The process of formulating a national defense policy is very complicated, involving factors such as domestic military technology and the particular country's relationship with potential adversary and allied nations. The world's major military powers usually possess the full range of arms production capabilities, which results in greater independence in formulating a defense policy. Third-tier countries (TTCs), however, lack this extensive ownership of military technological capability, and must therefore depend on first- or second-tier countries' (FSTCs) exports, making it difficult to formulate a defense policy without interference from FSTCs. This study proposes a three-role model for the interaction between the ally, the potential adversary and the country. The vast influence of the interaction and changing roles of FSTCs on the defense policy of TTCs are analyzed based on this model. Taiwan is used here as a case study, to explore the dynamic relationship between Taiwan, its potential adversary (China) and its ally (the United States). After in-depth research of the evolving roles and interaction among the three countries over time, results show that the United States and China have greatly influenced the formulation of Taiwan's defense policy by playing different roles. Finally, the implications of the model are also discussed.