In February, the ambassadors to the United States of the Marshall Islands, the Federated States of Micronesia, and Palau met with U.S. officials to raise concerns about the rush of executive actions since U.S. President Donald Trump took office for a second term. Among their worries was a freeze on U.S. foreign assistance, including programs administered by the U.S. Agency for International Development (USAID).
As in other parts of the world, the Trump administration’s furious dismantling of USAID disrupted projects and canceled contracts in these island nations. But the United States has a special obligation to help manage disaster relief to these three countries, known collectively as the Freely Associated States. When the Department of Government Efficiency (DOGE) pulled apart USAID, it also jeopardized U.S. commitments under the Compacts of Free Association, or COFAs, which govern the United States’ unique relationship with these countries.
Under the COFAs, which first took effect in 1986 for the Marshall Islands and Micronesia and 1994 for Palau, the United States agrees to defend the three states and provide essential economic assistance and government services. In return, it gets unfettered military access to the territorial land, sea, and air of the island chains, an area comparable to the size of the continental United States.
“It is this uninterrupted corridor from Hawaii to the Philippines that becomes a region of incredible U.S. strategic advantage,” said Brian Harding, an expert on Southeast Asia and the Pacific islands, most recently at the U.S. Institute of Peace. “It’s an incredible bargain.”
That bargain has become more critical as Washington seeks to project and protect its power in the Pacific. Under former President Joe Biden, the United States successfully renegotiated the COFAs, and Congress renewed them last year at a total cost of $7.1 billion over the next 20 years. It reflected a bipartisan recognition of the geopolitical importance of these partnerships in a region where China also seeks to expand its influence and to pull countries out of the U.S. orbit.
“Maintaining these critical relationships is the baseline for our engagement with the broader Pacific,” said Kathryn Paik, a former director for Southeast Asia and the Pacific on the U.S. National Security Council who is now at the Center for Strategic and International Studies. “If we don’t fully follow through on our COFA agreements, then the U.S. will lose a lot of trust throughout the entire region.”
U.S. disaster assistance in the Marshall Islands, Micronesia, and Palau is currently largely reinstated, though only after its status was juggled back and forth, according to sources familiar with the situation in the United States and the Freely Associated States.
However, it is not clear how Washington would respond today if a crisis erupted in the region. Former USAID staffers said responding to emergencies in these remote island chains is an extraordinary challenge. USAID, which took over the coordination of disaster relief in the Freely Associated States from the Federal Emergency Management Agency (FEMA) in 2008, built up technical know-how and relationships on the ground. “The capacity to do what we’ve done since 2008 is no longer there,” a former USAID advisor said.
A former USAID official said, in their view, “if something were to happen tomorrow, it would be a complete jump ball.”
A spokesperson for the U.S. State Department acknowledged that in the Freely Associated States, USAID has “historically played a lead coordinating role in responding to disasters of a certain magnitude. Once USAID is integrated into State, State plans to take over this responsibility.”
U.S. Secretary of State Marco Rubio confirmed that as of July 1, USAID operations would cease, though the State Department will run foreign assistance programs that “align with administration policies.” A State Department spokesperson said that “functions and programs being transitioned to the Department of State include disaster assistance, including disaster assistance provided under FPSAs”—the Federal Programs and Services Agreements, which provide the framework for U.S. obligations under the COFAs.
With disaster aid to the Freely Associated States currently back on, the COFA money mandated by Congress is flowing, according to people familiar with the situation. But DOGE’s slash-and-burn campaign fueled uncertainty in the region about the reliability of the United States and whether these strategic agreements might be sacrificed to the Trump administration’s domestic agenda.
The Freely Associated States are deeply intertwined with and dependent on the United States. Citizens of these countries can more easily travel and work in the United States, so remittances are a huge source of income. They can also serve in the U.S. military and do so at a higher per capita rate than U.S. citizens. And these countries rely on the United States for government services: not only disaster aid but also postal services, education and health programs, aviation safety, weather services, and veterans’ benefits. Many of these agencies are in the crosshairs of Trump’s federal government overhaul.
“Many people don’t realize that our commitment to the COFA states is being eroded by DOGE’s efforts here at home: the decimation of USAID, layoffs at the Department of Education, and the proposal to privatize the U.S. Postal Service,” said Jennifer Hendrixson White, the founder and managing partner of Scalare Advisors and a former top Senate staffer who helped Congress pass the most recent COFA renewal.
“If programs are being terminated and people are being let go, then there’s any number of ways that we are imperiling our commitments in the Western Pacific,” White added.
Some of this is collateral damage—a consequence of limited institutional knowledge in the U.S. government, including Congress, about the COFAs and their complicated origins. The United States administered the Freely Associated States as territories after World War II and left behind a devastating legacy, including the still-unresolved costs of nuclear testing in the Marshall Islands. The COFAs essentially turned this relationship into a treaty between sovereign states, yet it still hinged on U.S. economic aid and discretionary programs. There are few other alliances where both the U.S. Defense Department and Postal Service are key.
The Pentagon sees the COFAs as increasingly critical to its presence in the Pacific. The United States has long had a military base at the Marshall Islands’ Kwajalein Atoll, and it is expanding its presence across the region. Washington is building a Tactical Multi-Mission Over-the-Horizon Radar in Palau, which will help it keep tabs on the region. The U.S. military recently restored a World War II-era airstrip on Palau’s island of Peleliu.
Last year, the United States stood up Joint Task Force-Micronesia, a subset of U.S. Indo-Pacific Command, and in March, Defense Secretary Pete Hegseth promised to proceed with $400 million in planned military upgrades to Micronesia.
Kenneth Kuper, a researcher on geopolitics and Micronesia at the University of Guam, argues that the rationale of the COFAs was previously strategic denial—deterring others from the islands and creating a buffer between U.S. bases in East Asia and Guam—but now the United States’ focus is strategic reclamation.
“It’s no longer just to keep others out. It’s now, ‘We’ve got to use these places,’” Kuper said. “A lot of this is predicated on Guam’s perceived vulnerability and Chinese military modernization.”
This hardening was happening before Trump returned to office, but his decision to roll back extensions of U.S. soft power, such as USAID, is a signal of how the administration sees not only the COFA partnerships but also the rest of the Pacific. That may mean that the economic fortunes of the Freely Associated States may become even more directly tied to U.S. military interests. “The face of the United States in this region is now in uniform,” Kuper said.
The Freely Associated States do have leverage when it comes to a looming China. These countries understand their geostrategic value to the United States, and even in the recent COFA negotiations, these countries suggested that if Washington didn’t deliver on its economic commitments, it might have to seek out new partners. “Those countries do sometimes—as many countries around the world—play ‘the China card,’” said Satu P. Limaye, the vice president of the East-West Center.
Limaye said he does not see the COFAs as fundamentally at risk right now and he believes that any disruptions or inadvertent spillover effects from the DOGE reorganization can and will be addressed by Congress and the Trump administration. But the COFAs are a barometer for the rest of the region, where both United States and China are competing for influence.
China has made inroads in the Pacific, most notably in the Solomon Islands. “Even though the United States certainly has the upper hand because of history, culture, and the economic relationship of the Freely Associated States, China is looking for back doors everywhere and all the time,” Harding said.
The Marshall Islands and Palau are two of the few remaining states that still recognize Taiwan. That makes it hard for China to operate openly in either country, though it does so through private businesses and political influence. Palauan President Surangel Whipps, a strong U.S. backer, has accused China of weaponizing tourism to pressure the country to switch its allegiance.
Micronesia does recognize and has grown closer with China, which has promised infrastructure investments under its Belt and Road Initiative. (In May, China handed Micronesia a brand-new convention center.)
Contrast that with the still-lingering questions around the U.S. relationship with the Freely Associated States and Washington’s capacity to respond to a disaster or fulfill its obligations under the COFAs. In almost every conversation around the three countries, sources suggested some version of the following: The Marshall Islands, Micronesia, and Palau would all prefer to work with the United States, but if it fails to deliver, they will go with the alternative—and the alternative is China.
“If we’re going to prove to be unreliable and unpredictable, or if we’re going to prove to be just as self-interested as Beijing, then that doesn’t play at all to our advantage,” the former USAID official said.
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