time, not only did he correctly pronounce the country’s name, but he also delved into specific projects funded by the United States Agency for International Development (USAID) in Nepal. For instance, he controversially labeled a $20m allocation for fiscal federalism in Nepal as a “fraud,” though he failed to elaborate on why he held this view. This statement, while brief, has had significant repercussions in Nepal, particularly among anti-federal forces who have long argued that federalism is a foreign-imposed agenda.

Trump’s comments have provided a significant boost to these anti-federal forces, who are actively working to dismantle Nepal’s 2015 constitution. For years, these groups have claimed that federalism is not an indigenous concept but rather a product of foreign influence. Trump’s assertion that USAID’s funding for federalism is fraudulent has been interpreted by these groups as validation of their stance. As a result, many anti-federalists have become vocal supporters of Trump, believing that his administration aligns with their opposition to federalism. This development has added a new layer of complexity to Nepal’s domestic politics, as the debate over federalism continues to polarize the nation.

The impact of Trump’s policies on Nepal extends far beyond rhetoric. In late January 2025, Trump issued an executive order pausing all US foreign assistance for 90 days. While this move has affected numerous countries, its impact on Nepal has been particularly severe. Unlike larger nations such as China, which have been primarily affected by Trump’s trade tariffs, Nepal’s reliance on foreign aid makes it especially vulnerable to aid cuts. For a country that has long depended on international assistance to support its economy, health, education, and infrastructure, the suspension of US aid has been nothing short of devastating.

The immediate effects of the aid suspension are already being felt. From small stationary shops to five-star hotels, businesses that relied on the patronage of NGOs and INGOs funded by USAID are experiencing significant downturns. Stationary shop owners report a sharp decline in sales, as NGOs were among their primary customers. Similarly, hotels that once hosted events organized by international organizations are now struggling to maintain their revenue streams. Domestic airlines have also been hit hard, with a noticeable reduction in flights to major cities like Pokhara, Surkhet, Kailali, and Biratnagar, where NGO activities were once frequent. While precise numerical data on the economic impact of these changes is not yet available, it is clear that the suspension of US aid has disrupted one of the key drivers of Nepal’s hospitality and service sectors.

The ripple effects of the aid pause extend to local non-governmental organizations (NGOs) that depend on USAID funding. Many of these organizations are now downsizing or shutting down entirely, as they receive termination notices for projects funded by USAID or its implementing partners. Over the past few years, USAID had shifted its approach, working directly with local NGOs in an effort to bypass Kathmandu-based partners that were seen as ineffective. This shift had led to the establishment of branch offices in provinces like Lumbini and Madhes, where many NGOs focused their activities. Now, these offices and their staff face an uncertain future, as the suspension of funding leaves them without the resources to continue their work.

The challenges are not limited to local NGOs. American institutions operating in Nepal are also grappling with the fallout from Trump’s executive order. Many are laying off staff and considering whether to close their offices altogether. The lack of clear guidance from US headquarters has left these organizations in a state of confusion, unsure of how to proceed. Some have already terminated employee contracts due to a lack of funds to pay salaries. Even organizations aligned with the Republican Party’s agenda are not immune to these challenges, as the pause on foreign assistance applies across the board.

One of the most significant casualties of Trump’s aid suspension is the Millennium Challenge Corporation (MCC), a US-funded initiative that signed a $500m compact with Nepal in Sept 2017. The MCC compact aims to improve road quality, increase the availability and reliability of electricity, and facilitate cross-border electricity trade between Nepal and India. However, the project has been mired in controversy since its inception. From 2019 to 2022, the MCC became a divisive issue in Nepali society, with the country’s communist parties leading the charge against it. They argued that the MCC was part of the US Indo-Pacific Strategy (IPS) and should be rejected. China also opposed the project, labeling it a “Pandora’s box” that could undermine Nepal’s sovereignty.

Despite these objections, the Joe Biden administration worked tirelessly to secure parliamentary approval for the MCC. Senior US officials reportedly pressured Nepali leaders, even threatening to review bilateral relations if the compact was not endorsed. In the face of this pressure, Nepal’s political parties eventually approved the MCC in 2022, accompanied by a declarative interpretation stating that the compact was not part of the IPS. Since then, MCC projects have been making steady progress. However, Trump’s decision to suspend all foreign assistance for 90 days has brought these projects to a halt, raising concerns about whether the MCC will meet its five-year deadline. The suspension has also reignited political debates over the MCC, with opponents seizing the opportunity to renew their calls for its cancellation.

The broader implications of Trump’s aid suspension are deeply concerning for Nepal. Over the past few decades, Nepal has become increasingly dependent on foreign aid to address critical challenges in areas such as education, health, and climate change. Rather than reducing this dependence, the country has seen it grow. The sudden withdrawal of US support has exposed Nepal’s vulnerability, as the government lacks the resources to fill the void left by the aid cuts. For example, the US has officially canceled $19m in funding for biodiversity conservation, a critical issue for Nepal, which is on the frontlines of climate change. The loss of this funding will have dire consequences for Nepal’s ecosystems, which are already experiencing shifts in species distribution and an increased risk of extinction for many native plants and animals.

The suspension of funds for fiscal federalism and the cancellation of regional projects will further exacerbate Nepal’s challenges. These cuts come at a time when the country is already grappling with political instability, economic uncertainty, and the ongoing effects of climate change. The Nepal government and political parties have yet to officially respond to the aid suspension, as they are waiting to see whether the US will resume support after the 90-day pause. However, early indications suggest that the Indo-Pacific region remains a top priority for the Trump administration, which could mean continued support for Nepal, albeit through new mechanisms or agencies.

Some analysts speculate that the Trump administration may offer increased assistance to Nepal in exchange for reduced engagement with China. There are already murmurs within Nepal’s diplomatic circles that the US could pressure Nepal to scale back its participation in China’s Belt and Road Initiative (BRI), similar to what occurred in Panama. Additionally, there are concerns that the US may push Nepal to abandon its longstanding policy of non-alignment and align more closely with Western powers. Such a shift would represent a fundamental change in Nepal’s foreign policy, which has traditionally sought to maintain balanced relations with all major powers.

Given Nepal’s geopolitical position, experts argue that the country cannot afford to abandon its policy of non-alignment. Sandwiched between two regional giants, India and China, Nepal must navigate a delicate balancing act to preserve its sovereignty and independence. If the US ultimately decides to cut aid to Nepal, there are discussions within the political sphere about seeking support from other middle powers, such as the United Kingdom, Germany, South Korea, and Japan, to fill the void left by the US withdrawal. These countries are already exploring ways to support Nepal in critical areas if US assistance is not resumed after the 90-day pause.

The reduction of US influence in Nepal could be seen as a positive development for both India and China, which have long been wary of America’s growing presence in the region. However, it remains unclear how the Trump administration’s policies will evolve and how Nepal’s major political parties will respond to this new reality. Compounding the uncertainty is the fact that Nepal’s Embassy in the US is currently without an ambassador, as the newly appointed envoy has yet to assume office. In Kathmandu, think tanks and policy experts have begun deliberating on the potential impact of Trump’s policies and how Nepal should navigate this challenging period.

The Trump administration’s approach to Nepal has already shaken the foundations of the longstanding partnership between the two countries. The suspension of US aid is having far-reaching consequences, affecting everything from local businesses to large-scale infrastructure projects. As Nepal grapples with the fallout from these changes, it must also contend with the broader geopolitical implications of reduced US engagement. The coming months will be critical in determining the future of Nepal-US relations and the extent to which Nepal can adapt to this new reality.

Days after Elon Musk, who is heading the US Department of Government Efficiency, announced a series of expenditures, including $39m allocated for Nepal, US President Donald Trump backed him saying that support to Nepal’s fiscal federalism is a fraud. 

The Elon Musk-led Department of Government Efficiency (DOGE) took to X on Sunday to announce that it has canceled the funding to be received by Nepal among several other nations. Nepal was set to receive $20m for fiscal federalism and $19m for biodiversity conservation. These funds were among several global aid allocations that have now been scrapped, including $40m for gender equality programs and $47m for improving learning outcomes in Asia. US President Donald Trump painted Elon Musk as his enforcer-in-chief Tuesday, hailing the tech billionaire’s zeal in implementing the blizzard of executive orders the president has issued since returning to office. In a joint interview broadcast on Fox News, the two men spent substantial time singing the other’s praises and dismissing concerns that Trump is overstepping his executive powers.

Trump has signed scores of executive directives in the past three weeks, many of which have been challenged in the courts as potentially unconstitutional. Billionaire Musk, who was Trump’s top donor during his 2024 presidential campaign, was tasked with leading the newly-created Department of Government Efficiency (DOGE), with the declared goal of rooting out “waste, fraud and abuse” in federal spending.

“One of the biggest functions of the DOGE team is just making sure that the presidential executive orders are actually carried out,” Musk told Fox News. In the interview, Trump insisted his policies–including a wholesale onslaught on federal institutions–should be implemented without delay and said Musk was instrumental in pushing them forward.

“You write an executive order and you think it’s done, you send it out, it doesn’t get done. It doesn’t get implemented,” Trump said. He added that Musk and the DOGE team have now become an enforcement mechanism within the federal bureaucracy to enact his administration’s agenda without anyone standing in their way—or else risk losing their jobs. And some guy that maybe didn’t want to do it, all of a sudden, he’s signing it,” Trump said.

The Donald Trump administration’s decision to freeze all foreign aid has begun to show its effects in Nepal. US Secretary of State Marco Rubio issued an internal memo to all relevant agencies and diplomatic missions, announcing the suspension of foreign aid with exceptions only for emergency food assistance and military funding for Israel and Egypt.

In Nepal, USAID and its implementing partners have temporarily halted numerous ongoing projects. Pre-scheduled visits from US officials to Nepal have also been canceled. Organizations working with USAID now face an uncertain future, with no clarity on the fate of previously signed projects. Officials indicate that all activities will remain suspended for the next three months, adding to the ambiguity surrounding existing programs.

USAID has been Nepal’s largest donor in sectors such as health, education, agriculture and food security, water and sanitation, energy, environment and humanitarian assistance. Organizations collaborating with USAID were reluctant to comment on the impact of the freeze but acknowledged they were rushing to communicate with stakeholders about the decision.

The memo seen by Agence France-Presse (AFP) explicitly states, “No new funds shall be obligated for new awards or the extension of existing awards until each proposed new award or extension has been reviewed and approved.” This directive effectively pauses US funding for critical initiatives like PEPFAR, an anti-HIV/AIDS program launched under President George W Bush in 2003. PEPFAR, which has saved an estimated 26m lives, primarily in developing countries, is now facing uncertainty. The memo permits exceptions on a case-by-case basis and allows temporary funding for salaries and administrative expenses during this period.

The freeze comes with an 85-day timeline for an internal review of all foreign assistance. Rubio justified the decision by stating that it was necessary for the new administration to ensure foreign aid commitments were not duplicated, were effective and aligned with President Trump’s foreign policy priorities. Rubio, once a proponent of development assistance, noted the need for greater oversight.

The US has long been the largest donor in dollar terms, providing more than $64bn in overseas development assistance in 2023, according to the Organization for Economic Cooperation and Development. However, the Trump administration’s approach marks a significant departure from bipartisan support for foreign aid in Washington.

On his first day in office, Trump signed an executive order suspending foreign assistance for 90 days. Anti-poverty organization Oxfam criticized this move, calling it a drastic shift from a longstanding US consensus on foreign aid. “Humanitarian and development assistance accounts for only around one percent of the federal budget; it saves lives, fights diseases, educates millions of children and reduces poverty,” said Oxfam America President Abby Maxman. She warned that cutting these programs could have severe “life or death consequences.”

Trump’s decision to withdraw from the Paris Climate Accord and the World Health Organization further compounds potential challenges for countries like Nepal, where foreign aid plays a vital role in addressing critical issues.

In May 2022, the Nepal government and USAID signed a five-year assistance agreement worth $658m. The grant aimed to strengthen democratic governance, promote enterprise-driven economic growth, and build resilience in communities most vulnerable to natural disasters and climate change. This partnership highlighted the long-standing collaboration between the US and Nepal in addressing developmental and environmental challenges.

However, the recent freeze has cast doubt on the continuation of such initiatives. USAID operations in neighboring countries like Bangladesh have also come to a halt, citing the executive order. The suspension of foreign assistance underscores the Trump administration’s shifting priorities and its potential repercussions for vulnerable nations like Nepal.

As the freeze unfolds, the implications for Nepal’s development, public health and disaster resilience remain uncertain. The situation demands close monitoring, as delays in funding and project implementation could disrupt critical progress across multiple sectors.

Nepal can transform into a developed nation only if it succeeds politically, diplomatically, and economically, moving from a surviving ‘small state’ to a significant ‘influencing power’ by defying the notion of traditional theories of international relations that ‘bandwagon’, ‘bargain’, or ‘buffer’.

A variety of political shocks and waves have been sparked following Donald Trump’s triumph as the 47th president of the United States, both domestically and internationally. The president-elect vowed supporters that he would make America’s future “bigger”, “bolder”, “richer”, “safer”, and “stronger” during his victory speech. As a longstanding superpower, America has many domestic and international challenges to deal with. Trump’s rationale to preserve American greatness, diplomatic intelligence, and the legacy of American thinking on foreign policy, however, is yet again to be tested.

The interests and policies of the United States have a significant impact on those of numerous nations, both bigger and smaller, including its partners, allies, and adversaries. The greatness of America is largely dependent on how well it handles a variety of international issues, such as the ongoing conflicts in the Middle East and Ukraine, its relations with rising superpower China, the EU, and NATO, as well as how responsibly it handles several transnational issues such as climate crisis, cyber terrorism, maritime security, and nuclear and AI threats, among others.

The “bigness” of Israel—a small state in the Middle East—has been constantly questioned by many nations, perhaps as a result of American vested interest in the region and beyond. In contrast, Nepal’s small state status is high, definitely as a result of the enormous, rising neighbors on both sides. Bigness usually occurs as a relative phenomenon of smallness. The ‘bigness of smallness’ in this context refers to the small state’s geostrategic credibility both within and outside of the region.

Despite the fact that small states are less likely to use their economic or military might to alter the actions of larger states, they can still have a significant impact on global discourse and the development of the international order. It takes more than just military prowess, economic power, or geographic advantage for states to leave a lasting impact. They must take a calculated risk and project a ‘paragon of diplomacy’ in order to gain the trust of larger nations.

Small states in regional integration

Nepal, one of the world’s small powers, has greater significance in regional politics. Nepal’s existing geo-location, positioned between two rising economic giants—China and India—has drawn constant attention and careful scrutiny from the World Powers. This could perhaps be by assessing the soft potentials and natural resources of Nepal or perhaps by thinking that Nepal can become a stable hub to challenge or counter challenge the immediate neighboring powers. Nepal’s location has become more significant in the region than ever before because of the Belt and Road Initiative’s (BRI’s) projection of Nepal as a bridge connecting China and the rest of South Asia.

One example of the bigness of smallness is the role played by Singapore and Vietnam in the US-North Korea summit in 2018 and 2019 respectively, where their bases facilitated the two nuclear-armed rivals host the meeting successfully. Vietnam has proven to be equally trustworthy to the east and west, while Singapore’s history of neutrality, dependability, trustworthiness, and security is one of the factors that led to its selection as the summit location.

Despite its small size, Iceland's location is crucial for transatlantic security. Iceland is perhaps the only nation without an armed forces in the world. The North Atlantic Treaty Organization (NATO) counts Iceland as one of its founding members due to its geostrategic location. The geo-location of Iceland has strengthened the US-Iceland relationship. It is said that Iceland’s geo-strategic position is more important to US security than the security of Iceland itself.  The geo-location of Georgia, Ukraine, Kosovo, and Macedonia is also crucial for collective NATO security, while from the Russian perspective, Ukraine’s possible accession to NATO poses a threat to its national security.

Another instance of small states advancing the interests of larger states is the US’s historical relations with Bangladesh and Sri Lanka. Although things were different in the recent past, Malaysia, Sri Lanka, and the Maldives are thought to serve Chinese interests in the BRI. In the Middle East, Jordan’s stability is again largely under US interest. Tunisia is another small state with geo-strategic importance for regional stability in the Middle East and North Africa. Sweden, Norway, and Denmark have made exemplary efforts in promoting the norms of sustainable development and leadership attempts in the climate crisis within the UN, which shows the examples of Nordic countries acting as environmental champions. Despite their smallness, the Small Island Developing States (SIDS) and the Alliance of Small Island States (AOSIS) are having a significant influence on the international discourse.

The bigger states now have to acknowledge that small states are the primary drivers of economic growth, peace, and security. The role of small states is crucial for economic integration, soft partnerships, connectivity, access, and regional integration.

The bigness of Nepal

Nepal’s geostrategic significance has been steadily increasing in recent years. As evidenced by the history of South Asian politics and recent developments, Nepal’s geostrategic location in the region has gradually changed from a ‘safe zone’ to a ‘buffer zone’, to a ‘competition zone’, and finally a ‘clout of attraction’. Nepal must, therefore, play very smart and cautiously in its political, diplomatic, and economic dealings if it hopes to maintain its growing prominence.

The growing geostrategic rivalry in Nepal between the US, China, India, and the EU shows how important Nepal is to all of these nations. The competition between China and the US, India, or the EU in the areas of trade, energy, investment, diplomacy, and railway connectivity in Nepal demonstrates the country’s geostrategic importance. A new milestone in Nepal-China strategic relations was reached in 2016 when Prime Minister Oli visited China and signed ten agreements in a variety of sectors, granting Nepal access to four Chinese seaports for trade with a third nation. Nepal’s geo-strategic credibility has been assiduously enhanced by China’s confidence in Nepal as the protector of the security and stability of the Tibetan region and a geo-strategic soft partnership in the BRI. Prime Minister Oli should strategically step up in bringing the previous agreements to execution, with the interests of the country at the forefront, as he has received a formal invitation to visit China in the first week of December.

In an effort to counteract China’s increasingly powerful influence in the region and beyond, India is also demonstrating its influence in Nepal through a customized strategy. Nepal’s geostrategic significance increases as India works harder to keep China out of South Asian politics. Because of the delicate and unstable nature of the Tibetan region, the BRI's soft partnership, and China’s security concerns, Nepal would be more strategically significant even if India wanted China to be a part of South Asian integration.

Beyond Nepal’s regional bigness, Prime Minister Oli’s participation in the 79th session of the United Nations General Assembly (UNGA) with the vision of becoming a developed country by 2043, as well as his speeches at Harvard and Columbia University, the two top universities in the world, and the World Economic Forum (WEF) in 2018, marked a new beginning for Nepal to improve its coexistence in the global economy, trade, and diplomacy. Several admirers both domestically and internationally have praised Prime Minister Oli’s valiant attendance at the 79th and 73rd sessions of the UN General Assembly, where he presented the country’s image with a broad foreign policy outlook.

Oli has become Nepal’s first prime minister in office to speak at esteemed universities like Harvard, Columbia, and the World Economic Forum. He nobly reaffirmed the need to use global governance to address the new transnational issues instead of pleading for sympathy and grants. This demonstrates Nepal's aptitude to effectively defend its sovereignty and its equal standing in the global arena as a model of multilateral diplomacy. In recognition of the shifting global political, diplomatic, economic, and globalization landscape, Nepal organized the “2019 Nepal Investment Summit”, which drew in over 700 high-ranking international investors, policymakers, industry experts, speakers, dignitaries, influential figures from the global economy, and high-ranking government representatives from about 40 nations.

The key question, however, is whether the succeeding administrations have been sufficiently strategic to seize and capitalize on those opportunities.

The BRI induced bigness

India’s denial of participation in the Belt and Road Initiative (BRI) might have made Nepal more strategically important to China. Nepal now has to play a geo-strategic role in the region as a participant of the BRI. Trilateral cooperation between China, India, and Nepal would have been possible if India had signed the BRI project. China and India would then trade through Nepal. India and China would have benefited far more from that than from trade with the United States or Europe, which could again heighten Nepal’s bigness.

For China and India’s security, Nepal’s geostrategic location is more crucial than Nepal itself. India and China are geographically close to Nepal, so Nepal’s security—or lack thereof—will have an impact on their security. India’s constant concerns about security and China’s pursuit of economic dominance can only be resolved by a strategy known as ‘Broad Regional Integration’, or the new BRI, in which Nepal can serve as an integrating link.

Nepal is thought to be the link between China and South Asia in the BRI after signing the prospect. In 2019, President Xi visited Nepal. He might be open to making a second trip to Nepal. Nepalese delegates are being invited by Beijing and Delhi in succession. Nepal is regularly visited by leaders and officials from China and India. Prime Minister Modi has already made four trips to Nepal during his previous terms as India has retracted its diplomatic path to the country. In his third term as India’s prime minister, he is probably going to make his trip to Nepal in the foreseeable future. The fourth BIMSTEC summit was successfully held in Kathmandu. Nepal is viewed as a mediator by all of the regional organizations’ member states, which enhances Nepal’s geostrategic importance. Furthermore, as the latest SAARC chair, all eyes are on Nepal to restart the stalled SAARC process. 

Nepal, however, must take a calculated step forward and demonstrate exceptional diplomacy in order to gain the trust of larger economies. Nepal has never been a supporter of bloc and alliance politics. And it shouldn't. Instead, it should continue to uphold its neutral, reliable, compliant, and lofty ideals. The idea behind economic perspective is to practice economic dynamics in a way that promotes security, connectivity, and peace. Nevertheless, in order to serve the interests of the country and enhance its steadily rising international profile, Nepal must create a thorough ‘Political Intelligence Culture’ and practice ‘Stately Economic Diplomacy’ with a broad vision of building Nepal as a developed nation.

Vision 2043: Building a developed nation 

Prime Minister KP Sharma Oli underscored Nepal’s prospect to achieve developed nation status by 2043 during his speech to the 79th session of the United Nations General Assembly (UNGA). He, however, did not specify how the country would accomplish such an ambitious mission. It might not go as smoothly as anticipated, yet it would neither be impossible to accomplish this mission. The fact that a number of development indicators—such as economic competitiveness, political stability, diplomatic influence, social integrity, quality of life, academic recognition, scientific and technological innovation, tech and data sovereignty, public services, and foreign policy—lag well behind international metrics may make it more difficult. Conversely, it might be achievable if the vision and philosophy were turned into reality with pragmatic policy and action. The country should be passionate enough to adjust and grasp the pace of transformation—both within and outside—and aspire to thrive by cooperating with the international community, especially with development partners, including those in close proximity.

Nepal can be transformed as a developed nation only if it succeeds politically, diplomatically, and economically, moving from a surviving ‘small state’ to a significant ‘influencing power’ by defying the notion of traditional theories of international relations that ‘bandwagon’, ‘bargain’, or ‘buffer’. To put it another way, it has to understand the ‘bigness of smallness’ in reality and promote ‘self-help’ in order to realize the eminence of a developed nation. The country must, in fact, prudently use its ‘soft powers’ and internal values—such as geography, history, natural resources, culture, morale, civilization, and education—as well as foreign policy, technology, modernism, infrastructure, and research and development such that it can smoothly attain the status of a developed nation.

The author is a geo-strategic thinker and techno-geopolitical analyst