US President Donald Trump’s imposition of punitive tariffs on Pacific island nations, coupled with the reduction of USAID to the region and his administration’s withdrawal from the Paris Climate Agreement, signals a significant shift in US foreign policy. These actions carry deeper strategic implications for the broader Indo-Pacific region, particularly when witnessing intensified geopolitical competition between the US and China.
Pacific island nations, comprising mostly microstates such as Fiji, Nauru and Kiribati, are among the world’s most climate-vulnerable and aid-dependent nations. These countries are already grappling with existential threats such as rising sea levels, extreme weather events and economic fragility. Trump’s policies — particularly the cutting of development aid and imposition of tariffs — have further eroded US credibility as a reliable partner in the Pacific.
Fiji, with a population of approximately 930,000 and one of the more developed economies in the Pacific, was slapped with 32 percent tariffs under Trump’s trade realignment agenda. The rationale, based on alleged tariff asymmetries, was disputed by Fijian authorities, who claimed their average tariff on US goods was only about 2 percent. Other nations are faced with similarly burdensome tariffs: Nauru with 30 percent, Vanuatu 22 percent, and several others such as Samoa, Kiribati, Tonga, the Solomon Islands and French Polynesia were handed 10 percent tariffs. Even tiny Tokelau, with a population of only 1,600 and often dubbed “the next Atlantis” due to the risk of total submersion from sea-level rise, was not spared.
Notably, these tariffs were extended even to some nations under the Compact of Free Association (COFA) — a strategic arrangement granting the US military and diplomatic access in return for economic assistance and visa-free access for citizens. The Marshall Islands and the Federated States of Micronesia, two COFA members, have been hit with 10 percent tariffs, despite their strategic value to the US military. Interestingly, Palau, another COFA nation, was excluded.
This raises questions about the selective application of US policy and its strategic calculus. Palau is geopolitically significant in the western Pacific and has long been targeted by China so that it would sever it ties with Taiwan.
Beijing has used economic coercion such as weaponizing Chinese tourism, offering land leases without development, and allegedly sponsoring cyberattacks and organized crime to pressure Palau. Trump’s exemption of Palau from tariffs might be interpreted as a calculated move to retain influence in a strategically pivotal nation vulnerable to Chinese overtures.
Historically, the Pacific island nations have been a part of the Anglo-American sphere of influence, especially during and after the World War II. During the Cold War, the region was critical to the US forward defense strategies. However, applying coercive trade policies to such fragile economies risks pushing these nations closer to China, undermining long-term US strategic interests.
Many of the nations rely on foreign aid for up to 30 to 60 percent of their GDP, and face chronic infrastructure, governance and employment challenges. By contrast, China’s “check book diplomacy” and investments in roads, ports and government buildings — although controversial — has filled the vacuum left by declining Western engagement. According to the Lowy Institute’s Pacific Aid Map, China has become the second-largest donor to the Pacific (after Australia), surpassing New Zealand and the US.
The broader Indo-Pacific strategy articulated by the US and its allies has emphasized a “free and open Indo-Pacific,” a rules-based order and resistance to China’s expansionist ambitions, but Trump’s policy decisions run counter to these goals.
Former US president Joe Biden’s “Pacific pledge,” which aimed to restore US aid and diplomacy in the region, has reportedly suffered setbacks due to budgetary cuts and inconsistent implementation.
Meanwhile, Australia’s “Pacific step-up” and New Zealand’s “Pacific reset” strategies have attempted to re-engage the region with enhanced aid, diplomacy and labor mobility schemes. Yet these efforts require reinforcement from like-minded partners. Trilateral cooperation formats — Australia-India-Japan and Australia-India-Indonesia — are now more crucial than ever to maintain regional engagement and counterbalance Chinese influence. Taking Taiwan on board to strengthen regional cooperation could be a good move in this context.
India’s Forum for India-Pacific Islands Cooperation (FIPIC) has also emerged as a key platform for engaging the Pacific, especially through capacity-building and solar energy cooperation. Yet FIPIC’s presence must be more consistent and visible to make a meaningful impact.
Among the Pacific island nations, Fiji stands out as a regional leader, both economically and diplomatically. It played a central role in the Paris Climate Agreement negotiations, chaired COP23 in 2017, and continues to advocate vigorously for climate justice on behalf of the global south. Fiji also spearheaded the Pacific Islands Development Forum and has been instrumental in projecting the collective voice of Pacific Small Island Developing States at international forums such as the UN.
Undermining such actors through punitive tariffs sends a mixed message to the region. It reduces the ability of the US to shape narratives on climate, development and governance — areas where China is trying to offer tactical alternatives.
Trump’s tariff imposition on Pacific island nations is more than a trade policy — it is an act of geopolitical miscalculation. These actions undercut the very principles that the Indo-Pacific strategy claims to uphold — partnership, resilience and rules-based engagement. In doing so, the US risks alienating allies, ceding influence to China and weakening regional trust in Western-led security arrangements that are supported by fellow democracies such as Taiwan, Japan and India.
To mitigate this, rising and middle powers — particularly Taiwan, Japan, India, Australia and New Zealand — must step up their collective efforts to ensure that Pacific island nations remain partners in shaping the future of the Indo-Pacific region, rather than becoming pawns in great power competition.
Rahul Mishra is a senior research fellow at the German-Southeast Asian Center of Excellence for Public Policy and Good Governance at Thammasat University in Thailand. Shubhamitra Das is an associate professor at the Centre for Indo-Pacific Studies at Jawaharlal Nehru University in India.
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