Taiwan President Lai Ching-te last week outlined plans to invest an additional $40 billion (about €34.4 billion) of the special defense budget over the next eight years to develop an advanced defense system to counter China.
China, which views democratically ruled Taiwan as its own territory, has stepped up military and political pressure in recent years to assert its claim to the island.
In return, Lai has promised to increase Taiwan’s annual military spending to about 3.3% of gross domestic product (GDP) in 2026 – the highest since 2009 – and to 5% of GDP by 2030.
Highlighting the urgency of the situation, Lai pointed to Beijing’s goal of achieving “full unification with Taiwan by force by 2027.” The comment was later modified on official platforms and clarified to refer to Beijing’s “preparations” rather than the timeline confirmed by the presidential office.
Despite the confusion created by Lai’s speech in Taiwan, the United States has publicly welcomed the proposal. Despite not having formal diplomatic relations with Taipei, Washington is the island’s main security supporter and arms supplier.
Raymond Green, the de facto US ambassador to Taipei, said Washington supports Taiwan’s “rapid acquisition of significant asymmetric capabilities”.
In turn, Beijing condemned Taiwan’s ruling party for “opposing reunification and demanding independence using armed forces” and warned that this course is “doomed to fail.”
Taiwan’s budget plan – a message aimed at Washington?
Ding Shuh-fan, an honorary professor at National Chengchi University who specializes in East Asian international relations, said Taiwan’s new budget plan could be seen as a response to US President Donald Trump’s “holistic approach”. [and] Demands regarding Taiwan.”
Since Trump’s second term, Taiwan has faced increasing pressure from Washington to boost its self-defense.
Lai stressed that the $40 billion defense boost is a long-planned effort to deter Chinese aggression and has nothing to do with Taiwan-US trade talks or the recent phone call between US President Donald Trump and Chinese leader Xi Jinping. However, experts say the timing of the move is politically significant.
According to a report by Reuters news agency, Taiwan is currently negotiating with the US to reduce 20% tariffs on many exports and is discussing a deal that could commit Taiwan to invest more in US semiconductor capacity and send personnel to train US workers.
Before Lai’s announcement, China’s Xi Jinping held a phone call with Trump, during which Xi described Taiwan’s return to China as “an integral part of the post-war international order.”
Trump later said the talks with Xi were “very good” but did not mention Taiwan or echo Beijing’s language about the island.
While concerns have grown in Taiwan over whether the Trump administration could use it as leverage in dealings with Beijing, analysts say Taipei still holds the upper hand due to its strategic location and leading semiconductor industry.
“If President Trump were to ask Taiwan to ‘trade’ with China, the question would be what China could offer in return,” Ding said.
“The bigger concern will be how to ensure that US high-tech industries, including AI and semiconductors, are not harmed by such a deal,” he said.
What is T-Dome, part of Taiwan’s new air defense system?
One of the key features of the eight-year defense plan is a multilayered air defense network, known as T-Dome by the Taiwan government. The concept was first introduced during a presidential speech at the island’s National Day celebrations in October.
The system integrates advanced sensors, AI-enabled decision making and interception capabilities designed to detect and neutralize threats at high speed.
“The main reason is the emerging missile threat from China,” said Su Tzu-yun, director of defense strategy and resources at Taiwan’s National Defense and Security Research Institute.
Su said conventional ground-launched ballistic missiles give Taiwan about 10 minutes warning time, but new sea-based missiles from Chinese warships can reach Taiwan in as little as three minutes.
China, which has the world’s largest navy by number of warships, has continued to expand its fleet by prioritizing modern multi-role ships such as destroyers, cruisers, carriers and amphibious assault ships.
“With these new threats launched from the sea, Taiwan’s air-defense system must become more thorough and respond much faster,” he said.
Su argued that strengthening T-Dome not only enhances deterrence capabilities but also increases the risk to China’s People’s Liberation Army, making Beijing less likely to launch a military adventure.
Defense plan may face obstruction in Parliament
President Lai’s defense proposal still needs to be approved by Taiwan’s opposition-dominated legislature.
The opposition, including the main opposition party Kuomintang (KMT), have expressed strong concerns about increasing defense spending to a level equal to 5% of GDP.
KMT Chairman Cheng Li-wun recently warned that “excessive and unreasonable” military spending could strain the country’s finances and trigger an endless arms race.
Ding told DW that Lai was aware that the opposition would oppose the budget, so he made a deliberate move to publicly send a strong signal to Washington before the formal parliamentary presentation process.
“In fact, Lai has already made his position clear to the US,” Ding said. “How the opposition can try to block the plan in the legislature is so that the ruling party can say the onus is not on them.”
Edited by Carl Sexton