This article originally appeared in WGI.World.
By Stephen Nagy, July 22, 2025
The Trump 2.0 administration has exposed a fundamental weakness in the international system, namely the inability of traditional U.S. allies to effectively coordinate responses to economic coercion including tariffs from their security guarantor.
The experiences of Japan, South Korea, Australia, and Canada in attempting to resist U.S. tariff threats reveal not merely diplomatic failure but a structural impossibility rooted in the logic of game theory and power asymmetries. This article examines why collective action among these middle powers fails, why China represents a false alternative, and what realistic policy options remain for states caught between U.S. economic nationalism and Chinese authoritarian expansion.
The failure of coordinated resistance to Trump’s tariff threats can be understood through the lens of game theory, specifically the multi-player prisoner’s dilemma. Tokyo, Seoul, Canberra and Ottawa face a similar decision matrix that compels them to choose between cooperating with each other to resist U.S. pressure collectively, or defect to seek individual accommodation with Washington. The theoretically optimal outcome of a successful collective resistance leading to policy modification requires sustained cooperation among all parties. However, the incentive structure overwhelmingly favors defection which is what each state has done.
Consider the failed attempt in early 2025 to form a unified response to threatened U.S. tariffs on automobiles and steel. Japan initially proposed a coordinated approach through quiet diplomatic channels, seeking to present a united front that would demonstrate the counterproductive nature of such tariffs to Washington’s economic interests.
However, the coalition collapsed before it could materialize. South Korea, facing specific pressure over semiconductor exports and ongoing negotiations about burden-sharing for U.S. forces, quietly pursued bilateral discussions with Washington. Australia, concerned about potential exclusion from critical minerals agreements essential to its economic future, similarly sought individual accommodation. Canada, despite its USMCA membership theoretically providing protection, faced threats to energy exports that compelled separate negotiations.
Each country’s defection was individually rational. The potential gains from successful collective action were not an attractive bet when faced with certain losses from being singled out for punishment. The Trump administration’s demonstrated willingness to use differentiated pressure, offering selective exemptions to compliant nations while escalating pressure on holdouts, created a classic divide-and-conquer dynamic.
The fundamental obstacle to coordination lies not in diplomatic failure but in structural realities. The U.S. maintains asymmetric leverage over each ally across multiple dimensions that compound rather than offset each other. Economic dependencies tell only part of the story. Japan’s $63 billion annual trade surplus with the U.S. in 2025 creates vulnerability, but this is insignificant compared to its security dependence. With China’s military build-up in the region accelerating, North Korea’s nuclear arsenal expansion, and Russia’s deepening security and technological cooperation with Pyongyang and Beijing, Tokyo cannot risk compromising the alliance that underwrites its security.
South Korea faces even starker calculations. The presence of 28,500 American troops provides the ultimate guarantee against North Korean aggression. When weighing potential economic losses from tariffs against the existential security provided by the alliance, Seoul’s choice becomes predetermined. The Moon and Yoon administrations’ divergent approaches to China policy both ultimately foundered on this reality that neither closer ties with Beijing nor middle power coalition building could substitute for U.S. security guarantees.
Australia’s position illuminates another dimension of asymmetry. Beyond the ANZUS alliance and intelligence sharing through Five Eyes, Australia depends on U.S. technological access for its military modernization. The AUKUS submarine programme represents not just a defense acquisition but a generational bet on a U.S. partnership. Against such stakes, resistance to agricultural tariffs becomes a secondary concern.
Canada’s geographic position creates unique vulnerabilities. Sharing nearly a 9,000 km border with an economy ten times its size generates dependencies that transcend normal trade relationships. When 75.9% of exports flow southward and energy infrastructure is continentally integrated, the notion of meaningful resistance becomes chimeric.
The seeming irrationality of Trump’s tariff and trade policy including imposing tariffs that often harm U.S. consumers and disrupt allied relationships naturally drives consideration of alternatives. China’s position as the world’s second-largest economy and primary trading partner for most Indo-Pacific nations suggests an obvious hedge. Yet this represents a dangerous miscalculation rooted in economic determinism.
China’s economic relationships operate on fundamentally different principles than those with the U.S. Where American economic coercion seeks specific policy changes while maintaining alliance structures, Chinese economic statecraft aims at strategic subordination. The experiences of South Korea during the THAAD deployment crisis of 2016-2017, when China imposed harmful unofficial sanctions on Korean businesses, demonstrated Beijing’s willingness to use economic leverage for strategic coercion. Australia’s experience during 2020-2021, facing coordinated trade sanctions for calling for a COVID-19 investigation, reinforced this pattern.
More fundamentally, China cannot provide the security goods that underpin regional stability. The Chinese Communist Party’s core interests of maintaining party supremacy, revising regional order, and asserting territorial claims directly conflict with the status quo that benefits America’s democratic allies. Trade diversification toward China might provide short-term economic relief but at the cost of strategic autonomy and long-term security.
Understanding American behavior requires moving beyond surface irrationality to grasp underlying strategic logic. The Trump administration’s approach, while tactically and diplomatically crude, reflects a coherent if brutal assessment of international competition. Facing a rising China that leverages economic integration for strategic advantage, the U.S. seeks to reconstitute economic relationships on terms that preserve U.S. technological and industrial leadership.
The focus on allies reflects not vindictiveness but strategic prioritization. By extracting maximum concessions from nations that have limited alternatives, Washington accumulates resources and policy flexibility for long-term competition with China. The approach mirrors successful Cold War strategies that distributed alliance costs while maintaining American leadership. That such policies impose hardships on middle power allies is seen not as a bug but as a feature ensuring that allied prosperity remains contingent on American success.
This logic extends to technology policy. Restrictions on semiconductor exports to China, pressure on allies to exclude Huawei from 5G networks, and efforts to reshape supply chains all serve the larger strategy of maintaining technological supremacy. Allies are presented with binary choices precisely because ambiguity might allow China to exploit gaps in the containment architecture.
Given these structural realities, what options remain for U.S. middle power allies? First, abandon hopes of grand coalitions against American pressure. The game theory dynamics and power asymmetries make such efforts futile. Instead, pursue three complementary strategies including selective compliance with strategic bargaining, issue-specific mini-coalitions, and institutional thickening.
First, middle powers should accept the fundamental framework of American demands while bargaining hard on implementation details. Japan’s approach to semiconductor export controls by accepting the principle while negotiating specific thresholds and exemptions provides a model. By demonstrating strategic alignment, nations can preserve negotiating space on economic specifics.
Second, while middle power coalitions fail, narrow cooperation on specific technical issues can succeed. The successful coordination among allies on supply chain resilience initiatives demonstrates that cooperation remains possible when framed as supporting rather than resisting U.S. objectives. Focus on areas where American and allied interests genuinely converge.
Third, deepen integration within existing alliance structures to raise the costs of American defection. The progression from QUAD to QUAD-Plus, the AUKUS expansion discussions, and enhanced Japan-South Korea security cooperation create stakeholders within the American system invested in alliance stability. Make American unilateralism more costly without directly challenging it.
The inability of American allies to resist economic pressure reflects not diplomatic failure but international structure. In a system defined by hegemonic stability, the hegemon’s ability to extract rents from beneficiaries is not an aberration but a feature. The relevant question is not whether such extraction is fair which it is manifestly not but whether available alternatives are worse.
For America’s democratic allies, the calculation remains clear that accepting American economic nationalism as the price of security guarantees and systemic stability represents the least bad option. The task is not to resist this reality but to manage it by minimizing economic disruption while supporting the broader project of preventing authoritarian revision of international order.
The Trump administration’s approach may lack elegance and diplomacy, but its brutal clarity serves strategic purposes. By forcing allies to choose sides unambiguously, it constructs a coalition capable of sustaining an international order that, while less liberal than its predecessor, remains fundamentally more attractive compared to the authoritarian alternative.
China and Russia rhetorically champion a multipolar world of peaceful coexistence between different political systems, yet systematically undermine democratic institutions, rule of law, and human rights wherever these threaten to inspire their own populations. Their vision of “sovereignty”, “mutual respect”, and “non-interference” masks active efforts to make the world safe for authoritarianism by dismantling the legal and normative constraints that threaten regime survival.
That middle powers find the emerging American-led order coercive and distasteful is undeniable. That this order is however flawed preserves space for democratic governance, market economics, and legal accountability makes acceptance a strategic necessity. In the international anarchic system, the logic of power supersedes the logic of justice, but power exercised to preserve plural political possibilities remains preferable to power deployed to eliminate them. Understanding this reality is the beginning of strategic wisdom.
Dr. Stephen R. Nagy is Professor of Politics and International Studies at the International Christian University, Tokyo and concurrently a Visiting fellow for the Hungarian Institute for International Affairs (HIIA,) a visiting fellow at the Japan Institute of International Affairs (JIIA,) and senior fellow at the Macdonald-Laurier Institute (MLI.)
