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The Nepali Army (NA) has stated that it is closely observing the unfolding geopolitical landscape, particularly in light of the policies introduced by the newly-elected US President Donald Trump. Speaking at a press conference on Sunday, Major General Prem Dhoj Adhikari, head of the Department of Military Operations of the NA, emphasized that Nepal must assess the potential impact of major powers’ policy shifts on its security and economy.

“The policies adopted by powerful nations and evolving regional dynamics have far-reaching consequences,” Adhikari stated. “The Nepali Army is continuously evaluating these developments through a comprehensive strategy framework to address all security concerns.”

Trump’s return to the White House has raised global uncertainties, with expectations of significant policy shifts in US foreign relations, trade, and military engagement. Analysts anticipate that his ‘America First’ approach could impact US alliances and global economic policies, which may indirectly affect Nepal.

During the recently-concluded two-day meeting of the head of NA divisions, senior army officials including General Officer Commanding (GOC) of the divisions delved into the country’s internal and external challenges including Nepal’s strategic positioning amidst global shifts. The conference, attended by Chief of Army Staff General Ashok Raj Sigdel, reviewed national security challenges and emphasized Nepal’s need to adapt its strategies to emerging threats.

General Sigdel underscored the importance of maintaining Nepal’s military professionalism and preparedness while fulfilling constitutional duties. He stressed that Nepal must remain vigilant in the face of evolving geopolitical challenges, including technological advancements, climate change, and regional security dynamics.

Defense Minister Manbir Rai, who also addressed the meeting, highlighted the need for Nepal to assess the implications of global power struggles, ongoing conflicts and the rise of artificial intelligence in warfare.

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.

The Communist Party of China (CPC) has conveyed that Beijing is prepared to provide support if critical areas in Nepal are affected by US President Donald Trump’s executive order, which has halted all humanitarian assistance for the next 90 days.

At least two leaders from Nepal’s major communist parties stated that CPC representatives have informally assured them that China is ready to step in, particularly in countries of the Global South. A senior leader of CPN(Maoist Center) requesting anonymity said: “A CPC representative told me that China is willing to provide assistance if Nepal faces challenges in key sectors such as humanitarian aid, health, and education.”

However, the Chinese side has emphasized that any formal action would require an official request from the Nepal government. While CPC leaders have conveyed their position informally, there has been no direct government-to-government communication on the matter. The Chinese side also highlighted that the Belt and Road Initiative (BRI) framework agreement, signed during Prime Minister KP Sharma Oli’s visit to China last year, has laid the foundation for expanded cooperation across multiple sectors.

According to Nepal’s communist party leaders, China is closely monitoring the potential impact of Trump’s policy on Nepal. China has already expanded its assistance in key areas such as infrastructure, agriculture, health, disaster relief, and poverty alleviation. In the health sector, China provides support to several major hospitals in Nepal, including BP Koirala Memorial Cancer Hospital, Civil Hospital, and Bhaktapur Cancer Hospital. Last year, Nepal and China renewed a Memorandum of Understanding (MoU) on traditional medicine cooperation, agreeing to establish the China-Nepal Traditional Medicine Cooperation Commission. Additionally, Chinese medical teams have been visiting Nepal regularly to provide healthcare services in rural areas, conduct personnel training, and strengthen medical services.

The China Foundation for Rural Development (CFRD), a government-supported non-governmental organization, has been active in Nepal since 2015, expanding its support in health, education, agriculture, and other socio-economic sectors. Through CFRD, China has been assisting Nepali farmers, healthcare workers, local schools, and municipal officials. In agriculture, China has significantly increased its involvement.

Additionally, China has proposed establishing a fertilizer plant in Nepal, but Beijing believes Nepal’s bureaucratic hurdles are delaying progress. Chinese universities have also been deepening their engagement with Nepali institutions. Overall, China has significantly increased its support in areas where the US previously played a major role.

On the global stage, China has expressed its readiness to support international organizations where the Trump administration has withdrawn funding. At a press conference, Chinese Foreign Ministry Spokesperson Guo Jiakun reaffirmed China’s commitment to supporting the World Health Organization (WHO), enhancing international cooperation in public health, and advancing global health governance. Geopolitical analysts suggest that China, as the US’s political rival, is strategically positioning itself to fill the void left by Washington, particularly in the Global South.

Since his inauguration on Jan 20, US President Donald Trump has issued more than 300 executive orders, significantly impacting both the United States and countries around the world. His orders on foreign aid, illegal immigration, environmental regulations, gender policies and abortion rights are expected to have direct repercussions for Nepal. In response, Nepal’s Ministry of Foreign Affairs has directed its embassy in Washington to closely monitor these developments and identify areas of concern.

Following Trump’s executive orders, the United States Agency for International Development (USAID) and the American Embassy in Kathmandu have paused all activities, including small-scale projects. Consequently, non-governmental organizations (NGOs) operating with USAID funding have been forced to suspend their work for the past three months, potentially affecting Nepal’s health, education and humanitarian sectors. However, the Nepal government has yet to issue an official response. Meanwhile, the US State Department is conducting a review of all foreign aid programs to ensure alignment with the administration’s “America First” policy.

In addition to foreign aid restrictions, the Trump administration has launched a nationwide immigration crackdown, leading to the arrest of over 1,000 individuals, according to Immigration and Customs Enforcement (ICE). These arrests include individuals without prior criminal records. White House Press Secretary Karoline Leavitt stated that while criminal offenders remain the top priority, all undocumented immigrants are subject to enforcement. Preliminary reports indicate that ICE has already detained some Nepali immigrants, including students working beyond their permitted hours.

According to ICE, approximately 1,400 Nepalis are residing illegally in the US and may face deportation. The Trump administration has reiterated that it is each country’s responsibility to repatriate its undocumented citizens. However, Nepali officials have remained silent on whether they have received a formal request from the US government regarding deportations. Some Nepali students are reportedly experiencing difficulties due to these new restrictions.

Despite reports of Nepali nationals being detained, Nepal’s embassy in Washington has not issued a statement. Meanwhile, US Ambassador to Nepal Dean R Thompson recently met with Foreign Minister Arzu Rana Deuba to discuss bilateral matters, though neither side has disclosed details of their conversation. A senior official at the Foreign Ministry stated that the government cannot publicly comment on US immigration policy, as it is their internal matter. However, Nepal’s agencies should take steps to support affected citizens.

Regarding US aid, USAID has halted its programs, though the implications for the Millennium Challenge Corporation (MCC) remain uncertain. While MCC is not directly tied to USAID, its activities may also be affected. However, given bipartisan support for the MCC, the initiative is expected to continue. Nepal and the US signed the MCC compact in 2017 during Trump’s first term. Additionally, Trump’s decision to withdraw from the Paris Climate Agreement could have some impact on Nepal. The administration, however, has stated its commitment to “sensible environmental protections” while prioritizing national interests.

A senior official at the Ministry of Finance commented: “Although Nepal may not face a direct cut in US aid, certain projects that do not align with Trump’s policies could be discontinued.” The official clarified that a temporary pause in assistance does not necessarily indicate an overall reduction in US support. Observers suggest that Nepal should engage in diplomatic negotiations to ensure continued US support, particularly for critical sectors.

The Trump administration is still in the process of making key appointments at the State Department, following the dismissal of numerous senior officials appointed by the Biden administration. The administration is expected to introduce new policies, including an aggressive stance toward China and further developments in the Indo-Pacific Strategy (IPS). Nepali policymakers must remain vigilant and adaptable to these changes. Some officials suggest that dealing with Trump’s administration could be more challenging than engaging with Biden’s.

Under the Biden administration, US assistance and investment in Nepal increased significantly, with high-level engagements and diplomatic visits. Nepal now faces the challenge of maintaining this momentum through negotiations with the Trump administration, given its need for continued support. Over the past four years, US-Nepal relations have strengthened through extensive diplomatic efforts, including the implementation of the MCC project, a priority for the Biden administration.

The Trump administration also engaged with Nepal during its previous tenure. In 2018, then-Foreign Minister Pradeep Gyawali visited the US for bilateral discussions—the first such visit in years. However, the visit sparked controversy in Nepal when the US State Department suggested that Nepal could play a central role in the Indo-Pacific region. More recently, in 2023, Foreign Minister NP Saud paid an official visit to the US to discuss a broad range of bilateral issues.