Taiwanese President Lai Ching-te unveiled a US$40-billion supplementary defence budget last week, for the first time explicitly linking increased spending to growing military threats from Beijing.
The island’s Executive Yuan, or cabinet, greenlit the proposal, which would be Taiwan’s most significant mid-year defence expansion in more than a decade and push military spending to five per cent of GDP by 2030. Since 2016, Taiwan’s defence spending has hovered between 2–2.5 per cent of GDP.
The new defence spending would allow for the construction of a “T-Dome,” an “air defence system with high-level detection and interception capabilities,” according to the Taipei Times. Other budget priorities include Taiwan’s drone and counter-drone programs, an expanded early-warning system to track Chinese aircraft and vessels, bolstering cybersecurity and ‘information warfare’ units, and arms acquisitions from the U.S.
In an op-ed in the Washington Post, Lai framed the proposed investment — which would run from 2026–33 — as deterring aggression through preparedness.
On Wednesday, however, the opposition Kuomintang (KMT) and Taiwan People’s Party blocked the defence budget from being reviewed by the Legislative Yuan this week. The KMT’s caucus whip asked Lai to speak to the legislature and justify the spending.
If the fresh spending is ultimately approved, it may help Taiwan expedite a trade and tariff deal with the U.S.
Exports from Taiwan (besides semiconductors) remain subject to a 20 per cent U.S. tariff; Taipei is looking to get levies reduced to 15 per cent. Taiwan’s principal competitors, Japan and South Korea, have already finalized deals with Washington.
In a spot of good news for Taipei on Tuesday, U.S. President Donald Trump signed into law "The Taiwan Assurance Implementation Act," which requires the State Department to “review and report on” its guidance to federal agencies regarding the U.S.–Taiwan relationship at least every five years. The bill passed the House of Representatives by voice vote and received unanimous consent in the Senate.
Takaichi’s Taiwan tumult
Taiwan’s defence has been at the centre of an ever-escalating spat between China and Japan. The dispute — triggered by Japanese Prime Minister Takaichi Sanae’s November 7 comments that a Chinese invasion of Taiwan would constitute “a survival-threatening situation” for Japan — has dragged on for a month.
Beijing has banned imports of Japanese seafood, advised its citizens to avoid travelling to Japan, and postponed the release of Japanese films, among other measures. Additionally, on Tuesday, Chinese and Japanese coast guard vessels exchanged warnings in the East China Sea. Taiwan’s foreign minister said Tuesday the China–Japan relationship could take “maybe a year to stabilize.”
A call last week between Takaichi and Trump to discuss China and trade further muddied the waters: neither government released a readout, but The Wall Street Journal reported that Trump “advised [Takaichi] not to provoke Beijing on the question of Taiwan’s sovereignty,” for fear of scuttling a fragile China–U.S. trade detente. Tokyo rejected this characterization of the call.
Despite diplomatic tumult, Takaichi’s parliamentary prospects improved last week: three lower-house members dissolved their caucus and joined Takaichi’s Liberal Democratic Party (LDP), delivering her coalition a razor-thin majority. (The LDP does not, however, boast a majority in the upper house.)
