2025 in review: US began retreating from the Pacific island region again

2025 was a head-spinning year for the Pacific islands, which bore the brunt of Donald Trump’s series of executive orders, many of which came with an indiscriminate axe. First, he dismantled USAID and cut foreign aid, triggering a wave of anxiety across these aid-dependent islands.

Fortunately, America’s foreign aid cuts didn’t exactly cripple the Pacific island region. Lowy Institute estimated that 80 percent of U.S. dollars streaming into the region are earmarked for the freely associated states—the Federated States of Micronesia, Palau and the Marshall Islands—through Compacts of Free Association.

The Lowy Institute ranks the U.S. ninth among aid donors to the Pacific, contributing a modest 1.4 percent of total assistance to the region, roughly $42 million a year. By comparison, China, New Zealand and Japan each contribute approximately $250 million. Australia is the region’s largest benefactor, handing out as much as $1.5 billion. With USAID now dissolved, donor nations have increased their largess, while Taiwan is pitching in to fill the void.

The Pacific islands can likely shrug off the losses they incurred when the U.S. pulled back, but pardoning the action is a different story. While the financial impact may be relatively insignificant, foreign policy experts argue that the diplomatic currencies—credibility and trust—are at stake.

Over the years, the U.S. has been consistent with its now-it’s-hot-now-it’s-not attitude toward the region.

Under the Biden administration, the U.S. pampered the Pacific islands with love, attention and cash in a bid to harden America’s soft power and counter China’s growing clout in the region.

Trump himself took the initiative to woo the region back during his first term in office, after realizing that years of U.S. neglect had opened the door for China to step in.

“After years of high-level rhetoric about a ‘Pacific pivot’ and a ‘free and open Indo-Pacific,’ Washington’s sudden retreat from development partnerships sends a clear message: America is not a reliable partner,” Alexandre Dayant, deputy director of the Indo-Pacific Development Center, and Riley Duke, lead author of the Institute's Pacific Aid Map, wrote in a joint commentary published in The Interpreter.

Then there’s the Trump tariff chaos. Pacific island nations are levied between 5 and 15 percent. Market analysts don’t expect them to experience the tariff’s direct impact, given the small volume of their exports to the U.S. Nevertheless, they are not spared from its consequences. The tariff barrier impedes trade growth between the region and the U.S.

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“There will be indirect effects on growth via the tariff’s negative impact on the economies of major trading partners, such as Australia, New Zealand, Asian economies and, of course, the U.S. itself,” according to Nada Choueiri, deputy director for the Asia and Pacific Department at the International Monetary Fund.

U.S. Rep. Ed Case, hoping to save America’s waning soft power and mitigate the impact of Trump’s tariff policy, has proposed a presidential initiative to negotiate free trade agreements with Pacific island countries and extend duty-free treatment to certain goods imported from the region. The Democrat from Hawaii underscored the need for Washington to strengthen its economic diplomacy with island countries to protect its regional posture and ultimately, to keep China at bay. This year's congressional discussions will determine the fate of this proposal.

Closer to home, one of the most consequential Trump ocean policies threatening to burden Guam and the Northern Marianas is a federal plan to extract minerals from the ocean floor near the waters of these U.S. territories.

For conservationists, the federal plan to restore commercial activity around the Marianas Trench Marine National Monument is another battle they must fight.

In response, Guam’s elected officials, who otherwise bicker all year, have formed a united front to oppose what they see as a federal attempt to raid the region’s seabed resources.

Seeing political leaders agree on something for once was extremely rare but refreshing, and it’s something they should try to do more often in 2026.

Happy New Year!

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