Kenya braces for Sh45 billion hit as Trump abandons diplomatic hub

Kenya is bracing for its third major economic shock from Washington in less than two years after US President Donald Trump ordered a withdrawal from 66 international organisations.

This move now threatens billions in funding and Nairobi’s status as a global diplomatic capital. The withdrawal, announced Wednesday by President Trump, will affect several United Nations agencies headquartered or with major operations in Kenya in addition to key global agencies. 

Economists warn the exit could collapse a premium Kenyan service economy built for many years around the Nairobi city’s diplomatic hub, threatening thousands of jobs and vital development programmes in urban and rural areas.

The move follows the crippling freeze on US Agency for International Development (USAID) programmes in Kenya valued at nearly Sh20 billion a year ago. Analysts on Thursday termed the cumulative impact as a systemic blow to the country which is already reeling from $100 million (Sh13 billion) hit in new US tariffs and the loss of trade benefits under the African Growth and Opportunity Act (AGOA).

“The trend of Trump withdrawing the US from global obligations is in full swing—a way of asserting US supremacy without bearing responsibility,” said Macharia Munene, a professor of history. 

“Many elite jobs are likely to disappear. Kenya will need to pay serious attention to self-reliance as opposed to dependency.”

For the average Kenyan, the fallout will be felt not only in  the capital and other urban areas but across the country including in rural areas. 

Dr Samwel Nyandemo, an economics lecturer at the University of Nairobi, warned the “indirect impact could be catastrophic,” shrinking business linkages and displacing Kenyans employed by these entities.

“This definitely shall shrink various linkages with the American state and Kenya at large but more importantly on areas of technical support, learning by doing effects and other educative and managerial spillovers. It shall equally displace many Kenyans who were engaged in these entities,” he said.

The Kenyan government however downplayed the impact of the shock move “as minimal.”

Foreign Affairs Principal Secretary Korir Sing’oei further told The Standard in interview the US was within its rights to make the move. 

“I think it is within the prerogative of the United States to review her relationship with international organisations or any other organisation for that matter and to make a determination whether to continue its membership or withdrawing membership from those organisations based on its national interest,” he said.

“The decision of the United States with respect to the withdrawal from this institutions has very limited impact on Kenya. We do host indeed a number of international organisations none of them except the International Trade Centre are based out of Nairobi and so we expect there there will be very very minimal impact on Kenya.”

The country’s top diplomat also said the move is in line with efforts to reform the UN system.

“Overall, we think that what the US is doing is also something that is consistent with ongoing efforts by the United Nations to review the operations of different entities under the UN and aid reform process whose implications will become clear once the report of that process is tabled at the UN General Assembly in the near future,” he said.

However, a data analysis suggests a deeper crisis. At least a dozen targeted agencies have deep ties to Kenya, putting an estimated $250-350 million (Sh32-Sh45 billion) in annual project value at immediate risk.

When accounting for the “multiplier effect” on real estate, hospitality, and professional services, that figure could double, analysts said.

The withdrawal from the UN Framework Convention on Climate Change (UNFCCC) is damaging. 

As the parent treaty for global climate action, its loss undermines the system Kenya, as recently championed by President William Ruto, uses to negotiate for climate finance. 

Experts likened it to removing the foundation of a building; while the rooms above—like the Paris Agreement—remain, the structure becomes unstable.

Mohamed Adow the founder of non-profit body Power Shift Africa regretted the decision. 

“By abandoning international climate frameworks, America isolates itself from global solutions and risks being left behind as the rest of the world accelerates toward a clean energy economy that will define 21st century prosperity,” noted Adow.

Similarly, the exit from the International Trade Centre (ITC) hits the “hand-on” support that connects Kenyan coffee farmers and handicraft makers to Western buyers. 

Without ITC funding, small businesses lose a primary bridge to global markets experts said. 

Karen Landmark, Managing Director of the UNEP-linked think tank GRID-Arendal, told The Standard that strong multilateral cooperation is “not optional” for regions facing severe climate impacts. 

“Countries such as Kenya, which have shown consistent leadership, now play an even more important role in keeping the multilateral process credible,” she said in interview.

In Nairobi’s “diplomatic blue zone,” the anxiety was palpable yesterday a Standard spot-check showed. The potential downsizing of UN-Habitat in Gigiri threatens an ecosystem of international schools, luxury retailers, and real estate in suburbs like Runda, business owners said.

“This decision doesn’t just stop projects; it strangles the economy of entire suburbs built around the diplomatic community,” one Runda business owner said.

Faced with a Western vacuum, some UN agencies and Kenya itself have been looking East for alternative funding. On November 16, last year several UN bodies met Chinese officials in Nairobi to explore funding through China’s Global Development Initiative after initial funding cuts hit their agencies and affected their mandates.

While this may plug some gaps, analysts warn it cannot immediately replace the scale of decades of US backed engagement.

“Kenya needs to identify reliable partners and move on,” Dr Nyandemo said. 

bngugi@standardmedia.co.ke

The economic domino effect however extends to security and health. 

The defunding of the Global Counterterrorism Forum (GCTF) weakens Kenya’s frontline fight against al-Shabaab, while cuts to the UN Population Fund (UNFPA) and UN Women will further strain health systems already struggling after the 2025 USAID funding freeze analysts said.