The federal funding freeze has had immediate impacts on industry and services across the United States.

 

On February 10, 2025, U.S. District Judge John “Jack” McConnell Jr. issued an Enforcement Order that clarified his previous Temporary Restraining Order (TRO), which ordered the Trump administration to release federal funds.

Federal programs and agreements impacted by the funding freeze include:

• Funding from the Inflation Reduction Act (IRA)
• Drinking Water State Revolving Funds
• Solar for All
• Climate Pollution Reduction Grant
• Home Electrification and Appliance Rebates Program
• Environmental Quality Incentives Program (EQIP)
• Food aid agreements with other countries

Background

On January 27, 2025, in response to initial Executive Orders (EOs) issued by President Donald Trump, “the Office of Management and Budget (OMB), issued a sweeping freeze on all federal financial assistance,” according to an article by Womble Bond Dickinson (US) LLP’s Kristina M. Moore in The National Law Review. “Specifically, OMB ordered all agencies to ‘temporarily pause all activities related to obligation or disbursement of all Federal financial assistance.’ … In a footnote, the memorandum clarified that the freeze does not include assistance provided directly to individuals.

“Notably, OMB halted both the obligation and disbursement of federal funds, indicating that the freeze applies to both obligated and unobligated funds. Funds that have been authorized and appropriated become obligated when a formal award document is signed and executed. Failure by the government to comply with the terms of these formalized agreements opens the door to legal remedies for damages incurred.”

The Trump administration rescinded the memo, but the underlying EOs remain in force.

Legal rulings

McConnell’s ruling noted that the “pause on federal assistance is likely unconstitutional and has caused harm to ‘a vast portion of this country,’” according to CBS News. “These pauses in funding violate the plain text of the [TRO], McConnell wrote. Under his most recent order, the Trump administration must immediately restore frozen funding while his [TRO] is in effect and end any federal funding pause. The judge directed the Trump Administration ‘immediately take every necessary step’ to comply with his [TRO], including clearing administrative or technical obstacles … and restore withheld assistance, including federal dollars appropriated in the Inflation Reduction Act and infrastructure law. He ordered the Trump administration to resume funding of institutes or other federal agencies covered by his restraining order.”

A second federal D.C. court case also resulted in the issuance of a TRO. That ruling by Judge Amir H. Ali “cited the financial devastation that the near-overnight cutoff of payments has caused suppliers and nonprofits that carry out much of U.S. aid overseas,” reports AP News.

Industry impact

The freeze on funding had instant consequences on industry, nonprofits, farmers, states, and individuals.

“The freeze has most immediately impacted federal conservation and voluntary climate-smart agriculture projects. Across the country, farmers have been left in limbo after making sustainability investments, trusting that the government would uphold its commitments,” an MSNBC article by Rob Larew, president of the National Farmers Union, says. “For example, some farmers who purchased cover crop seed to improve soil health or installed solar panels to reduce energy costs are now learning that federal reimbursements have been cut off. These are not theoretical losses. These are real financial burdens that could push family farms into bankruptcy. … The U.S. purchased roughly $2 billion in food aid last year from American farmers; dismantling our food aid program is certain to disrupt market prices and create additional stress for U.S. food producers.”

“Asset and securities purchases and other investment activities may be threatened, retraded or cancelled prior to closings. Those purchasers reliant on federal grants or backing for closing funds may face liquidity issues. Acquisition targets may face more challenging business environments,” notes international law firm RPCK.

“Contractors, farmers and suppliers in the U.S. and around the world say the Trump administration’s funding freeze has stiffed them on hundreds of millions of dollars in pay for work already done, has forced them to lay off staff and is rapidly putting many near the point of financial collapse,” AP News adds.

Other sources report Medicaid portals going offline, and Head Start facilities have reported impending closures “as child care centers continue to struggle to access operating funds,” according to research and advocacy organization Center for American Progress.

Industry that has a guaranteed contract, grant, or loan from the federal government that has been impacted by the funding freeze should:

• Carefully review the terms of the agreement to determine contractual remedies.
• Take action according to the remedies described in the agreement or other legal remedies, including those within the Federal Acquisition Regulations and the Code of Federal Regulations.
• Consider legal action to compel the federal government to honor the agreement.
• Contact the appropriate state representative to inform them of the situation and create allies.