Vietnam is one of the developing world’s clearest success stories. Vietnam launched sweeping economic reforms in 1986 and opened itself to deep international engagement, transforming the country from one of the poorest into a dynamic middle-income economy in a single generation. GDP per capita climbed from under $700 in 1986 to nearly $4,500 in 2023, and the extreme poverty rate fell from 14% to under 4% between 2010 and 2023, according to the World Bank. The economy grew roughly 8% in 2025. Much of that progress unfolded alongside foreign aid in Vietnam — and in 2025, a sudden freeze on U.S. assistance showed how fragile those gains can be when they hinge on a single donor.

A Partnership Built Out of War

Foreign aid in Vietnam has touched everything from public health to the unfinished business of the war itself. The United States has been Vietnam’s most prominent aid partner, and its most meaningful contributions addressed the legacy of the war. Since the 1990s, Washington has helped clear unexploded ordnance, clean up Agent Orange contamination and account for missing soldiers.

The American military sprayed vast areas of southern Vietnam with Agent Orange and other herbicides between 1962 and 1971. As many as 4.8 million Vietnamese may have been exposed to the dioxin those chemicals contained, and at least 1 million still live with related health and disability effects, according to the U.S. Institute of Peace. The Vietnam Red Cross estimates that about 150,000 children have been born with birth defects tied to that exposure — including limb deformities, spina bifida, developmental disabilities and other conditions that can leave people unable to walk or live independently, sometimes across two or three generations.

According to the U.S. State Department, the U.S. provided more than $250 million for unexploded ordnance clearance and more than $155 million for disability support in affected provinces between the early 1990s and 2025. The two countries completed a major dioxin cleanup at Da Nang Airbase in 2018 and began remediation at the larger contaminated site at Bien Hoa.

These programs did more than remove poison from the soil. They turned a painful history into a foundation for cooperation, helping the former adversaries normalize relations and, in 2023, establish a Comprehensive Strategic Partnership — Vietnam’s highest diplomatic designation.

Addressing HIV/AIDS

U.S. aid also propped up public health. About 250,000 Vietnamese live with HIV, and the epidemic has long been concentrated among marginalized groups — including people who inject drugs and men who have sex with men — who often face stigma that keeps them from seeking care. Through the President’s Emergency Plan for AIDS Relief (PEPFAR), American funding sustained HIV prevention and treatment for tens of thousands of Vietnamese. Vietnam became the first and only country in Asia to receive focused PEPFAR support after the program launched in 2003, and within a decade the U.S. was the largest single donor to the national HIV response. That investment helped Vietnam reach a 99% viral-suppression rate in PEPFAR’s focus provinces and shift most patients onto antiretroviral treatment paid for through domestic health insurance. Most of the country’s pre-exposure prophylaxis clients still rely on PEPFAR support, UNAIDS reported.

The 2025 Freeze

In January 2025, President Donald J. Trump issued an executive order pausing nearly all foreign aid, and his administration moved to dismantle the U.S. Agency for International Development (USAID). By March, the State Department had announced that most USAID programs would be terminated and the rest folded into the department; the agency effectively ceased operating by mid-2025.

The effects in Vietnam were immediate. Writing in the Georgetown Journal of International Affairs, two Vietnam specialists documented how the freeze idled more than a thousand deminers, cut off rehabilitation services for tens of thousands of people affected by Agent Orange, and reduced the world’s largest dioxin remediation project to a skeleton crew. In Quang Tri Province, Vietnam’s most contaminated region, over a thousand local demining workers lost their jobs. At Bien Hoa, U.S. diplomats warned of an environmental and public-health catastrophe as dioxin-laced soil sat exposed, ProPublica reported. UNAIDS found that the cuts suspended or terminated HIV and tuberculosis programs, leaving some patients to pay out of pocket.

A Partial Recovery — And a Lasting Lesson

After lobbying from Vietnamese officials and American advocates, funding for most war-legacy projects resumed by late March 2025, and in October the two governments signed a memorandum reaffirming cooperation. But the disruption left a mark. The Georgetown analysts argue that even a brief suspension in the “safest” area of cooperation signaled that any U.S. commitment could fall victim to domestic politics — prompting Vietnam to diversify its partners and giving China fresh evidence to portray Washington as unreliable. Just weeks after the freeze, Reuters reported, Xi Jinping visited Hanoi and signed roughly 45 cooperation agreements.

Foreign aid makes up about 1% of the U.S. federal budget, yet its impact in Vietnam has been enormous. Foreign aid in Vietnam shows both what outside assistance can build and how quickly it can stall: the events of 2025 underscored a simple truth — the gains aid produces are real, but they are not self-sustaining.

– Jen Phan

Jen Phan is based in Hanoi, Vietnam and focuses on Business and Politics for The Borgen Project.

Photo: Wikimedia Commons