Taiwan has unveiled a T$1.25 trillion (US$39.9 billion) supplementary defence budget, marking one of its most significant military spending increases in recent years. The announcement comes after a sustained period of Chinese military pressure, including near-daily incursions into Taiwan’s air defence identification zone and expanding naval activities. Beijing continues to assert that Taiwan is its territory, while Taipei rejects these claims and argues that China’s actions threaten regional stability. President Lai Ching-te, who has previously signaled a desire to strengthen Taiwan’s defences, aims to increase military expenditure to 5% of GDP by 2030 a major shift for an island long reliant on the United States for support. The new spending plan reflects Taipei’s conclusion that the security environment has deteriorated to a point requiring a rapid buildup of deterrence capabilities.
WHY IT MATTERS
This defence package is significant because it signals that Taiwan is preparing for a prolonged period of heightened tension with China. By raising spending above 3% of GDP for the first time since 2009, Taiwan is accelerating efforts to modernize its armed forces and expand asymmetric capabilities a key strategy for countering a much larger Chinese military. The move also has implications for broader Indo-Pacific security, as Taiwan sits at the center of major global supply chains, especially semiconductors. Any conflict involving the island would have worldwide economic repercussions. Additionally, the announcement tests the United States’ commitment under its legal obligation to help Taiwan defend itself, particularly as the Trump administration has so far approved only a limited number of arms sales this year. The overall decision underscores the growing sense in Taipei that deterrence, rather than diplomacy alone, is essential for survival.
A range of actors will be directly affected by Taiwan’s expanded defence spending. For Taiwan itself, the budget reflects both political determination and public concern, as leaders balance the urgency of national security with domestic expectations about economic priorities. China stands on the opposite end of the debate, condemning the move as wasteful, provocative, and orchestrated by foreign powers, and warning that it will only destabilize cross-strait relations. The United States remains a pivotal player, as Taiwan’s primary security partner and arms supplier, and its actions in the coming months will shape Beijing’s and Taipei’s strategy alike. Regional governments such as Japan, South Korea, and Southeast Asian nations are also stakeholders, because escalation in the Taiwan Strait would directly affect their own security and trade routes. Beyond governments, the global technology sector especially companies dependent on Taiwan’s semiconductor production is intricately tied to the island’s stability and therefore to its defence posture.
WHAT’S NEXT
The supplementary defence budget will now move to Taiwan’s legislature, where it is expected to pass given the governing party’s support for military strengthening. Once approved, the government is likely to detail specific procurement plans, which may include new air-defence systems, long-range missiles, drone platforms, and naval upgrades aimed at deterring a potential blockade or invasion. Attention will also focus on Washington, where upcoming decisions on arms transfers will indicate the level of U.S. engagement in Taiwan’s defence strategy. China is expected to respond with a combination of military signaling such as increased air and naval patrols and sharper rhetoric accusing Taiwan of escalating tensions. Regionally, allies and partners may adjust military planning and enhance coordination as they assess the implications of Taiwan’s defence buildup for broader Indo-Pacific stability. Over the next several months, the situation is likely to remain fluid as each stakeholder reacts to the shifting balance of power across the Taiwan Strait.
With information from Reuters.