This week, New Zealand is taking part in Talisman Sabre 2025, a major joint military exercise led by the United States and Australia and including key allies from across the Indo-Pacific. While New Zealand’s participation in this exercise is not new, this year it coincides with a significant shift in the country’s defence and foreign policy posture.
For decades, New Zealand has carefully maintained a balancing act between its security ties and values-based alignment with the US and its deep economic relationship with China. While there were signs of a strategic tilt towards Washington under the previous government, the current administration is pivoting more decisively through a series of new defence initiatives and closer alignment with US-led security frameworks. But this more assertive strategic positioning has not gone unchallenged.
Last month, the country’s former prime minister Helen Clark, alongside other senior political figures, issued an open letter to Prime Minister Christopher Luxon expressing concern about the government’s foreign policy trajectory. They warned that further alignment with initiatives like AUKUS Pillar 2 risks jeopardizing New Zealand’s diplomatic autonomy and its economic relationship with China, the country’s largest trading partner.
Their message underscores a broader unease: New Zealand is at risk of abandoning its carefully calibrated foreign policy in favour of a more militarized alignment that could constrain its autonomy and diminish its influence in the region.
New Zealand’s foreign policy shift
The strategic landscape in the Indo-Pacific is undeniably changing. The US has gradually reoriented its Indo-Pacific strategy over the past decade, intensifying diplomatic, military and economic engagement to counter China’s expanding regional influence. Key allies – notably Australia and Japan – have rapidly increased defence spending and tightened security cooperation.
Recently, New Zealand has also taken steps in this direction. Prime Minister Luxon was the only leader of the Indo-Pacific Four (IP4) countries to attend last month’s NATO summit, signalling New Zealand’s commitment to Euro-Atlantic defence frameworks. The government has also expressed interest in joining AUKUS Pillar 2 and is engaging in a series of new military partnerships with the US. These US-led initiatives aim to strengthen defence cooperation in space, naval warfare and supply chain resilience in preparation for potential conflict and competition with China.
New Zealand’s 2025 Defence Capability Plan, released in April, also has a clear strategic focus on China as the primary regional security concern. The plan outlines a near doubling of defence spending from just over 1 per cent of GDP to 2 per cent as well as an ambitious modernization of the armed forces. While previous defence reviews placed greater emphasis on humanitarian priorities such as climate change, this plan focuses squarely on hard security concerns.
Recent foreign policy decisions also signal a hardening posture towards China. New Zealand tightened military ties with the Philippines during a standoff with China, suspended funding to the Cook Islands over its strategic partnership with Beijing, and deployed naval vessels through the Taiwan Strait.
This shift has not gone unnoticed by China. The country’s ambassador to New Zealand warned last year that closer alignment with US-led initiatives like AUKUS would ‘inevitably’ have negative consequences for the bilateral relationship. China has also taken more aggressive measures towards New Zealand such as conducting live-fire exercises and deploying vessels to the Tasman Sea.
Risks and implications
The rationale behind New Zealand’s shift is understandable. It wants to maintain a secure Indo-Pacific, ensure technical interoperability with key partners and assert sovereignty in the face of regional power plays. But the strategic risks of overcommitting to US-led military frameworks are significant – and potentially self-defeating.
First, there is the economic risk. China remains New Zealand’s largest trading partner, ahead of Australia and the US. Unlike Australia, which has historically adopted a more hawkish approach towards Beijing, New Zealand’s economic and diplomatic policies have been built on a more nuanced strategy.
Joining agreements which are explicitly designed to counter China could jeopardize this relationship. New Zealand’s small size and economic exposure mean it may have fewer strategic options than larger allies. Simply put – the payoff is unlikely to be worth the price.
Second, New Zealand already benefits from integration into key intelligence and defence networks, such as the Five Eyes, The Five Power Defence Arrangements and the NATO IP4 dialogue. In seeking to join AUKUS Pillar 2, which centres on technology cooperation to advance interoperability and capability, the government risks undervaluing the longer-term tech benefits already available through existing security relationships. Strengthening existing mechanisms also offers a more balanced approach without the risks inherent in alignments like AUKUS, which China views as antagonistic.
Third, strategic overreach could alienate New Zealand from other regional actors. Many Pacific Island nations and Southeast Asian countries are pursuing hedging strategies, carefully balancing between Beijing and Washington. By visibly aligning itself with one camp, New Zealand risks losing credibility among partners who value neutrality and inclusive engagement. Its recent diplomatic tensions with the Cook Islands are a case in point.