JUNE 2025
SMALL STATES, BIG STAKES: A BATTLE FOR INFLUENCE IN THE INDO-PACIFIC
June saw a sharp deterioration in the global economic outlook, with the World Bank, the UN, and OECD warning that global growth is set to slow to its weakest pace since the 2008 financial crisis — excluding outright recessions. The Indo-Pacific is feeling the strain most acutely. Growth forecasts for East Asia, South Asia, and the Pacific have all been downgraded, as the region’s high trade openness leaves it especially exposed to tariff shifts and geopolitical uncertainty. With external demand weakening, governments are scrambling to attract investment and diversify their economies. These developments underscore the fragility of post-pandemic recovery and the urgent need for resilient, inclusive strategies across the Indo-Pacific.
This month’s briefs examine the evolving contours of US engagement in the region, where alliance strains and overlooked partnerships are increasingly shaping the strategic balance. Our first brief looks at the Pacific, where Washington’s hard power remains unmatched — but new travel restrictions targeting key island nations risk undermining its influence. Our second brief considers Northeast Asia, where South Korea’s newly elected President Lee Jae-myung is pursuing a pragmatic foreign policy that could collide with Donald Trump’s instinct to scale back military commitments and revive direct talks with Pyongyang. Together, these developments raise pressing questions about the credibility and consistency of US leadership in the region.
Across the Indo-Pacific, governments are navigating a volatile mix of diplomatic frictions, domestic unrest, and deepening great power rivalries. In South Asia, India and Pakistan are locked in a post-crisis diplomatic contest, while Nepal faces internal dissent over energy reforms. Southeast Asia is contending with renewed border tensions between Thailand and Cambodia, questions over US reliability, raised at the Shangri-La Dialogue, and complex trade-offs in defence ties, especially for the Philippines. In East Asia, Taiwan’s political balance is being tested, and Japan is showing growing unease over US pressure. Meanwhile, China is intensifying regional engagement — from hosting Pacific leaders to asserting influence in Europe — even as tensions mount over trade and technology. In the Pacific Islands, diplomatic alignment, digital development, and climate action remain top priorities, as states seek to safeguard sovereignty and secure new partnerships in a contested strategic environment.
With trade tensions rising, inflation lingering, and policy uncertainty mounting, developing economies face growing pressure. As the Indo-Pacific adapts to these shifting dynamics, 9DASHLINE remains committed to providing the in-depth analysis you need to stay informed and ahead. If you haven’t already, subscribe to our newsletter to ensure you don’t miss our next edition.
ISLANDS OF INFLUENCE: PACIFIC MICROSTATES CANNOT BE A US AFTERTHOUGHT
By David MacSweeney, Founder at 9DASHLINE
While recent events in the Middle East placed US hard power centre stage, highlighting American reach and capability, the Indo-Pacific remains the epicentre of US-China strategic competition.
The recent deployment of decoy B-2 bombers to Guam, designed to draw attention away from strikes on Iranian nuclear facilities, highlights the island’s critical role in US efforts to project power. Washington’s decision to prioritise Guam over Diego Garcia in the Indian Ocean in such a high-profile operation was clearly intended to emphasise its strategic value.
Nevertheless, hard power alone will not secure US influence in the Indo-Pacific, which rests as much on trust, long-term partnerships, and shared values. The region’s vast scale, diversity of interests, cultures, and historical relations means that any effort to cultivate influence must draw on the full spectrum of power. Soft power, economic influence, and people-to-people relations — rather than military strength alone — are necessary for shaping long-term outcomes in a region where democracy remains under threat.
In this context, the Trump administration’s move to crack down on foreign nationals from countries that fail to meet ‘established benchmarks and requirements’ has included three critical geostrategic island nations: Tonga, Tuvalu, and Vanuatu. Together, these states, whose combined population is just 450,000, are among 36 countries facing new US travel restrictions. While framed as a security measure, the decision represents a significant misstep at a time when strong regional partnerships in the Indo-Pacific are essential. Furthermore, any ban would likely have limited material impact, while providing only a reputational downside, given that travel to the United States from these countries is already limited due to the distance and weak economies — for example, Tonga’s GDP per capita is just USD 5,700.
Meanwhile, despite a US diplomatic push, including the opening of new embassies, China continues to deepen its engagement across the Pacific, pursuing wide-ranging efforts designed to draw island nations into its orbit. In Micronesia, Beijing is reviving a World War II–era airfield on Woleai Atoll — just 400 miles south of Guam—positioning itself closer to the aforementioned US military base. In February, it signed a Comprehensive Strategic Partnership with the Cook Islands, focusing on infrastructure development and deep-sea resource exploration, and continues to push Pacific nations to adopt the "One-China principle" as a condition for diplomatic ties.
Taiwan, meanwhile, continues to see its tiny diplomatic footprint in the region shrink. Kiribati, the Solomon Islands, and most recently Nauru have cut ties in favour of Beijing. The Marshall Islands, Tuvalu, and Palau — all Taiwan allies — face intense coercion, including economic leverage and offers of development assistance. China’s 2022 security pact with the Solomon Islands raised concerns across the region. Since then, Beijing has sent advisers to Vanuatu and Kiribati and is actively pursuing similar security arrangements with other island nations. Earlier this month, China and Fiji signed an agreement to deepen their rugby cooperation, framed as a “gateway to a lasting partnership,” that will promote cultural exchange and see them host joint international events, youth exchanges, and more.
These developments highlight just how aggressively Beijing is working to reshape the strategic map of the Indo-Pacific. While Trump gravitates towards great powers with whom he identifies, small island nations — so often overlooked in great-power politics — are increasingly key players in the regional balance of power. UN votes, access to undersea resources, and control of vast maritime zones give them disproportionate strategic significance. The evidence thus far suggests that Beijing understands the Indo-Pacific will not be won by hard power alone.
Five months into a four-year term, the Trump administration must learn that if it wants to lead in the region, it needs to act like a partner, not just a power.
STRATEGIC STRAIN: WHAT LEE’S PRESIDENCY MEANS FOR US–KOREA RELATIONS
By Connor Fiddler, Principal Coordinator at 9DASHLINE
Since the 2000s, South Korean progressives have generally favoured engagement with North Korea. When President Donald Trump unexpectedly pursued diplomacy with Pyongyang during his first term, the presence of progressive President Moon Jae-in in Seoul proved fortuitous. Despite initial friction, both leaders largely aligned on the belief that diplomacy was the best path forward. This time, however, this alignment may not be so easy. On 3 June, South Korea elected another progressive, Lee Jae-myung, just months after former President Yoon Suk Yeol’s brief and controversial declaration of martial law. Yet, Lee differs from his progressive predecessors: he has embraced what he calls “pragmatic diplomacy”, signalling a move away from the more ideological foundations of traditional progressive foreign policy and toward continuity with his conservative predecessor.
While Lee supports dialogue with North Korea and continuity in cooperation with Japan, he has also underlined the need to bolster deterrence through military strength. He backs enhancing conventional capabilities, including the “three-axis” system — an aggressive doctrine focused on preemptive and retaliatory strikes to deter North Korean aggression. Lee is also expected to seek a deeper and more robust military partnership with the United States.
Lee’s approach is likely to clash with Trump’s, who remains sceptical of the US military presence on the Korean Peninsula. Reports suggest that Trump may act on past threats to significantly reduce — or even fully withdraw — American troops. Trump may also attempt to revive his strategy of direct engagement with North Korea, as he did during his first term.
Polling suggests that Lee would face strong domestic opposition if he is perceived as overly conciliatory towards North Korea. With public support hinging on a credible deterrent and growing concerns over potential US disengagement, Lee will need to balance alliance management with domestic political imperatives.
The US-South Korea alliance weathered major strains during Trump’s first term, largely due to shared views on North Korea. But with Trump entering a second term and Lee charting his own course, finding common ground may prove far more difficult, further testing a fragile alliance.
For more analysis on how South Korea’s new president may navigate his country’s relationship with the US, read this recent article by Dr. Wongi Choe (Korea National Diplomatic Academy) on 9DASHLINE.
ACROSS THE INDO-PACIFIC
South Asia
India and Pakistan, following recent cross‑border retaliations and a ceasefire, have intensified diplomatic outreach to shape global narratives and claim victory. In India, Prime Minister Modi welcomed seven multi‑party delegations returning from international visits, where they emphasised the limited scope of Indian strikes and sought support for a coordinated international effort against global terrorism. Meanwhile, Pakistan dispatched two delegations — one led by former Foreign Minister Bilawal Bhutto and another by the Prime Minister’s advisor Tariq Fatemi — to pressure India diplomatically and portray it as the aggressor. Islamabad also seized the opportunity to reset ties with the United States, following reports that Modi had declined a US invitation to visit. This diplomatic opening led to a long meeting between Pakistan’s newly promoted Field Marshal Asim Munir and President Trump.
India also reeled from the tragic crash of Air India Flight 171, a Boeing 787 Dreamliner, shortly after takeoff from Ahmedabad en route to London on 12 June. The first fatal incident involving a 787 killed 241 lives on board and 34 on the ground; miraculously, one passenger survived. The black box has been recovered, and an AAIB‑led investigation is underway focusing on potential engine failure or loss of power.
In Nepal, the government passed its latest budget amid political turbulence. A proposed shift from a ‘take-or-pay’ to a ‘take‑and‑pay’ policy model — under which the Nepal Electricity Authority (NEA) would purchase only the electricity it actually uses — sparked dissent within the ruling coalition and resistance from the private sector, raising concerns about hydropower financing. Ongoing protests by monarchist groups and a visa fraud scandal implicating Home Minister Lekhak, further delayed budget proceedings, with opposition parties RSP and RPP boycotting the debate.
In Sri Lanka, the ruling party, National People’s Power (NPP), retained its dominance in the 2025 local elections, winning 43.26 per cent of the vote. The World Bank has extended USD 150 million in support of Colombo’s clean energy transition, with expectations that this will unlock further private sector investment.
Meanwhile, China convened its second trilateral diplomatic dialogue in South Asia, this time with Pakistan and Bangladesh. A similar summit in May 2025 had included Pakistan and Afghanistan. Held in Kunming, the meeting focused on strengthening trade and connectivity under the Belt and Road Initiative (BRI), with a proposal to establish a working group to institutionalise trilateral cooperation. Bangladesh, for its part, secured significant external financing: a USD 400 million climate resilience loan from the Asian Development Bank and a combined USD 1.3 billion in International Monetary Fund disbursements from the third and fourth tranches of its programme.
Southeast Asia
Thailand announced new border restrictions with Cambodia after a deadly 28 May border clash reignited tensions. Thai Prime Minister Paetongtarn Shinawatra cited efforts to curb tourism to Cambodian casinos and combat scam operations, allowing only essential travel. Cambodia retaliated by blocking Thai fuel and Internet services, and both countries reinforced troops along the border. Domestic critics accused Paetongtarn of weakness after a leaked call with Cambodian leader Hun Sen, further inflaming tensions. Despite ongoing provocations, Thailand maintains that it remains committed to bilateral negotiations. The standoff highlights how long-standing border disputes can quickly escalate into broader political and economic confrontations in Southeast Asia.
At the 2025 Shangri-La Dialogue in Singapore, US Defence Secretary Pete Hegseth laid out the Trump administration’s Indo-Pacific strategy: deter China, deepen military ties, and push allies to raise defence spending — potentially up to 5 per cent of GDP. Citing the risk of a Chinese invasion of Taiwan by 2027, Hegseth called for urgency and collective investment. Though he reaffirmed Washington’s commitment to the region, doubts persist over the US’ long-term reliability and whether regional allies can meet these elevated expectations. The speech clarified Trump’s vision but exposed challenges in aligning rhetoric with regional political and economic realities.
The US-Philippines defence relationship is deepening, with joint exercises showcasing advanced American weapons like HIMARS and NMESIS in strategic areas such as the Luzon Strait. These drills aim to enhance maritime strike capabilities and deter Chinese aggression. Simultaneously, the US Navy is reviving Subic Bay as a key logistics hub. Yet obstacles remain: Philippine Defence Secretary Gilberto Teodoro recently downplayed a proposed USD 5.6 billion F-16 deal, citing its high cost and unclear priorities. While Washington is investing in forward deployments and infrastructure, Manila remains cautious about long-term procurement, highlighting enduring asymmetries in expectations and capacity within the alliance.
East Asia
In Taiwan, 24 Kuomintang (KMT) lawmakers will face a recall vote on 26 July that could end their legislative majority and reshape Taiwanese politics at a critical juncture for national defence and security. The Democratic Progressive Party (DPP) holds 51 of the 113 legislative seats, while the KMT has a slim majority with 52 seats, supported by the “third force” Taiwan People’s Party (TPP, eight seats), and two KMT-affiliated independents. The recall effort is unprecedented in Taiwan’s political history, making outcomes difficult to predict. However, just a five-seat flip to the DPP would shift the legislative balance of power. President Lai Ching-te has launched a 10-stop speaking tour in support of the recalls, framing the campaign around sovereignty, identity, defence, and democracy. Taiwan’s CommonWealth Magazine has an excellent podcast discussing the recalls with Academia Sinica’s Nathan Batto, writer of the indispensable Frozen Garlic blog.
In South Korea, newly elected President Lee Jae-myung began his term with a Cabinet reshuffle, appointing Ahn Gyu-back as the country's first civilian defence minister in 64 years, fulfilling a campaign promise to enhance civilian oversight of the military. In foreign policy, Lee is focused on bolstering cooperation with both the US and Japan amid global instability. South Korea and Japan celebrated 60 years of diplomatic normalisation on 22 June, and Lee underscored the importance of the bilateral relationship during a summit with Prime Minister Shigeru Ishiba. On North Korea, Lee has distanced himself from his predecessor’s more confrontational approach, suspending loudspeaker broadcasts towards North Korea and calling for more diplomacy.
In Japan, Prime Minister Ishiba skipped this month’s NATO summit, citing the absence of other Indo-Pacific 4 leaders and his inability to secure a meeting with Trump, raising questions about the strength of NATO-IP4 cooperation. In addition, the Financial Times reported that Japan has cancelled the annual "2+2" security talks with the US, following demands from Washington to increase defence spending to 3.5 per cent of GDP, up from a previous request of 3 per cent. While the upcoming Japanese upper house elections on 20 July likely influenced the decision, the primary factor is disagreements over defence spending. Taken alongside Ishiba’s refusal to support Trump’s attacks on Iran, the NATO no-show, and the ongoing tariff dispute, there appears to be deep division in the bilateral relationship, raising questions about the US’ Indo-Pacific strategy in Trump’s second term.
In China, Foreign Minister Wang Yi hosted Beijing’s first-ever Pacific Islands foreign ministers' summit, underscoring China’s ambition to expand its influence in the region. Highlighting commitments to international law and climate action, as well as China's six-point plan for a "community with a shared future", Beijing’s strategic moves are a stark contrast to the US "America First" policy.
Amid rising trade tensions with the US, speculation is growing about a possible Europe-China détente. However, Finbarr Birmingham’s reporting in the South China Morning Post underscores persistent tensions in the bilateral relationship. China’s reluctance to offer concessions reflects a belief that Brussels lacks both credibility and leverage. With China’s exports to the EU surging — resulting in a 22 per cent increase in the EU's trade deficit with China in May alone — these tensions are unlikely to be resolved anytime soon.
Pacific Islands
New Zealand has frozen NZD18.2 million in aid to the Cook Islands after the latter signed a broad strategic agreement with China without prior consultation, violating their free-association agreement. Prime Minister Luxon visited Beijing to reinforce economic ties while underscoring concerns over China's expanding presence in the Pacific. New Zealand continues to attract wealthy Americans, many disillusioned with US politics, seeking “golden visas”. Meanwhile, China hosted a high-level delegation from Fiji to discuss cooperation in renewable energy, agriculture, and digital technologies, and the China Rugby Football Association signed an MOU with Fiji Rugby Union to support youth development and sports infrastructure — part of Beijing’s broader soft-power push in the region.
Micronesia deepened its defence partnership with the US Coast Guard during their semi-annual Joint Committee Meeting, agreeing to expand shiprider operations, enhance maritime domain awareness, and hold a regional symposium in Honolulu in 2026. The US military also released an updated environmental impact plan for operations in the Northern Mariana Islands to assuage local ecological concerns tied to expanded defence training.
Australia joined UK-led naval patrols in the South China Sea to reinforce freedom of navigation amid escalating Chinese maritime assertiveness. Meanwhile, recent US strikes in Iran, which included sending several decoy B-2 warplanes to Guam, were also reportedly aimed at signalling US presence in the Indo-Pacific.
On the digital and economic front, Nauru became the first Pacific country to launch a dedicated digital asset regulator, positioning itself as a future fintech hub. Yaren also reiterated that deep-sea mining and ocean conservation can coexist, in contrast to Palau’s more cautious stance on seabed resource extraction. Tuvalu, facing existential climate threats, called for a binding international treaty on sea-level rise during the UN Oceans Conference, amplifying the Pacific’s voice in climate diplomacy.
In Melanesia, pro-independence activists from West Papua renewed their campaign for full membership in the Melanesian Spearhead Group (MSG), while Papua New Guinea’s Prime Minister James Marape reaffirmed support for regional solidarity within the bloc. In education, a Lowy Institute report highlighted Papua New Guinea’s increasing reliance on China for scholarships and vocational training, challenging Australia’s long-standing leadership in the sector. French President Emmanuel Macron has invited New Caledonian stakeholders to Paris for renewed dialogue following protests and ongoing political uncertainty in relation to controversial electoral reforms.
Tonga reported two key developments: the completion of the first phase of its national 5G rollout by Digicel and a major cyberattack that disrupted its health systems, highlighting both digital opportunity and vulnerabilities in the kingdom.
THE BEST OF 9DASHLINE
In case you missed them, this month’s standout 9DASHLINE articles explore how power, pressure, and precarious partnerships are reshaping the Indo-Pacific and beyond.
From the revival of royalism in Nepal and Europe’s uneasy recalibration with China, to undersea cables emerging as a new frontier in geopolitical competition, and the fallout of a second Trump presidency on transatlantic ties, these pieces delve into the infrastructure, ideologies, and global currents challenging established orders.
Dive into these timely perspectives to better understand the forces testing resilience across the region.
ECONOMIC SPILLOVER: TARIFFS OVERSHADOW ANNUAL ASIAN DEFENCE DIALOGUE
At this year’s Shangri-La Dialogue, US efforts to reassure Indo-Pacific allies rang hollow as deep contradictions emerged between America’s security rhetoric and economic policies.
In a sharp and timely analysis, Juliet Lee (Asia Society Policy Institute) explores how the Trump administration’s sweeping tariffs have unsettled even Washington’s closest partners — undermining defence cooperation just as China deepens its own strategic engagement in the region. While US Defence Secretary Pete Hegseth doubled down on deterrence against China, regional leaders pushed back against trade restrictions they see as destabilising and disrespectful of sovereignty.
Lee argues that without a more balanced approach that integrates trade and security, the US risks alienating allies and ceding ground to China in the world’s most dynamic region.
IMPASSE: WHY LOSING THE US STILL WON’T BRING EUROPE CLOSER TO CHINA
Trump’s return to the White House has shaken Europe, forcing a reckoning with its reliance on American power and complicating already fraught ties with China.
In this sweeping and sobering piece, Nicholas Bequelin (Senior Fellow, Yale Law School) examines the fragile state of Sino-European relations amid a collapsing transatlantic order. He explores Europe’s strategic dilemma: caught between a revisionist Russia, an assertive China, and a volatile US, the continent is struggling to define its role in a rapidly shifting global landscape.
Bequelin argues that while economic ties between Europe and China remain deep, mutual mistrust, values gaps, and China’s alignment with Russia limit any genuine rapprochement. In the end, the greatest threat may lie not in Beijing or Washington but in Europe’s own failure to act with unity and ambition.
UNDERSTANDING NEPAL’S PRO-MONARCHY MOMENTUM
As political disillusionment deepens in Nepal, pro-monarchy forces are attempting an unlikely comeback — but are they gaining real traction?
In this timely analysis, Dr. Amit Ranjan (Institute of South Asian Studies, NUS) examines the recent resurgence of royalist sentiment under former King Gyanendra, tracing the roots of today’s rallies to political instability, rising Hindu nationalism, and popular frustration with coalition governance. While nostalgia for the monarchy is growing in some quarters, Ranjan argues that a return to royal rule would be a step backwards — authoritarian in nature and unable to deliver genuine democratic renewal.
Despite its noisy presence, the movement remains fractured and limited in reach — a symptom of deeper political malaise rather than its solution.
INDIA’S CRITICAL ROLE IN SAFEGUARDING UNDERSEA CABLES
Undersea cables carry nearly all global internet traffic — and in the geopolitics of the Indian Ocean, they are becoming both indispensable and increasingly vulnerable.
In this compelling analysis, Arun Teja Polcumpally (JSW Science and Technology Fellow, ASPI Delhi) argues that India must urgently step up to protect these digital lifelines. As China develops deep-sea cable-cutting technology and non-state actors threaten connectivity, India’s strategic location and regional clout make it well-positioned to lead a collective framework for cable security in the Indian Ocean Region.
Polcumpally outlines concrete policy steps — from commissioning Indian-flagged repair vessels and designating cables as critical infrastructure, to launching a regional initiative under the MAHASAGAR framework — and makes the case for why digital resilience must now be seen as a national and regional security priority.
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