What the world has learnt since President Donald Trump returned to the White House in January 2025 is that anything is possible- from suspending aid to rehabilitating blood-stained dictator and slapping sanctions on allies. The conservative Heritage Foundation’s “Project 2025” blueprint recommends US withdrawal from the United States from the International Monetary Fund (IMF) and the World Bank, framing these institutions as costly and misaligned with U.S. national priorities. Professor of Governance at the University of Oxford, Ngaire Woods, argue that such a decision could primarily harm U.S. strategic and economic interests rather than serve them.
The Case Against U.S. Withdrawal from the World Bank and IMF
In a recent commentary, Woods, a professor of Global Economic Governance at the University of Oxford, warns that a U.S. exit from these multilateral institutions would weaken American influence in shaping global financial rules and strategic economic policies. The IMF and the World Bank have long provided the U.S. with leverage over global economic governance, allowing it to set terms for financial stability, direct investment flows, and enforce policy standards beneficial to U.S. geopolitical and economic interests.
According to Woods, leaving these institutions would create a power vacuum that other nations, particularly China, would be quick to fill. China has already expanded its global financial reach through the Belt and Road Initiative and the Asian Infrastructure Investment Bank (AIIB), offering an alternative to Western-led financial systems. If the U.S. were to retreat from its leadership role, China could step in to redefine global financial regulations in ways that may disadvantage American businesses and investments.
Furthermore, the absence of the U.S. in the IMF and the World Bank would make it significantly harder for Washington to enforce economic sanctions or financial measures as tools of foreign policy. These institutions have historically played a crucial role in supporting U.S. sanctions regimes, by limiting financing to targeted regimes or assisting countries transitioning to market economies in alignment with U.S. interests.
Domestic Economic Consequences Of US Leaving the World Bank and IMF
Beyond geopolitical ramifications, Woods highlights how a withdrawal could harm the U.S. economy. American firms and financial institutions benefit directly from the World Bank’s infrastructure projects and the IMF’s financial stability measures, which help maintain a predictable and open global economy. By withdrawing, U.S. businesses would face higher risks in emerging markets, as financial instability in developing economies could spill over into the broader global financial system.
Additionally, the U.S. dollar’s status as the world’s reserve currency has long been reinforced by the country’s leadership in these financial institutions. The IMF’s Special Drawing Rights (SDRs) and emergency lending mechanisms provide indirect support for the dollar’s dominance. Without U.S. involvement, there is a risk that alternative financial mechanisms—potentially centered around the Chinese yuan—could gain traction, undermining the dollar’s global supremacy.
Trump’s Cuts to USAID
A Trump push to withdraw from the IMF and the World Bank would align with his broader approach to reducing U.S. financial commitments to global development institutions. One of the key precedents for this policy direction was his administration’s deep cuts to the United States Agency for International Development (USAID). Under Trump’s first term, USAID faced significant budget reductions, with programmes supporting global health, infrastructure, and economic stabilization slashed as part of an “America First” foreign policy agenda.
These cuts weakened U.S. influence in developing nations, reducing Washington’s ability to guide economic and governance reforms in key regions. Critics argue that the decision to scale back USAID funding not only diminished America’s soft power but also created opportunities for China and other geopolitical rivals to step in with their own financial aid programs. A withdrawal from the IMF and the World Bank would further extend this pattern of disengagement, signalling a retreat from global financial leadership at a time when emerging economies are actively seeking alternative development partnerships.
Warnings from Financial Institutions
Echoing Woods’ concerns, global financial institutions and analysts have warned that a U.S. withdrawal from the IMF and World Bank could destabilize these organizations. S&P Global recently cautioned that such a move would pose an “unprecedented risk,” potentially damaging the institutions’ credit ratings and reducing their ability to respond to global financial crises. The U.S. has historically been the largest shareholder and a primary contributor to these institutions, and its departure would necessitate structural adjustments that could weaken their ability to provide financial stability worldwide.
IMF Managing Director Kristalina Georgieva, however, remains optimistic that the U.S. will take a pragmatic approach, regardless of the administration in power. She emphasized that previous U.S. administrations, including Trump’s first term, have engaged constructively with these institutions. For instance, in 2018, under Trump’s presidency, the World Bank secured a $13 billion capital increase with U.S. support—indicating that even the Trump administration saw strategic value in maintaining U.S. engagement with global financial institutions.
Political and Strategic Repercussions
Withdrawing from the IMF and the World Bank would also raise questions about America’s broader commitment to multilateralism. The U.S. has already faced scrutiny for its approach to global alliances, particularly following its withdrawal from the Paris Climate Agreement and its confrontational stance toward the World Trade Organization (WTO). Another high-profile exit could further alienate U.S. allies and weaken the country’s standing in international diplomacy.
Moreover, such a move could trigger internal political battles in Washington. Congress, which plays a key role in international financial commitments, may resist a full withdrawal. Both Republican and Democratic lawmakers have historically supported U.S. leadership in these institutions, seeing them as key tools for advancing national interests abroad.
As the Trump administration explores its policy direction in 2025, the debate over the U.S. role in the IMF and World Bank will likely intensify. While proponents of withdrawal argue for reduced financial burdens and greater national sovereignty, critics warn that the costs of disengagement far outweigh the benefits. By stepping away from these institutions, the U.S. risks ceding economic influence, weakening its ability to shape global financial norms, and opening the door for rival powers to fill the void. Ultimately, the decision will not just shape America’s role in international finance—it will redefine its position in the world order.