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In June of 2024, Chinese tourists could be found lining-up along the windows of the departure terminal at Palau’s international airport to photograph two United States Air Force F-22 fighter jets starting their engines. The U.S. military was in the midst of conducting an exercise, called  and this remote archipelago in the Pacific Ocean was abundant with American military personnel. 

Despite there being no permanent military base in Palau, this country once bore witness to one of the bloodiest incursions of World War II at the . Eighty years after the War, this Oceanic nation of more than 300 small islands still holds immense strategic importance amidst the polarizing pulls of geopolitical tension between China and the United States. Behind the spectacle of Chinese tourists watching American fighter jets prepare for takeoff, a much larger contest for influence is playing out. However, Palau is not alone in navigating complex geopolitical dynamics — the Marshall Islands and Micronesia also face growing attention from China, even as they maintain longstanding relationships with the United States.

In , the United States entered into a  (COFA) with the Federated States of Micronesia (FSM), the Republic of the Marshall Islands (RMI) and in , with the Republic of Palau. For decades, COFA agreements have provided these three island nations with independence and American economic aid and military protection. In return, the United States receives exclusive access for its military to operate in and out of their sovereign borders. These special arrangements have provided the United States reliable allies in the Pacific and allows the American military far reaching forward operating capabilities.

Despite their small population, remote positioning, and low trade volume, recognizing why Palau, Micronesia, and the Marshall Islands are relevant in the larger geopolitical equation comes down to a few key factors.

1. Recognition of Taiwan (ROC): Palau and the Marshall Islands are two of the remaining twelve countries in the world which still recognize Taiwan’s sovereignty. Despite their free association status and close partnership with the United States, they have not adopted a “One China” policy – placing a thorn in Beijing’s side. The People’s Republic of China (PRC) has urged Palau for years to forfeit their recognition of the Republic of China (ROC) in exchange for substantial commercial and tourist incentives. Until recently, these economic tools of coercion have not been effective, even in the face of deceptive tourism practices and other . Likewise, the Marshall Island’s recognition of Taiwan also irks China, placing them as a geopolitical target of interest. In ways similar to the United States, Taiwan provides substantive  to both Palau and the Marshall Islands in return for diplomatic ties.

2. Commitment to Climate Action: In addition to being caught up in the back-and-forth tides of the U.S.-China power rivalry, these remote nations, like many other island communities across the world, face a separate existential conflict – climate change. Rising sea levels and shifting weather patterns jeopardize the economies and national security of countries like Micronesia, the Marshall Islands, and Palau. Against their interests, the United States has not shown a steadfast commitment to addressing the issue of climate change, with the Trump Administration having now pulled out of  a second time. The , the primary newspaper of Palau, published a story in February that highlights the Palauan President, Surangel Whipps Jr., beckoning China and India to take leadership action on the climate front. The climate remains an imperative agenda item for all three nations. 

3. Tariffs: On April 2, 2025, President Trump imposed U.S.  on more than 180 countries around the world. This list of tariffs includes Micronesia and the Marshall Islands, two of the three countries that have COFA agreements with the United States, both of which heavily rely on the financial assistance of the American government. Palau is the sole freely associated state to not be impacted by U.S. tariffs and is among an  of eleven countries who managed their way out of the 10% baseline tariffs. Russia, Belarus, Cuba, North Korea and Vatican City are among some of the other countries which have been exempt from these baseline tariffs.

So, what does all of this mean for these Pacific Island nations?

The Republic of Palau

Palau, a country for which the population heavily relies on the services of the telecom giant, , has China’s attention for not only its strategic location, but also because of its recognition of Taiwan’s sovereignty. China is willing to bring strong financial incentives to the table for the Palauan government to change its stance and, according to  from the President of Palau, there are some in the Palauan government who can be swayed. While Palau may not currently be the target of U.S. tariffs, they do not have to look far to see that the U.S. has put tariffs on the Marshall Islands and Micronesia, the only other two COFA nations. Meanwhile, Palau is threatened by climate change at the same time the United States is withdrawing from multilateral commitments to curb rising waters and warming temperatures.

Republic of the Marshall Islands

In February of 2024, U.S. congressional funding was held up in the House of Representatives. This included a bill which was already negotiated and promised to deliver extended .  of the Marshall Islands indicated that the delays had already started impacting the well-being of island citizens and inferred that alliance opportunities for the Marshall Islands were present elsewhere if the U.S. could not deliver. The Marshall Islands are also on China’s foreign policy agenda because of their recognition of Taiwan. The islanders’ uncertainty continues to accumulate despite the country being the permanent location of the Ronald Reagan Ballistic Missile Defense Test Site, a U.S. military base on the Kwajalein atoll in the Marshall Island archipelago. Unsure of the reliability of the United States, stemming from funding delays, withdrawal from The Paris Agreement, and the Trump administration’s tariffs, leave the people of the Marshall Islands wondering how long the United States will be attentive to their needs when China is willing to step in.

The Federated States of Micronesia

Micronesia’s firm stance behind a “One China” policy may give the Chinese Communist Party (CCP) the impression the Pacific nation can be more easily swayed to align with Beijing, perhaps even with the U.S. COFA agreement in place. Just last year, President Wesley W. Simina conducted a to Beijing shortly after renewing COFA with America. China has continued to aggressively court Micronesia in recent years, even being  for doing so in forums. But for a Micronesian economy which so heavily relies on American support, reductions in U.S. climate commitments may affect perceptions of leadership in the Pacific region. Likewise, placing tariffs on this allied nation, which accounts for far  of U.S. imports, will not bolster those perceptions.

In recent years, China has been successful in diplomatically gaining support of three separate Pacific Island nations – the Solomon Islands, Kiribati, and just last year, Nauru – to sever ties with Taiwan in favor of China. It is not unthinkable that Palau, Micronesia and the Marshall Islands, all freely associated with the U.S., might not choose to do the same in the future if the United States proves unreliable. At present, the U.S. military has already announced plans to build a  on Palau and has put forth heavy investments in building a . Maintaining favorable opinion among the government and citizens of these nations is paramount for a long-term, reliable partnership. On top of the islanders’ concerns already cited above, there is also worry that further militarizing these islands with U.S. assets may result in pulling them into conflict if relations ever were to significantly erupt between the two superpowers.

If China were to continue to prove successful in swaying Pacific Island nations in their favor, the consequences to U.S. interests would not go unnoticed. Taiwan could confront the loss of two of only twelve remaining sovereign nations which recognize its independence. If Palau and the Marshall Islands, historically longstanding American allies, forfeit their acknowledgement of Taiwan’s sovereignty, China may feel more emboldened to reunify Taiwan. This would have large implications on the U.S. semiconductor supply chain. Another detriment to the United States would be the risk of losing its military monopoly in these remote and strategic islands, potentially ceding the land to the forces of China’s People’s Liberation Army (PLA). In WWII, many Pacific Islands were used as  to attack the United States – it is not in the interest of the American military to lose its reach of power and influence in the Pacific.  in June 2024 that “the Indo-Pacific has remained [America’s] priority theater of operations” and that “the actions that [the United States] takes […] will continue shaping the 21st century for the entire world.” China recognizes the importance these island nations hold to the U.S. and, likewise, understand the strategic value they would add to the PRC.

At a global scale, a stark contrasting feature between the United States and China is political stability. Under the Trump presidency, the U.S. is floundering between on-again off-again policies. Over the long term, American predictability remains lost with pendulating administrations switching every four years and a consistently divided Congress. Proactive and consistent diplomacy, the pursuit of strong, respectful relations with these democratic nations, and a steadfast commitment to the COFA agreements are all essential pillars that must remain predictable and stable. If the U.S. falters, these countries may turn elsewhere for their own survival. 

Articles published on CID Voices present the informed views of the authors, grounded in their prior research and professional expertise. These views are solely those of the authors and do not reflect the Center or the University.