Taiwan

A Pacific island has become one of the biggest economic success stories of the year so far.

Taiwan has witnessed a dramatic boom in recent months driven by the mania for artificial intelligence (AI). Earlier this year, its stock exchange soared to become the fifth largest in the world based on market capitalisation, the value of its publicly traded shares, overtaking the United Kingdom, Canada and India.

Much of that upward momentum has been driven by AI and other technology exports highly sought after by the United States.

Last year, the US imported $201bn worth of goods from Taiwan, nearly double its rate from 2024, when it acquired $116bn in imports. In May, Taiwan eclipsed China to become the third-largest source of US imports, after Mexico and Canada.

Experts have described Taiwan’s market acceleration as a return to its status as a “tiger economy” — a term used to capture surging growth in East Asia. Much of the credit, they say, falls to its flourishing technology sector.

“Artificial intelligence helps explain the rising importance of Taiwan,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.

But critics warn that, while Taiwan’s market remains strong, factors like tumultuous international relations, as well as demographic concerns, could complicate the island’s long-term outlook.

“It seems to be a win-win for now,” said Reza Hasmath, an academic faculty adviser at The China Institute at the University of Alberta. “But Taiwan is just postponing a reality that’s not sustainable.”

An economic boom

Taiwan’s thriving export market helped boost its gross domestic product (GDP) to 8.63 percent in 2025.

That rocket-ship trajectory continued into the first quarter of this year, when the GDP saw an exhilarating 13.69 percent rise.

Government data released on Friday showed that the island is continuing that momentum, with its economy growing an impressive 12.92 percent in the second quarter of the year, which ended in June.

“The GDP growth is going like gangbusters,” said Dexter Tiff Roberts, nonresident senior fellow at the Atlantic Council’s Global China Hub.

Roberts expects the trend to be “long term”, as Taiwan produces about 90 percent of the advanced chips used to power leading AI models.

“That’s not going to go away. We know the world, and the US, needs this,” he added.

While the AI boom is a global phenomenon, the US has become a major market for such chips, with billions of dollars flowing into the industry each year.

US President Donald Trump, meanwhile, has pledged to bolster his country’s status as “the world leader in artificial intelligence”. His administration has claimed to attract more than $2.7 trillion in tech and AI investments since the start of his second term.

To secure US access to Taiwan’s cutting-edge semiconductor technology, the Trump administration signed an agreement under which Taiwan will invest $500bn in the US.

Half of that amount is expected to come in the form of direct investments by Taiwanese semiconductor and tech firms, including through the development of onshore tech manufacturing.

The rest is largely comprised of credit guarantees for additional investments from Taiwan in the US.

Under the agreement, Taiwanese firms would be allowed to import 2.5 times the capacity of their US factories, without fear of steep tariffs.

In a subsequent trade agreement, Taiwan agreed to reduce its tariffs on 99 percent of US exports.

Taiwan has also boosted its tech exports to the US through investments in nearby Mexico, with cross-border plants manufacturing inputs for data centres in Texas.

‘Unbalanced relationship’

But Hasmath, the faculty adviser at the University of Alberta, warns that there are troubling signs on the horizon for Taiwan-US relations.

Trump has long sought to eliminate trade deficits with US economic allies, and he has lashed out at countries that export more to the US than they import.

Hasmath pointed out that Taiwan is building a robust trade surplus with the US, close to $200bn and counting. That could spark a backlash.

“This is an unbalanced relationship and not conducive to Taiwan in the long term,” Hasmath warned.

Trump will not tolerate a hefty trade surplus for long, he added. Hasmath believes the US president will soon look to renegotiate his country’s deals with Taipei.

Roberts at the Atlantic Council, meanwhile, warned that Trump is “mercurial” — and with such a temperament comes “uncertainty”.

Then there’s the question of political upheaval in the US. Trump’s approval ratings are low, and he is ineligible under US law to run for a third term as president.

Demographic problems

While Taiwan’s economic boom is “very real” and “very obvious”, Roberts said there are clear vulnerabilities even on the domestic front.

Taiwan’s traditional export sectors like plastics and textiles are underperforming. Plus, Roberts pointed out that only a small fraction of the Taiwanese population is involved in the AI sector.

“A majority of the younger population is not in hi tech, so that’s a real problem,” he said.

While the booming stock market has sparked a “wealth effect” — those with rising portfolios feel richer and are more inclined to spend — that helps the wider population only to an extent.

With most of Taiwan’s employment concentrated outside of the AI sector, economists have warned that the island could develop what’s called a K-shaped economy, where the wealthy see growth, while the poorer segments of society stagnate or decline.

The chip industry employs up to 350,000 people at most, experts say.

Meanwhile, TSMC, Taiwan’s biggest chip company, makes up to 40 percent of the stock market and provides four percent of the island’s GDP growth. That lopsided proportion is “unsustainable”, according to Hasmath.

Plus, Taiwan has a rapidly ageing population, with roughly a fifth of its population over the age of 65.

The island also has other vulnerabilities. For example, it relies heavily on foreign imports of energy products, particularly oil, and has struggled with water scarcity.

Then, there’s the superpower next door: China. The government in Beijing considers Taiwan, a self-governing island, as its own territory, and it has taken aggressive measures to limit the island’s ability to establish diplomatic relations of its own.

That conflict has added fuel to the debate around Taiwan’s growth, with a spokesperson for the Chinese government reportedly saying the island’s growing proximity to the US tech sector will “drain Taiwan’s economic interests” and “hollow out” the country’s major industry.

Hasmath said that, if the AI boom backfires on Taiwan, all of that ultimately adds up to a “recipe for electoral change, a shift in government” in Taipei.

Taipei, Taiwan – China’s coastguard and civilian fleet are expanding their presence in the waters east of Taiwan, raising fears that Beijing may be rehearsing a containment strategy that would cut off the self-ruled island from outside trade and assistance.

Through June and July, China’s Maritime Safety Administration and coastguard staged multiple patrols and “special maritime law enforcement operations”, according to official government announcements.

While China regularly patrols the Taiwan Strait – the waterway with an average width of about 180km (112 miles) separating coastal China from the main island of Taiwan – this marks the first time the patrols have moved east of Taiwan in such quick succession, according to analysts.

K Tristan Tang, a nonresident fellow at the United States-based National Bureau of Asian Research, said the shift carries both strategic and symbolic weight for Taiwan.

“Beijing is signalling that it wants to extend its claimed administrative jurisdiction to Taiwan’s eastern waters, effectively surrounding Taiwan rather than only eroding Taiwan’s space in the strait,” Tang told Al Jazeera.

“Law enforcement operations” have included patrolling the area and requesting information from commercial vessels about their origin and destination, according to Taipei.

The shift east has also occurred amid a greater uptick in Chinese maritime activity around Taiwan and its outlying islands. Taiwan reported 55 sightings of Chinese coastguard and research vessel activity in June, up from 30 sightings in May.

These sightings included Chinese activity near the uninhabited Taiwan-controlled Dongsha Islands, also known as the Pratas Islands, in the South China Sea.

Beijing has said the operations are a response to talks between Japan and the Philippines to set their maritime boundaries, which infringe on “territorial sovereignty as well as its maritime rights and interests”, according to Chinese state media.

Some of the waters around southern Japan and the northern Philippines overlap with Taiwan’s Exclusive Economic Zone (EEZ), which extends 200 nautical miles (370km) from its coastline.

On July 4, China’s coastguard announced that law enforcement activities to the east of Taiwan would continue to “firmly safeguard China’s territorial sovereignty and maritime rights and interests”.

China claims Taiwan as a province – which means it also views Taiwan’s EEZ as under its jurisdiction. It also claims large swaths of the nearby South China Sea and East China Sea, some of which are disputed by Japan, the Philippines, Vietnam, Malaysia, Indonesia and Brunei.

China’s Ministry of Foreign Affairs has previously told reporters that its activities near Taiwan are “legitimate actions to exercise China’s jurisdiction, safeguard regional stability and uphold order at sea in accordance with the law”.

The Chinese embassy in Washington, DC did not immediately respond to Al Jazeera’s request for comment.

‘Grey zone’ tactics

Ray Powell, founder and director of Sea Light, a maritime transparency project based at Stanford University, said he views the uptick in patrols as part of China’s “boa constrictor strategy that intends to squeeze Taiwan one coil at a time”.

China has pledged to annex Taiwan by peace or by force, and it employs a variety of pressure tactics, from cutting off access to international spaces such as the World Health Organization, drone and fighter jet incursions, to alleged cyberattacks, according to Taiwan’s National Security Bureau.

Known as “grey zone” tactics, these manoeuvres are designed to strain Taiwan’s limited resources and damage morale in order to convince its 23 million people that annexation is inevitable, according to Taiwanese officials.

Security analysts like Powell have warned that “law enforcement” activities could quickly escalate into a blockade or quarantine. Taiwan is particularly vulnerable to this type of pressure as an island that imports nearly all its energy supplies.

“One day we could look back at this and say this was in some ways the start of the quarantine,” he told Al Jazeera.

“Today it’s radio challenges; what is the next stage after that? When do we start to see them stop and inspect ships or reroute them? It’s not a very big step to start squeezing Taiwan on things it needs, like LNG,” Powell said.

China has already signalled that a blockade could be on the table in the future. Since 2022, Beijing has regularly staged large-scale military exercises in the Taiwan Strait, including a simulated blockade of the island during its last round of exercises in December.

While coastguard activity is more low-profile than a naval patrol, Chauluen Lin, an expert in asymmetric warfare at Taipei’s Institute for National Defense and Security Research, told Al Jazeera the fleet could be considered a “second navy”.

China’s coastguard is not a civilian police force, as it falls under the jurisdiction of the Central Military Commission as a division of the People’s Armed Police.

China’s coastguard patrols have been unusual enough to elicit a rare joint response from the United Kingdom, Germany and France, who said in late June that the “actions threaten regional stability and the freedom of navigation and safety of international shipping”.

“We reiterate our opposition to any unilateral change to the status quo, particularly by threat or use of force or coercion,” the statement said.

US Secretary of State Marco Rubio said last week that Washington disagrees with the expanded patrols and that they undermine regional stability.

A distracted US

William Yang, the Crisis Group’s senior analyst for Northeast Asia, told Al Jazeera that Beijing may be taking advantage of a US distracted by the war in Iran and a president who appears ambivalent towards Taiwan.

Although the US does not recognise Taiwan as a country, it has pledged to help the island defend itself. Much of this assistance has come in the form of weapons sales, training and intelligence sharing.

US President Donald Trump also cast doubt on these commitments when he said US weapons sales could be a “negotiating chip” with China following a meeting with Chinese leader Xi Jinping in May.

“The external environment has fundamentally changed in the Indo-Pacific region, at least from their perspective, with Washington very focused and tangled up in the Middle East,” Yang said.

“At the same time, the US has no bandwidth to really look at or respond to such an expansion of Chinese maritime operations in these sensitive waters,” he added.

Published on
16/07/2026 – 14:24 GMT+2

TSMC posted a record quarterly profit on Thursday and raised its revenue outlook as booming demand for artificial intelligence chips continued to fuel growth at the world’s largest contract chipmaker.

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Taiwan-based TSMC reported earnings of $4.31 per share for the April-June quarter, beating analysts’ expectations.

Revenue came in at $40.2 billion (€36.8bn), above analysts’ estimates of $39.63 billion (€34.6bn).

In local currency, net profit reached a record NT$706.6bn (€19.1bn), up 77% from a year earlier, while revenue climbed 36% to NT$1.27 trillion (€36.8bn), as appetite for the advanced chips TSMC makes for customers such as Nvidia and Apple showed no sign of cooling.

Given that it manufactures semiconductors for almost every major chip designer, the Hsinchu-based firm’s results are closely read as a gauge of the wider sector and of broader AI demand itself, just as investors fret over a possible bubble.

CEO Che-Chia Wei described global AI-related demand as “extremely robust” and said he expected it to remain very strong until around 2029 or 2030. On that basis, TSMC now forecasts 2026 revenue growth of slightly above 40% year on year, up from its previous guidance of more than 30%.

Thursday’s figures confirmed what monthly sales data had already suggested.

As reported on Monday, June revenue jumped 67.9% year on year, and first-half sales rose 35.6% from the same period in 2025, slightly ahead of analysts’ consensus forecasts for the quarter.

TSMC shares rose about 1% after the earnings release but later pared those gains as a sell-off in AI-related shares weighed on benchmarks across Asia during Thursday’s session.

Expanding US manufacturing

Alongside the results, TSMC said it would spend an additional $100 billion (€87.4bn) to expand its manufacturing capacity in the US, on top of the $165 billion (€144bn) already committed to building six fabrication plants in Arizona.

The move would bring the company’s total US investment pledges to around $265 billion (€231bn).

The fresh funds are expected to fund four further Arizona plants dedicated to the most advanced chips, those of 2 nanometres and below, and are intended to “support the strong multi-year demand” from the company’s leading American customers, CEO Che-Chia Wei said during the firm’s earnings conference.

TSMC also said it would spend more this year than previously planned, increasing its capital expenditure budget to between $60 billion (€52.4bn) and $64 billion (€55.9bn), up from an earlier range of $52 billion (€45.4bn) to $56 billion (€48.9bn).

The announcement follows a trade agreement struck earlier this year between the Trump administration and Taiwan, under which Taiwanese companies committed to invest at least $250 billion (€218bn) in the US technology sector inreturn for lower tariffs.

Additional sources • AP

Published on
13/07/2026 – 12:23 GMT+2

TSMC said on Monday that June revenue rose 67.9% year on year to NT$398.27 billion (€10.8bn), bringing the first-half of the year revenue to NT$2.4 trillion (€65.4bn), a 35.6% increase from the same period in 2025.

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Based on the company’s monthly revenue disclosures, second-quarter revenue amounted to roughly NT$1.27 trillion, ahead of the NT$1.264 trillion (€34.4bn) consensus forecast from 20 analysts surveyed by LSEG.

Monday’s release covers June revenue and cumulative first-half sales only.

TSMC will publish its full second-quarter earnings on Thursday, including net profit, gross margin, operating margin and updated financial guidance.

The road ahead

At its April earnings presentation, TSMC said it expects full-year 2026 revenue to grow by more than 30% in US dollar terms and projected capital expenditure of between $52 billion (€45.5bn) and $56 billion (€49bn) as it expands manufacturing capacity to meet AI-driven demand.

New fabrication plants are under construction or in preparation in Arizona, Japan and Germany, reflecting both the scale of customer demand and government efforts to strengthen domestic semiconductor manufacturing.

Shares in TSMC rose about 1% following Monday’s revenue update.

Investors will now turn their attention to Thursday’s full earnings report for updates on profitability, margins, full-year guidance and the rollout of the company’s two-nanometre manufacturing technology, which is already attracting strong customer interest.

The AI engine

The company sits at the centre of one of the largest investment cycles in the semiconductor industry’s history.

Many of the world’s leading AI processors, including Nvidia’s GPUs and much of the custom AI silicon designed by Amazon, Google and Microsoft, are manufactured by TSMC in Taiwan.

At the company’s April earnings presentation, CEO Che-Chia Wei described AI demand as “extremely robust”, driven by the shift from chatbots that answer questions to agentic AI systems capable of taking actions.

That transition requires significantly greater computing power, increasing demand for the advanced chips TSMC manufactures.

Advanced technologies, defined as chips produced using process technologies of seven nanometres or smaller, accounted for 74% of wafer revenue in the first quarter.

TSMC’s three-nanometre technology alone contributed 25% of wafer revenue.

Reports have indicated that Nvidia has reserved roughly 60% of TSMC’s advanced chip-packaging capacity for 2026, highlighting continued supply constraints across the AI semiconductor market.

Typhoon Bavi brought heavy rain and powerful winds to Japan’s southern islands while skirting Taiwan, where rough seas, fallen trees and localized damage were reported.

Despite the storm, residents in Keelung ventured out to markets as Bavi weakened while tracking toward China’s east coast, where landfall is expected on Sunday.

July 10 (UPI) — Typhoon Bavi weakened as it moved off the Philippines on Friday but was expected to bring heavy rain to Taiwan and parts of Japan before it makes landfall in China.

Bavi, which was called Inday in the Philippines, killed at least 15 people after heavy rains caused flash floods and landslides in several villages and cities, and affected tens of thousands of people there, The BBC and The Philippine Star reported.

The typhoon on Friday brought storm surge and rain to Okinawa, Japan, and was expected Saturday to pound the north and east sides of Taiwan, potentially bringing nearly 40 inches of rain in some areas.

Once past Taiwan, the storm could make two landfalls in China, part of which is still recovering after Typhoon Maysak earlier this week.

Maysak’s havoc is linked to at least 39 deaths, though searches were underway for people reported missing.

Hundreds of flights in Japan, including Okinawa and the Sakishima Islands, were canceled on Friday and Saturday as residents braced for Bavi’s pounding rain.

Forecasters in China warned of two potential landfalls as it moves toward the north, noting that Bavi’s size — at it’s widest point, the typhoon is as wide as France — means that both its remnants and outer rain bands are likely to affect a huge swath of people and property.

Beijing’s new ethnic unity law has taken effect. It strengthens Mandarin’s position as the primary language of education, official business and public spaces across China.

The government says the law’s provisions on social cohesion and preventing separatism benefit everyone.

But activists abroad say it will further erode the rights of groups such as Uighurs and Tibetans. They are also warning against a clause that states China can take action against those who violate the law outside of the country.

Taiwan has echoed this criticism. Its government warns the law could be used to target people there who are critical of Beijing.

Presenter: Mohammed Jamjoom

Guests:

• Einar Tangen – Senior fellow, Centre for International Governance Innovation
• Zumretay Arkin – Vice president, World Uyghur Congress
• William Yang – Senior analyst for Northeast Asia, International Crisis Group

The de ​facto US ambassador Raymond Greene says drones represent a ‘game-changing opportunity’ to enhance Taiwan’s security.

Taiwan needs a “hornet’s nest” of drones to help deter conflict and provide security, says the top United States ⁠diplomat to the self-governing island that China claims as part of its territory.

Speaking at a forum on drones in the central city of Taichung, Raymond Greene, director of the American Institute in ‌Taiwan and the de facto US ambassador, said on Thursday that drones represented a “game-changing opportunity” to enhance Taiwan’s security and reinforce peace in the broader region.

The US, Taiwan’s most important international backer and arms supplier despite their lack of formal diplomatic ties, has strongly supported the government’s military ⁠modernisation plan and increased defence spending.

Taiwan has said it needs to bolster its defences in the face of a stepped-up threat from China.

China regards Taiwan as part of its territory and opposes Washington’s continued, though informal, backing of Taipei.

The US and Taiwan can anchor “democratic” drone production and strengthen the collective deterrence posture of the free world, Greene said.

“Fortunately for Taiwan, drones have significantly boosted defenders, even when facing overwhelming odds,” he added, referring to the war in Ukraine.

“Nothing will deter conflict more effectively than turning Taiwan into a hornet’s nest ⁠of air, surface and subsurface drones.”

While Taiwan’s government has prioritised drones ⁠and other asymmetric military systems, in May, the opposition-dominated parliament passed only two-thirds of the $40bn in extra defence spending that President William Lai Ching-te had asked for, earmarking funds only for US arms.

The government has now proposed a new 210 ⁠billion Taiwan dollars (US$6.59bn) package to pay for surveillance, coastal attack and small unmanned surface drones through the end of 2031.

However, in May, a senior US military official said Washington was putting a $14bn arms sale to Taiwan on hold to preserve munitions for the US-Israel war against Iran.

The Kuomintang (KMT), Taiwan’s main opposition party, this ⁠week proposed its own drone legislation with a spending cap ⁠set at 240 billion Taiwan dollars (US$7.5bn) over six years and annual spending capped at 40 billion Taiwan dollars (US$1.25bn).

Its plan would fund drones from the main budget rather than a special budget, which is what the government wants.

On Wednesday, Lai ‌called the need for drones pressing.

“Facing changes in the geopolitical situation and the evolution of modern warfare, building asymmetric combat capabilities is a national defence project that is a race against ‌time,” ‌he said at a meeting of his Democratic Progressive Party.

Lai rejects Beijing’s sovereignty claims, saying only the island’s people can decide their future.

China officially objected through its Foreign Ministry to the Japanese draft resolution to increase armaments and abandon Japan’s post-World War II commitment not to rearm its military, as approved by the Liberal Democratic Party of Japan during its general council meeting. The draft resolution proposed amending three key security documents, which are the National Security Strategy, the National Defense Strategy, and the Medium-Range Defense Forces Enhancement Plan. It was to be submitted to the Japanese government and parliament for further discussion. Chinese authorities officially rejected and objected to the draft, deeming it a threat to their national security and their spheres of direct influence in Taiwan, the South China Sea, and the Indo-Pacific region. They considered it a radical escalation of Japan’s security strategy, detrimental to Chinese national security and to the global security initiative proposed by Chinese President Xi Jinping.

Here, the revision of Japan’s three security documents, represented in the National Security Strategy, National Defense Strategy, and Defense Force Enhancement Plan, represents a strategic shift away from its post-war pacifist constitution toward more proactive and independent military policies. The nature of this shift is evident in Tokyo’s easing of restrictions on lethal weapons exports and its reorientation of its armament toward counter-offensive capabilities and missile development. Under Prime Minister Sanae Takaichi’s administration, the Liberal Democratic Party of Japan has adopted a proactive approach, reshaping Japanese industries and institutions to address the greatest strategic challenge posed by China. The updated National Security Strategy has already fundamentally altered the country’s pacifist military doctrine by disarming the Japanese military and preventing its rearmament since World War II, a move that has drawn staunch opposition from China, which seeks to protect its own national security. The most significant amendments to the three Japanese security documents included Japan’s acknowledgment of its ability to double and enhance its counter-strike capabilities. This was achieved by allowing Japan to possess long-range missiles capable of striking enemy targets before launch. Simultaneously, Japanese authorities approved doubling defense spending, raising the military budget to 2% of GDP.

China objected to the Japanese draft resolution, which aimed to increase Japanese armament and militarize the region and global supply chains, and threatened to escalate the situation. Beijing strongly condemned these trends, describing them as new militarism. A key point of contention for China was what Chinese intelligence and military circles perceived as a warning of Japanese and foreign interference in Taiwanese affairs, as China considers Taiwan an integral part of its territory. Beijing condemned the Japanese leadership’s statement that any emergency in Taiwan is an emergency for Japan, describing a potential Chinese military intervention in Taiwan as an act of aggression. Here, Beijing rejects Japan’s new military approach, characterized by advanced military deployment. China has officially protested and taken countermeasures against Japan’s plans to deploy defensive missiles on Yonaguni Island, located only about 110 kilometers from Taiwan. China has strongly accused Japan of violating its commitments, arguing that this new Japanese military expansion violates Tokyo’s international obligations and its pacifist constitution. China has warned Japan that it will pay a heavy price if it intervenes militarily in the Taiwan Strait.

Chinese intelligence, military, security, and defense circles link Japan’s armament activities in Taiwan to American interference in Chinese affairs through its network of allies in the Asian region, such as Japan, given its close alliance with Washington. Here, Japan defends its military rearmament against China, with several of its officials sending political and security warnings to China. They argue that, given the uncertainty in Japan stemming from US policies and the fluctuating stance in Washington, Japan seeks to bolster its own capabilities and build regional alliances (with the Philippines, Australia, and NATO) to expand deterrence against Beijing and maintain regional security from a Japanese perspective. Strategic circles in Tokyo view the potential fall of Taiwan to China as a direct and existential threat to Japanese national security and vital shipping lanes, making the protection of the Taiwan Strait a fundamental component of Japan’s updated defense doctrine.

For these reasons, China’s decisive response was seen as a challenge to its national security, especially given Japan’s de facto official classification of Beijing as the greatest and most unprecedented strategic challenge to its security. This classification was further reinforced by Japanese authorities’ approval of developing military production, strengthening domestic defense industries, and easing restrictions on arms exports. This is where the dimensions of China’s official rejection and objection lie, as it is considered a violation of the pacifist principle enshrined in the Japanese military doctrine, which was internationally and regionally agreed upon after World War II for Japan’s disarmament. Beijing believes that Tokyo is abandoning its pacifist constitution and returning to a militaristic path, while Japan exaggerates the narrative of a China threat. Beijing accuses Japan of fabricating flimsy pretexts to justify its military expansion and arsenal, which threatens China’s regional security. Therefore, China warned that these Japanese steps to increase armament undermine peace and stability in the Asia-Pacific region and jeopardize the principles of China’s global security initiative. China also registered its objection to Japan’s exclusionary approaches to its initiative based on shared and sustainable security. Furthermore, China linked this Japanese escalation in its confrontation with China in the region to the sensitive issue of Taiwan and the close alliance between the United States and Japan, while categorically rejecting Japanese interference in Taiwan’s affairs and considering the island’s security an integral part of China’s national security.

Taiwan has accused China of carrying out a “provocative act” after Chinese Coast Guard vessels conducted patrols in waters east of the island. The operation followed announcements by Japan and the Philippines that they would begin formal talks on maritime boundary delimitation, a move Beijing views as involving waters linked to Taiwan.

Chinese state media described the deployment as a special maritime law-enforcement operation. Taiwan responded by dispatching Coast Guard vessels, which reportedly warned the Chinese ships away from restricted waters. Defence Minister Wellington Koo characterized the patrols as both a challenge to Taiwan’s sovereignty and an example of “cognitive warfare” aimed at reshaping perceptions of territorial control.

The incident comes amid sustained Chinese military activity around Taiwan, including frequent air and naval operations. Taiwan is also monitoring the movements of the Chinese aircraft carrier Liaoning, which is operating in the Western Pacific near waters east of the Philippines.

Why It Matters

The patrols represent more than a routine maritime operation. They signal China’s growing willingness to extend its presence beyond the Taiwan Strait and into areas east of Taiwan that have traditionally been viewed as strategically important for the island’s defence.

The move also demonstrates Beijing’s opposition to emerging regional cooperation among U.S. partners and allies. The maritime boundary discussions between Japan and the Philippines reflect increasing efforts among regional states to clarify maritime rights and strengthen coordination in contested waters.

For Taiwan, Chinese Coast Guard activities present a complex challenge. Unlike military operations, law-enforcement patrols operate within a legal grey zone that allows Beijing to advance territorial claims without triggering a conventional military confrontation. Such actions can gradually normalize China’s presence in disputed areas while increasing pressure on Taiwan’s security apparatus.

The incident further highlights the growing integration of maritime, legal, and information-based strategies in China’s approach to territorial disputes across the Indo-Pacific.

Stakeholders

Taiwan

• Protecting maritime sovereignty and territorial claims.
• Maintaining freedom of navigation and security in eastern waters.

China

• Expanding operational presence around Taiwan.
• Reinforcing sovereignty claims through maritime law-enforcement activities.

Japan

• Engaged in maritime boundary discussions with the Philippines.
• Monitoring Chinese activities that could affect regional security.

Philippines

• Seeking greater legal clarity over maritime boundaries.
• Increasing security cooperation with regional partners.

United States

• Maintaining stability in the Taiwan Strait and broader Indo-Pacific region.
• Supporting freedom of navigation and regional deterrence efforts.

Regional Security Partners

• Including Australia and other Indo-Pacific states concerned about changing maritime dynamics.

Strategic Implications

The patrols illustrate China’s increasing reliance on so-called “grey-zone” tactics, which fall below the threshold of open military conflict while steadily advancing strategic objectives. By deploying Coast Guard vessels rather than naval forces, Beijing can challenge Taiwan’s authority while reducing the risk of immediate military escalation.

The incident also reflects the expanding geographical scope of cross-strait competition. Traditionally concentrated in the Taiwan Strait, tensions are increasingly extending into the Western Pacific, where control of maritime approaches carries significant strategic value for both China and Taiwan.

Furthermore, the timing of the operation suggests that Beijing is seeking to influence regional maritime diplomacy. By responding directly to Japan-Philippines boundary discussions, China is signaling its opposition to initiatives that could strengthen legal and political frameworks contrary to its territorial claims.

The episode reinforces concerns among regional governments that maritime disputes are becoming increasingly interconnected, linking Taiwan, the East China Sea, and the South China Sea into a broader strategic contest.

What’s Next?

Several developments warrant close attention in the coming weeks:

• Taiwan is likely to increase coordination between its military and Coast Guard to strengthen maritime surveillance and response capabilities.
• China may continue deploying Coast Guard vessels east of Taiwan as part of a sustained effort to normalize its operational presence in the area.
• Japan and the Philippines are expected to proceed with maritime boundary discussions despite Beijing’s objections, potentially drawing further diplomatic responses from China.
• Increased activity by the Liaoning carrier group could provide additional indications of China’s broader military objectives in the Western Pacific.
• The United States and regional partners may intensify maritime monitoring and security cooperation to deter unilateral attempts to alter the status quo.

Future outcomes

The incident reflects a broader shift in regional security dynamics, where maritime law-enforcement operations are increasingly being used as instruments of strategic competition. Rather than relying solely on military pressure, China is employing a combination of legal, political, and operational tools to reinforce its territorial claims and shape the regional security environment.

For Taiwan, the challenge extends beyond the immediate presence of Chinese vessels. The longer-term concern lies in preventing the gradual normalization of Chinese activities in areas that Taipei considers vital to its sovereignty and security. As regional actors deepen cooperation on maritime governance and security, incidents of this nature are likely to become an increasingly important indicator of the evolving balance of power in the Indo-Pacific.

With information from Reuters.

A swarm of drones lit up the evening sky near Taiwan’s Taipei 101 skyscraper in a dazzling display depicting a giant robot, a sports car, and Earth. The light show was part of Computex Taipei, one of Asia’s largest technology exhibitions.

Nvidia is set to bring artificial intelligence to laptop and desktop computers with brands like Microsoft and Dell later this year as the US tech giant broadens its AI presence.

The Santa Clara, California-based AI chipmaker unveiled on Monday at its annual Nvidia GTC event in Taipei new powerful chips that would bring advanced AI functions to laptops and desktop computers.

CEO Jensen Huang said that the new development is “going to reinvent the PC [personal computer]”.

The changes come amid three years of collaboration between Microsoft and Nvidia and pit the latter against companies like chipmaker Advanced Micro Devices and personal computer brands Intel and Apple.

“This is going to be the new PC,” Huang said as he unveiled Nvidia’s RTX Spark superchip — which combines CPU, or central processing unit, and GPU, or graphics processing unit, capabilities — that would power new Windows laptop and desktop computer models in what the company called “AI personal computers”, expected to debut in the fall of this year.

The chip, developed with Taiwan’s MediaTek, will be in compact desktops from Dell, HP, Lenovo, ASUS, Microsoft Surface and MSI, with models from Acer and GIGABYTE to follow.

Nvidia, which is already the world’s most valuable company, said the reinvention will be for creating and gaming.

“When it has an autonomous [AI] agent, an agent that’s helping you, that understands you, you could talk to it. It could look at you. You could ask it to read files, go help you do some research. It could do a lot more,” Huang said.

Microsoft said in a separate statement that the personal computers running on Nvidia’s RTX Spark superchips would be able to support “highly capable AI models” and complex workloads. With the new superchips, these personal computers can run AI agents locally, Nvidia said.

“This is the first across the lineup of PC reinvention for 40 years,” Huang said.

Nvidia’s move is significant at a time when demand is growing for the use of personal AI agents, said Lian Jye Su, chief analyst at the technology research and advisory group Omdia.

“For consumers, it means more choices, which is always a good thing,” Su said.

Neil Shah, analyst and co-founder of Counterpoint Research, described Nvidia’s announcement as a move that’s “revolutionising how PCs would look like in the next 10 years”.

The new laptops and desktop computers “will drive agentic AI applications in every home”, Shah said, with an aim of having an “AI supercomputer” in each household.

Also during Monday’s speech, Nvidia’s Huang said its new Vera CPUs for data centres are in full production and are “going to be our new major growth driver” on the boom of AI agents, with early customers including Anthropic, OpenAI and SpaceXAI.

Huang also revealed a humanoid robot reference design that could act as a blueprint for future research, especially within the higher education sector. Nvidia said its “Isaac GR00T” stands nearly 1.83 metres (6 feet) tall and has the humanoid chassis of Chinese robot maker Unitree’s H2. It is equipped with five-fingered dexterous hands, made by Singapore-based robotics startup Sharpa, that are capable of finely controlled movements.

Reception for AI PCs has been mixed so far. HP reported last week that the devices helped prop up quarterly sales, but Dell said earlier this year that demand had fallen short of initial expectations. Qualcomm, looking to capitalise on AI demand, has also been offering AI PCs with Microsoft.

On Wall Street, Nvidia stock rose nearly 4 percent on the news in midday trading. Microsoft ticked up 2.5 percent and Dell surged 9.3 percent. Competitors AMD and Intel, on the other hand, are on the decline. AMD is down 0.1 percent from the market open, and Intel is down by 2.5 percent.

Nvidia’s (NVDA) CEO Jensen Huang said the company plans to invest about $150B a year in Taiwan while announcing a new expanded campus in Taipei.

“Four years ago, five years ago, Nvidia was spending about 10, 15 billion dollars a year in Taiwan. Now

Taipei, Taiwan – For Li, an engineer at Taiwanese computer giant ASUS, the AI boom sweeping Taiwan has made it an exciting time to work in tech.

Taiwan is a semiconductor powerhouse, producing about 90 percent of the most advanced chips used to power leading AI models such as ChatGPT and Claude.

“I’ve felt Taiwan’s tech and computer industry becoming more vibrant,” Li, who asked not to be identified by his real name, told Al Jazeera, pointing to events such as the upcoming Computex tech and AI expo running from June 2 to 6.

Still, Li worries that the spoils of Taiwan’s AI windfall are not being shared equally.

“Most industries unrelated to tech don’t seem to be feeling the benefits, so it doesn’t feel evenly distributed at the moment,” Li said, explaining that many of his former classmates working outside of tech do not appear to be doing as well.

“It’s mainly the industries at the front of this tech wave that are benefitting.”

Taiwan’s economy is growing at a pace that would be the envy of any country.

Gross domestic product (GDP) rose 8.63 percent in 2025, followed by a heady 13.69 percent expansion in the first three months of this year.

Exports surged 34.9 percent last year to $640.7bn, with more than two-thirds of the total being tech-related goods and services.

Semiconductors alone account for more than 20 percent of Taiwan’s GDP, according to US trade data, with the vast majority of production handled by Taiwan Semiconductor Manufacturing Company (TSMC), whose top customers include Nvidia and Apple.

TSMC by itself accounts for more than 40 percent of the value of the island’s stock market.

While impressive, the rapid economic expansion has raised concerns about being overreliant on the growth of AI.

Taiwan’s Central Bank Governor Yang Chin-lung has sounded the alarm about an emerging “K-shaped economy,” where certain sectors grow rapidly while others fall into stagnation.

While critical to Taiwan’s economy, the semiconductor industry is far from the largest source of jobs.

The sector employs only about 300,000 people in a workforce of 11 million, according to data compiled by Dachrahn Wu, director of National Central University’s Research Center for Taiwan Economic Development.

The broader electronics and IT manufacturing industry employs about one million people, compared with about seven million working in the service sector, according to Wu’s data.

The heavy reliance on a single industry for growth marks a shift from the Asian Tiger era of the 1960s to 90s, when Taiwan’s economy was driven by hundreds of thousands of small and medium-sized enterprises (SMEs), according to James Lin, a historian who specialises in Taiwan’s post-war economic transformation.

“From the 1970s to 1990s, economic growth was concentrated in the hands of small and medium family enterprises that exemplified the ‘living room factory’ model, where family-owned businesses focused on producing one part for a consumer product,” Lin told Al Jazeera.  

“The benefits of this period were thus more widely distributed across Taiwanese society,” Lin said.

“By contrast, today, wealth inequality is growing in Taiwan as land is becoming more expensive and large corporations like TSMC attract the lion’s share of foreign capital investment rather than small corporations.”

Alicia Garcia Herrero, chief economist for Asia Pacific at French investment bank Natixis, said Taiwan’s economic model has left it at risk of becoming a “dual society” where tech sweeps up talent, funding and resources at the expense of other industries.

“It’s very hard if you’re not in [the semiconductor] sector in Taiwan right now,” Garcia Herrero told Al Jazeera, pointing to low wages for workers in non-tech roles and rising costs for businesses.

Some of Taiwan’s challenges are out of its control, said Chao-Hsi Huang, associate dean at the Taipei School of Economics and a former director at Taiwan’s central bank.

Those challenges include US President Donald Trump’s tariffs, which have partially exempted semiconductors but hit exporters in non-tech industries.

“The traditional [manufacturing] sector suffers higher tariffs than other competing countries like Korea or Japan, or even Southeast Asian countries, due to the fact we are not able to sign free trade agreements,” Huang told Al Jazeera.

“We are treated differently, and that’s a difficulty we are facing.”

Critics have placed other issues on the shoulders of the government, including a weak currency that has made exports more competitive but chipped away at consumers’ purchasing power.

Taiwan’s government denies engaging in currency manipulation, though it acknowledges intervening in the market to smooth out “volatility” when the new Taiwan dollar falls or rises sharply against other currencies.

After two decades of stagnation through the 2010s, wages are growing again – albeit unevenly.

Real average wages grew 1.4 percent in 2025, while median wages rose 1.35 percent, according to the Directorate-General of Budget, Accounting and Statistics (DGBAS).

Still, 70 percent of Taiwanese earned less than the average, a statistic attributable to the distorting effect of much higher salaries in the tech sector, where pay is nearly double the national average.

For Taiwanese frustrated with stagnant pay, Taiwan’s soaring stock market has offered some consolation.

Riding the AI boom, the Taiwan Stock Exchange (TWSE) more than doubled in value between 2019 and 2025 to $2.2 trillion, according to HSBC.

Regulatory changes introduced in 2020 made it easier for small-time investors to buy single stocks, encouraging a rush of everyday Taiwanese into the market.

In January, the TWSE reported that the number of trading accounts had reached 13.77 million – equivalent to 60 percent of Taiwan’s population – while hailing the bourse as a “cornerstone for inclusive prosperity and shared growth”.

Though more equal than neighbours such as Singapore, Hong Kong and China, Taiwan’s wealth divide has grown over the decades.

In 1980, Taiwan had a Gini coefficient of 0.308 – a measurement of wealth distribution where 0 indicates perfect equality – putting it on par with contemporary Norway, according to the DGBAS.

By 2024, Taiwan’s Gini coefficient had grown to 0.341 – lower than many countries but still a significant rise.

“I feel that the benefits of economic growth haven’t been distributed evenly,” Ryan, an engineer in the local tech sector who asked not to be identified by his real name, told Al Jazeera.

“Some industries or asset holders benefit significantly, but ordinary office workers often experience a rise in prices and housing costs, rather than an easier life,” he said.

Wei-ting Yen, an assistant research fellow at the research institution Academia Sinica, said while the semiconductor and stock market booms have helped some Taiwanese, they have heightened the angst of others.

In a survey of 1,195 Taiwanese voters carried out last month, 40 percent said their household was financially either “anxious” or “very anxious” due to rising living costs, particularly housing.

“I think subjectively, they’re anxious that they’re not accumulating wealth and it’s not enough to help them buy a house or an apartment,” Yen told Al Jazeera.

“Housing prices have been going crazy worldwide, and the stock market has been going crazy, [but] for people who do not have extra money to invest in those two options, it creates even more frustration and anxiety around them,” she said.

Strategic ambiguity, the US policy of neither explicitly supporting nor opposing Taiwanese independence, has been considered effective for decades in maintaining stability in the Taiwan Strait. However, the summit between Trump and Xi Jinping on May 14-15, 2026, in Beijing revealed signs that this formula’s effectiveness is beginning to be limited. China pushed the US not merely to “not support” but to actively “oppose” Taiwanese independence. The US responded by displaying an inconsistent position. Taiwan openly asserted its sovereignty. All three responses emerged within less than 24 hours, and no international forum was able to manage the contradictions.

AT His strategic ambiguity is not simply a matter of US foreign policy. It reflects deeper limitations in the global governance system in addressing unresolved sovereignty issues. At the same time, China is actively promoting an alternative world order through its Belt and Road Initiative, non-interventionist principles, and multipolarity agenda, which indirectly influence how the Taiwan issue is positioned on the international stage. Without a concrete framework for joint governance, the potential for miscalculations across the Taiwan Strait will continue to increase.

On May 16, 2026, the day after Trump left Beijing, Taiwan’s Ministry of Foreign Affairs issued an official statement. Taiwan is a sovereign and independent nation. It is not under Chinese rule. This statement was not new rhetoric.

What makes this significant is the context. Trump had just called a $14 billion arms sale to Taiwan a bargaining chip in negotiations with Xi Jinping. China had just successfully pushed the US to soften its tone on Taiwan. In less than 24 hours, three main actors make statements that cannot all be true at the same time. And there is no one international institution that has the authority to decide which is more valid.

This isn’t a sudden diplomatic failure. It’s the result of a policy of strategic ambiguity that has been in place for more than five decades and is now beginning to show its limitations.

Strategic ambiguity was once effective because all parties had an incentive not to test its limits. That situation is changing. China is becoming increasingly assertive. militarily and increasingly actively shaping an alternative global order. Taiwan is becoming more assertive in claiming its political identity. The US under Trump is increasingly unpredictable. In these conditions, the ambiguity that once served as a buffer for stability has now become a source of uncertainty. The global governance system lacks adequate instruments to fill the gaps left by this increasingly outdated formula.

Starting from the background, a US strategic ambiguity towards Taiwan was born of deliberate compromise. In the Shanghai Communique (1972), Washington used the word “recognizes” China’s position that Taiwan is part of China, not “accepts.” The difference in vocabulary was no accident. It opened diplomatic normalization with Beijing without formally abandoning Taipei.

This formula was then codified through the Taiwan Relations Act of 1979 and three joint US-China communiques. During the Cold War era and the two decades that followed, this formula remained relatively stable because China was not yet strong enough to challenge it militarily and Taiwan was not yet confident enough to challenge it politically. As noted by T.Y. Wang in the journal Politics and Policy, strategic ambiguity is designed not only to deter China from attacking Taiwan but also to restrain Taiwan from taking steps that Beijing might deem provocative.

But the conditions that made that formula effective have changed structurally. Taiwan’s democratization since the 1990s has produced a political identity increasingly independent of the “One China” narrative. The PLA’s military modernization has changed the cost calculations of conflict. And Trump’s return to the White House has brought a transactional approach that, as noted by the Global Taiwan Institute, exacerbates existing ambiguities with conflicting signals that are record arms sales accompanied by a striking rhetorical silence on US security commitments to Taiwan.

On the ground, this uncertainty has already resulted in a measured escalation. Military exercises: Justice Mission 2025 In December 2025, a full-scale blockade of Taiwan was simulated, with over 90 aircraft crossing the median line of the Taiwan Strait in a single day. These median line violations were not an anomaly. Since 2022, they have become increasingly routine and have rarely elicited an organized response from the international community.

The most important part to understand next is about the One China Policy. The One China Policy affirms that a single label includes three irreconcilable positions. Beijing maintains that Taiwan is an unreturned province and that reunification is a non-negotiable goal. Taipei maintains that the Republic of China (ROC) is a sovereign state that predates the People’s Republic of China and that the two have never ruled each other. Washington maintains its own version, based on the Taiwan Relations Act, that recognizes Beijing’s position without explicitly endorsing it.

These three positions exist simultaneously because they have never been tested in an international forum that has the authority to decide which is more valid. Brookings Institution; he noted that this policy was originally designed for a period when China was not yet acting like a revisionist power. Now, conditions have changed, and the old formula requires a recalibration that has yet to materialize.

There’s a compelling argument here. Strategic ambiguity has also served as a deterrent to war. It prevents China from attacking because it’s unsure whether the US will intervene. It also prevents Taiwan from declaring formal independence because it’s unsure whether the US would defend it. In this logic, ambiguity is a feature, not a bug.

However, analyst Brandon K. Yoder in the European Journal of International Relations, The effectiveness of deterrence hinges on credibility, which is currently eroding. When Trump called weapons for Taiwan a “negotiating chip,” he indirectly communicated to Beijing that the US commitment was conditional. When commitments are conditional, their deterrent effect is significantly weakened.

What results is not new stability, but rather an increasingly unpredictable gray area. Each party operates based on its own assumptions about the limits that can be tested. Without governance mechanisms that explicitly clarify these limits, the risk of miscalculation continues to grow.

The Taiwan issue cannot be read in isolation from China’s broader agenda of reshaping the global order. Over the past two decades, Beijing has not only protested the existing international system but also actively developed an alternative.

The Belt and Road Initiative, which now encompasses more than 140 countries, is more than just an infrastructure project. As analyzed in China Quarterly of International Strategic Studies, BRI serves as both a governance and economic mechanism, linking infrastructure development with new standards of connectivity and cooperation that reflect the Chinese model of development without political conditions.

Beyond the BRI, China is actively pushing three major initiatives: the Global Development Initiative, the Global Security Initiative, and the Global Governance Initiative. They share a common thread that is strengthening the norm of sovereignty, rejecting intervention based on Western values, and promoting multipolarity as a substitute for single-party hegemony. Bruegel noted that the concept of “Community with a Shared Future for Mankind” popularized by Xi at Davos 2017 has even been included in several UN General Assembly resolutions, demonstrating how far China has succeeded in pushing its global narrative into multilateral institutions.

The relevance to the Taiwan issue is that the more countries accept China’s sovereignty-based, non-interference-based governance framework, the more limited the space for international mechanisms to challenge Beijing’s claims to Taiwan. China’s global governance agenda and its claims to Taiwan are not separate issues. They are part of the same project: redefining who has the right to set the rules of the game in what have traditionally been called “internal affairs.”

This also makes Trump’s and Xi’s bilateral approach a more suitable instrument for China’s interests. When the Taiwan issue is managed through negotiations between the two great powers, broader norms, such as the right to self-determination and representation of sovereign entities, are not discussed. Observer Research Foundation noted that BRI cooperation with the UN from 2015 to 2019 was more about mutual legitimacy than structural integration, and a similar pattern is seen in the way China uses multilateral forums to validate its diplomatic positions without actually committing to the process.

Trump’s and Xi’s meeting in May 2026 shows a pattern that deserves serious attention. That is, the Taiwan issue is now managed almost entirely outside the multilateral framework. There are no regional forums, no UN mechanisms, no activated joint protocols. There are just two leaders, two delegations, and an agenda far broader than just Taiwan.

Observation: Both sides reveal a glaring asymmetry. In China’s version, Taiwan is referred to as the “most important issue,” and Xi warned of potential conflict if handled incorrectly. In the US version, Taiwan is not mentioned at all. CSIS noted that the meeting resulted in a commitment to “strategic stability” without concrete instruments to realize it. The lack of crisis communication protocol. Limited incident management framework. There isn’t any commitment to refrain from provocative military exercises.

This is not simply a shortcoming of the meeting. It reflects a more systemic limitation. namely the limitations There is no sufficiently authoritative multilateral platform to address this issue. The UN Security Council is hampered by Beijing’s veto power. ASEAN adheres to the principle of non-intervention, which actually benefits China’s narrative. The G20 has no mandate to address sovereignty disputes.

The result is what could be called a governance deficit. This doesn’t mean there are no institutions, but rather that the existing ones are insufficiently effective for the situation. And it’s in this deficit that military escalation moves in to fill the space that structured diplomacy should be filling. Modern Diplomacy noted that the US approved an $11.1 billion arms package for Taiwan by 2025 while simultaneously sending ambiguous rhetorical signals, a combination that makes it difficult for both China and Taiwan to read exactly where the real line is.

The following three recommendations are not intended to resolve the Taiwan status question. Their purpose is more limited and more immediate. namely for reducing the risk of miscalculation before a minor incident escalates into an uncontrollable crisis. All three rely on existing political conditions and momentum.

First, the momentum of the Trump-Xi meeting should be used to establish a permanent, dedicated military crisis communication channel for incidents in the Taiwan Strait. The most relevant precedent is the Washington-Moscow hotline, established after the 1962 Cuban Missile Crisis, precisely because the world had nearly come to war due to miscommunication, not intention. CNBC noted the May 2026 meeting resulted in a relatively constructive atmosphere between the two leaders. This is a rare window of opportunity and should be used for something concrete.

Second, Indonesia, as a BRICS member and ASEAN dialogue partner with a relatively balanced working relationship with Washington and Beijing, could propose a regional consultation forum focused on managing incidents in the Taiwan Strait. This would not be a forum to decide Taiwan’s status, but rather a technical mechanism for de-escalation procedures and crisis communication. ASEAN has the foundation for this through the Treaty of Amity and Cooperation, and Indonesia’s current position within BRICS provides added legitimacy in Beijing’s eyes.

Third, the US, China, Japan, and South Korea need to negotiate a joint commitment that no party will change the status quo in the Taiwan Strait through force. This is inspired by the Helsinki Final Act of 1975, which successfully committed European countries not to change their borders by force, despite many of their mutual distrust. The agreement did not resolve existing disputes, but it did raise the costs of escalation measurably. With Xi seeking economic stability before 2027 and Trump seeking to avoid military engagement far from the US mainland, both sides’ calculations are now more open to this type of commitment than in previous periods.

It can be concluded that strategic ambiguity is one of the most ingenious products of Cold War diplomacy. It maintained stability in the Taiwan Strait for decades, not by solving the problem, but by making all parties unsure whether testing its limits was a good idea.

The conditions that make that formula work are changing simultaneously. China is stronger and more assertive. Taiwan is more assertive in its political identity. And the US under Trump is sending signals that are more easily read as conditional than committed. These three changes are not occurring one after the other, but simultaneously, and the global governance system has not yet responded accordingly.

The Trump-Xi meeting in May 2026 is neither a turning point in the war nor a step toward a resolution. It is a reflection of the current situation: three actors with three different interpretations, no referee, and increasingly little room for error.

What’s needed isn’t a final solution on Taiwan’s status, as that won’t come anytime soon. What’s needed are concrete steps that reduce the risk of miscalculation while keeping all options open. Crisis channels, regional consultative forums, and non-escalation commitments are small steps but have clear historical precedent. The question is whether the political will for these small steps can still be found amidst the escalating rivalry.

Acting Navy Secretary Hung Cao’s remarks come as US President Donald Trump gives mixed signals on the sale.

A top United States military official has said Washington is pausing a $14bn arms sale to Taiwan to conserve munitions for its war on Iran.

Acting Navy Secretary Hung Cao provided the update to lawmakers during a Senate hearing on Thursday, a week after the weapons sale took centre stage in talks between US President Donald Trump and Chinese leader Xi Jinping in Beijing.

“Right now, we’re doing a pause in order to make sure we have the munitions we need for Epic Fury – which we have plenty,” Cao told the Senate Appropriations Subcommittee on Defense.

“But we’re just making sure we have everything, but then the foreign military sales will continue when the administration deems necessary.”

Cao said any decision to move forward with the sale – which would be the largest ever weapons transfer to Taiwan – would be made by Secretary of Defense Pete Hegseth and Secretary of State Marco Rubio.

The war has been paused since the US and Iran agreed to a ceasefire on April 8, but the sides have yet to reach a permanent peace deal.

The US Congress approved the weapons package for Taiwan in January, but the sale requires Trump’s sign-off to move forward.

If approved, the sale would surpass a record-breaking $11bn arms package for Taiwan approved by Trump in December.

Taiwanese Premier Cho Jung-tai told reporters on Friday that Taiwan would continue to pursue arms purchases, according to Taiwanese news outlet FTV News.

William Yang, senior analyst for northeast Asia at the Crisis Group, said in a social media post that the pause will “exacerbate anxiety and scepticism about US support in Taiwan and make it difficult for the Taiwanese government to request additional defence budget for the foreseeable future”.

Trump, who has confirmed that he discussed the arms sale with Xi, said last week in an interview with Fox News that he “may” or “may not” approve the package.

Trump has also suggested that the package could be used as a “negotiating chip” – despite a decades-old precedent against consulting with Beijing on arms sales.

China claims self-governing Taiwan as part of its territory, and objects to Washington’s ongoing but unofficial support for Taipei.

The US government does not officially recognise Taiwan but is committed to helping the island to defend itself under the 1979 Taiwan Relations Act, enacted shortly after Washington severed diplomatic ties with Taipei.

Trump has continued to test the status quo on Taiwan in other ways, saying earlier this week that he would consider speaking to Taiwanese President William Lai Ching-te about the arms deal.

Such a move would break with four decades of diplomatic protocol against direct talks with the Taiwanese leader and almost certainly provoke an angry response from Beijing.

Trump held a phone call with former Taiwanese President Tsai Ing-wen after his 2016 election win, but their talks took place before he was sworn in as president.

President Lai says Taiwan’s future is up to its people as the island faces Chinese and US headwinds.

Taiwanese President William Lai Ching-te said the future of Taiwan should not be decided by “foreign forces” but is instead in the hands of its 23 million citizens.

Speaking on the second anniversary of his inauguration on Wednesday, Lai said his goal as president continued to be maintaining peace and stability across the Taiwan Strait – the 180km (112-mile) waterway dividing Taiwan from China – and to prevent “external forces” from altering the island’s political status quo.

The president said he was still willing to engage with Beijing, which cut off communication with Taipei in 2016, but only through “orderly exchanges” based on the principles of “equality and dignity”.

Taiwan is a responsible member of the international community, not a “party that undermines stability”, he also said, in an apparent swipe at Beijing.

China’s Taiwan Affairs Office on Wednesday accused Lai of inciting “cross-strait confrontation” by supporting “Taiwan independence” in remarks coinciding with his anniversary.

The office’s spokesperson, Zhu Fenglian, said Lai “peddles separatist fallacies” while using a narrative of “democracy versus authoritarianism” to describe the Taiwan-China relationship.

Zhu also accused Lai of ignoring the wellbeing of the Taiwanese public to pander to “external forces attempting to ‘seek independence through foreign aid’ and ‘seek independence through force’.”

Lai has faced a tumultuous 24 months as president, with pressures from both inside and outside Taiwan, including from traditional ally the United States.

The opposition-controlled legislature cut down a signature special defence budget from $40bn to $25bn, and this week tried and failed to impeach him over a tax revenue dispute.

He has a 38 percent approval rating, according to a poll conducted earlier this month by news network TVBS, which, while low, is still better than his 32 percent approval rating during his first year in office.

His disapproval rating has also fallen from 55 percent to 44 percent.

Lai said on Wednesday that his government would take other measures to make up the shortfall in Taiwan’s defence spending.

As president, Lai has also had to contend with uncertainty from the US, Taiwan’s longstanding unofficial ally, amid growing pressure from China, which has staged five rounds of military exercises around Taiwan since his May 2024 inauguration.

US President Donald Trump said last week that US arms sales to Taiwan could be used as a “very good negotiating chip” with Beijing.

Trump’s remarks followed a meeting with Chinese President Xi Jinping in Beijing, where the Chinese leader called on Trump to take a stronger stance on Taiwan’s political status.

The US has for decades maintained a deliberately ambiguous stance on the issue.

Lai was also forced to delay a state visit to Eswatini, formerly known as Swaziland, Taiwan’s only diplomatic ally in Africa, in April when several countries denied him access to their airspace due to alleged Chinese pressure. He later made the trip through a circuitous route on board Eswatini King Mswati III’s private jet.