Latest Policy and Economic Developments: Mongolia and the USA in 2025

The relationship between Mongolia and the United States is entering a new phase in 2025, marked by shifting policies, evolving economic ties, and significant changes in both nations’ domestic and foreign agendas. Here’s an expert overview of the most important updates shaping Mongolian and U.S. policy and economic outlooks this year.

Mongolia-USA Policy Relations: Strategic Partnership and New Priorities

• Strategic Third Neighbor Partnership: Mongolia and the United States continue to prioritize their “Strategic Third Neighbor Partnership,” focusing on strengthening bilateral relations and exploring new opportunities for mutually beneficial cooperation. Recent high-level meetings, including one between Mongolia’s Prime Minister Oyun-Erdene Luvsannamsrai and U.S. Ambassador Richard Buangan in April 2025, underscore ongoing dialogue about policy initiatives and partnership opportunities2.
• Aid and Development Shifts: The return of President Trump has brought a review and likely reduction of U.S. foreign aid, including USAID programs in Mongolia. Projects supporting gender equality, environmental protection, and academic research are at risk of being trimmed or cut entirely, though the core strategic partnership is expected to remain robust. The Millennium Challenge Corporation’s Mongolia Water Compact, a major joint infrastructure project, is nearing completion but could see future funding uncertainty1.
• Defense and Diplomacy: Even as development aid comes under review, defense and diplomatic cooperation remain pillars of the relationship. Mongolia is seeking to expand its peacekeeping contributions with U.S. technical support, and both countries reaffirm the importance of security ties in the Indo-Pacific region1.

Mongolia’s Economic Outlook: Growth, Trade, and Diversification

• Strong Growth Forecast: The Asian Development Bank projects Mongolia’s economy will grow by 6.6% in 2025, driven by mining (especially copper from Oyu Tolgoi) and a recovering livestock sector. Domestic demand and infrastructure investments are also key contributors, though risks such as commodity price volatility and inflation (currently at 9.1%) remain4.
• Trade Diversification: Mongolia is set to sign a three-year interim Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU), aiming to reduce reliance on China and Russia by expanding export markets for products like meat and cashmere. While the FTA could boost exports, it is also expected to increase imports from EAEU countries, potentially widening Mongolia’s trade deficit3.
• U.S. Business Engagement: The American Chamber of Commerce in Mongolia continues to advocate for stronger U.S. business involvement. While the Biden administration expanded economic ties, the new U.S. administration is expected to focus on business-driven cooperation. U.S. businesses see opportunities in Mongolia’s critical minerals, tourism, technology, and financial sectors, but call for continued reforms to improve the investment climate6.

U.S. Economic and Policy Environment: Turbulence and Transition

• Tariff Shocks and Economic Headwinds: The U.S. economy faces heightened uncertainty in 2025 due to new tariffs and trade tensions. Economic expectations have dropped, stock markets are volatile, and the dollar is weakening. The Federal Reserve is expected to cut interest rates to cushion the slowdown, but inflation risks remain elevated. The unemployment rate is forecast to rise to 4.5% in 2026 as job growth slows and immigration enforcement tightens5.
• Policy Uncertainty: The U.S. is negotiating with major trading partners to potentially roll back some tariffs, but the risk of a prolonged trade war remains. Fiscal policy is expected to be expansionary, with tax cuts and market-friendly measures aimed at stabilizing growth. However, downside risks—such as a loss of investor confidence or further escalation in trade conflicts—could dampen recovery5.

Key Takeaways for 2025

• Mongolia and the USA are reaffirming their strategic partnership, with a focus on defense, diplomacy, and targeted economic cooperation—even as U.S. development aid faces cuts.
• Mongolia’s economy is on a strong growth trajectory, but remains vulnerable to external shocks and trade imbalances. The new FTA with the EAEU is a significant step in trade diversification.
• The U.S. economy is navigating turbulence from tariffs and policy shifts, with slower growth and higher inflation expected, but recession is not forecasted if current policy paths hold.
• Both countries are seeking to deepen business ties, with Mongolia looking to attract more U.S. investment in key sectors.