Middle Powers Face a Rude Awakening in the Post-American World

For seven decades, middle powers enjoyed the best of both worlds. They prospered under American security guarantees while trading freely with everyone, including America's rivals. But as the US-led global order fractures, these countries may discover they miss the old system more than anyone expected.

Countries like South Korea, Australia, Canada, and the Netherlands built their modern prosperity on a simple formula: align with America for security, trade with everyone for wealth. This strategy worked brilliantly when the US was the undisputed hegemon and global trade flowed relatively freely.

Now that comfortable middle ground is disappearing.

The Golden Age of Having It All

Middle powers occupy a unique position in the international system. They're not superpowers, but they're far from insignificant. South Korea ranks as the world's 10th largest economy. Australia controls vast natural resources. Canada sits in the G7. The Netherlands serves as Europe's logistics hub.

These countries mastered the art of strategic hedging. They could criticize American foreign policy while enjoying NATO protection. They could embrace Chinese investment while maintaining Western democratic values. They could profit from global supply chains without bearing the costs of maintaining them.

But this balancing act depended on a crucial assumption: that great powers would compete within a shared framework of rules and institutions. That assumption no longer holds.

When Hedging Becomes Impossible

The US-China rivalry has shattered the old playbook. Washington increasingly demands that allies choose sides, while Beijing punishes countries that align too closely with America. Middle powers find themselves caught in the crossfire.

South Korea's predicament illustrates the challenge. The country depends on the US for security against North Korea, yet China remains its largest trading partner with bilateral trade worth $240 billion in 2023. When America pressures Seoul to restrict semiconductor exports to China, Korean companies like Samsung and SK Hynix face an impossible choice: anger their security guarantor or lose their biggest market.

Australia learned this lesson painfully in 2020 when China imposed punitive tariffs on Australian coal, wine, and barley after Canberra called for an investigation into COVID-19's origins. The message was clear: alignment with America carries economic costs.

The New Rules of the Game

The Biden administration's "friend-shoring" initiative and China's Belt and Road Initiative represent competing visions of economic blocs organized around geopolitical loyalties rather than pure efficiency. This forces middle powers into a trilemma: align with America, tilt toward China, or attempt to forge a third path.

The third option—building coalitions of middle powers to maintain strategic autonomy—sounds appealing in theory but faces practical obstacles. These countries have divergent interests and limited leverage against great powers determined to divide them.

ASML, the Dutch company that makes the world's most advanced semiconductor equipment, exemplifies the new reality. Despite enormous Chinese demand, the company cannot sell its extreme ultraviolet lithography machines to China due to US pressure. Economic logic takes a backseat to geopolitical considerations.

The End of Economic Innocence

Perhaps most fundamentally, middle powers must abandon the fiction that economics and security exist in separate spheres. The era when they could pursue prosperity while remaining geopolitically neutral is over.

This shift requires painful recalculations. Canadian pension funds must weigh the returns from Chinese infrastructure investments against the risk of sanctions. Australian universities must balance lucrative Chinese student fees against academic freedom concerns. European countries must decide whether Chinese 5G networks are worth potential intelligence risks.

The old middle power strategy of "diversification" increasingly looks like strategic confusion rather than sophisticated statecraft.

Adapting to a Bipolar World

Some middle powers are already adapting. Japan has clearly chosen the American camp, despite economic costs. India pursues strategic autonomy but leans toward the US on key security issues. Others, like Germany, still hope to maintain profitable relationships with both superpowers—a position that looks increasingly untenable.

The countries that thrive in this new environment will be those that make clear-eyed choices about their core interests and accept the trade-offs that come with them. Those that continue hedging may find themselves isolated from both camps.