S. Korea, Taiwan, Vietnam Prove Small Nations' Economic Might

Make American shipbuilding great again (Masga) may sound like an effort by the US to bolster its economic strength and project power internationally, but Masga is not an American policy. It is a South Korean initiative that emerged following trade talks with the US in June.

Rather than responding to the Trump administration's tariff threats solely through trade negotiations, Korean officials saw an opportunity to show their American counterparts that South Korea deserved better treatment. They suggested that South Korea bring its shipbuilding prowess to the US .

South Korea is perhaps most famous as an exporter of K-pop, cars and semiconductors. But it is also a global powerhouse in shipbuilding. The shipyard in the south-eastern Korean city of Ulsan alone produces roughly ten times more ships annually than the entire US shipbuilding industry.

And as the US tries to counter China's rapidly growing naval fleet, Korean assistance is something that is clearly needed. The US navy secretary, John Phelan, declared earlier in 2025 that US shipbuilding programmes "are a mess". He added: "I think our best one is six months late and 57% over budget … That is the best one."

Masga was launched in August , with South Korean conglomerates HD Hyundai and Samsung Heavy Industries signing a US$150 billion (£112 billion) deal to modernise US shipbuilding capabilities.

It is a clear example of a middle power, a term for countries that lack the dominance of great powers but matter because they possess distinctive industrial, resource or diplomatic capabilites, using economic statecraft to punch above its weight.

Economic statecraft has largely been used to describe actions taken by great powers like the US and China to enable and restrict access to their consumer markets, investment coffers and production capabilities. The aim is to achieve foreign policy goals or national security objectives by inflicting damage on or beating the capabilities of a rival power.

One classic example is the US government's use of sanctions against Russia over its war in Ukraine and Iran over its nuclear programme. The overt linking of economic tools like sanctions and tariffs to defence objectives in Washington's recent national security strategy is another striking illustration of this.

Middle powers have traditionally not actively pursued economic statecraft to achieve their objectives. They have instead looked to secure a seat at key tables through cooperative participation in regional and multilateral forums. But some of these countries are now asserting their power more explicitly, through preemptive moves like Masga.

Using economic statecraft

Taiwan is perhaps the most obvious case of a middle power engaging in economic statecraft. The country has used its critical role in global semiconductor supply chains as leverage to protect itself against Chinese invasion. Former Taiwanese president Tsai Ing-wen referred to international reliance on the island's chip industry as a "silicon shield" in 2021.

Taipei imposes strict controls on tech sales and screens investment, particularly from China, to protect its position. And Taiwan's industry-leading firms, such as TSMC, also invest heavily to maintain their technological edge.

Vietnam offers another example. Consistent with its "bamboo diplomacy" foreign policy model, Hanoi hosts leaders from China, Russia and the US, seeking flexibility rather than rigid alignment. The aim is clear: to maximise Vietnam's national interests pragmatically and with autonomy.

With the world's sixth-largest reserves of rare earths, Vietnam is now looking to use critical minerals as a tool of economic statecraft. The government voted to ban rare-earth exports on December 11, citing the need to reorient the sector towards domestic processing and higher-value manufacturing rather than merely the export of basic raw materials.

Rare earths are essential components in numerous products that are central to our daily lives, including smartphones, semiconductors and electric vehicles. By restricting foreign access to these essential inputs, Vietnam is striving to secure its long-term position in the supply chains of highly in-demand resources.

Together, these cases show how economic statecraft is not only the preserve of great powers. Middle power states are selectively granting and restricting access to their economic strengths to reshape markets and security relationships. Korea's shipbuilding, Taiwan's chip production and Vietnam's rare earths illustrate this more assertive approach.

They are no longer confined to reactive measures or behind-the-scenes diplomacy in regional forums or multilateral negotiations. These states are proposing economic and military partnerships, as seen in initiatives such as Masga and Tsai's assertion that everyone needs to care about Taiwan, given how essential chips are to the world economy.

Great powers are taking notice. In October, HD Hyundai and US defence contractor Huntington Ingalls Industries announced they are together building next-generation navy vessels. This marks the first time a South Korean firm will build a US navy ship. And Washington has also reportedly been courting Hanoi with elevated diplomatic status and promises of mining support.

For other middle powers, the lesson is clear: identify and leverage the strategic economic strengths that other countries depend on.

Robyn Klingler-Vidra received a research grant from the Chiang Ching-kuo Foundation between 2019-2023.