United States Secretary of State Marco Rubio wished Palau a happy Independence Day on October 1st, 2025, the 31st anniversary of the country’s establishment as an independent nation.
“On behalf of the United States of America, I congratulate the people of Palau as you celebrate 31 years of independence,” Rubio said. “The United States and Palau have worked together to ensure prosperity, peace, and security in the Indo-Pacific. Our decades-long partnership has been instrumental in managing regional and maritime security, while advancing economic development. Together, we have built a foundation of mutual respect and cooperation that will continue to grow in the years to come.”
U.S. and Palau together
Palau is one of three sovereign nations with Compacts of Free Association with the United States.
Palau was originally settled by sailors from Indonesia and was colonized by Spain in 1885 as part of the Spanish East Indies, which included the Philippines. After its defeat in the Spanish-American War, Spain sold Palau to Germany. Japan annexed Palau during World War II. In 1944, the United States took Palau and neighboring islands from Japan. The islands came under a U.N. trusteeship in 1947 and remained under U.S. administration until 1994, when the Palau islands declared independence.
Palau had gradually moved toward sovereignty and independence throughout the U.N. trusteeship, establishing a constitution and local government. In 1978, the citizens of Palau voted against joining the Federated States of Micronesia. In 1982, Palau and the United States signed a Compact of Free Association giving Palau economic support while providing the United States largely unfettered military access throughout the island. It took 12 more years for the two countries to ratify the details of their compact.
The Compact of Free Association guaranteed the U.S. defense rights and national security powers in Palau for 50 years, expiring in 2044. However, the economic provisions lasted for just 15 years. That expired in 2009 and was renegotiated by Palau and the United States.
An updated Compact of Association was agreed upon in 2010, but Congress did not fund it until 2018. A new updated compact was signed in 2024. U.S. national security authority in the region is expected to continue indefinitely.
Rubio, the son of Cuban immigrants, completed his message to the people of Palau by saying, “The United States appreciates Palau’s regional leadership and commitment to our shared priorities, and we look forward to continuing our long friendship.”
How is Palau doing as an independent nation?
Palau was classified as a high income nation by the World Bank in 2024. It’s economy is heavily reliant on tourism, a situation that China has reportedly exploited.
According to the U.S. Marine Corps University/Education Command, Palau averaged 634 Chinese tourists per year in 2008, accounting for less than 1 percent of all visitors. By 2015, this number had skyrocketed to 91,000 visitors, making up 54 percent of the nation’s total tourist population. However, in response to Palau’s continued recognition of Taiwan, the China banned state-backed package tours to Palau in 2017, and the COVID-19 pandemic further upended the nation’s tourism industry. Because 42.3 percent of Palau’s gross domestic product (GDP) comes from tourism, these travel disruptions created a significant economic impact on the country, from which it is still recovering.
Palau also relies on foreign aid from the United States, Australia, Japan, and other nations.
The Republic of Palau is a democratic country with a good record on human rights, currently graded higher than the United States in Freedom House rankings. However, reliance on foreign workers has occasionally led to exploitation of those workers.
Independence Day is celebrated in Palau each year on October 1 with community events, traditional dancing and music, and fireworks.
