Taiwan spends $40 billion on defense

In an op-ed for the Washington Post in late November, Taiwanese President Lai Ching-te declared, "I will boost defense spending to protect our democracy." Calling out "an unprecedented military buildup by Beijing"-which has vowed to bring Taiwan under its control, without ruling out the use of force-Lai announced that his government would introduce a historic supplemental defense budget of 1.25 trillion Taiwan dollars, or $40 billion. Citing foundational texts of U.S.-Taiwan relations, including the 1979 Taiwan Relations Act and the 1982 Six Assurances, Lai underscored the importance of collaborating with U.S. President Donald Trump's administration to "uphold the cross-strait status quo." The proposed new special defense budget is a sea change in Taiwan's strategic posture. It aims to address decades of chronic underinvestment in its own defense by raising its military budget from next year's 3.3 percent of GDP to a 5 percent baseline by 2030. It also seeks to secure multi-year asymmetric military capabilities that could transform the Taiwan Strait into a "hellscape" for China's military should it attempt an invasion. It also comes amid the Trump administration's heightened expectations that Taiwan share the burden of its own defense, as reflected in its America First policies and its new National Security Strategy. Raymond Greene, the de facto U.S. ambassador in Taipei, has underscored these expectations in his public comments. The central question now is whether the budget can clear the opposition-controlled legislature, where deep partisan polarization and procedural hurdles have already slowed its advance. In a statement welcoming the new budget, Greene expressed optimism that these obstacles will be overcome. "Just as support for Taiwan is a longstanding U.S. bipartisan priority, I expect Taiwan's political parties will find similar common ground," he said. What sets this special defense budget apart from Taiwan's regular annual defense spending is not only its size, but also the shift it represents in Taiwan's approach to military readiness. By locking in a pre-determined level of funding over the next eight years (2026–2033), the budget seeks to blunt the impact of the annual budgetary haggling and incrementalism that have contributed to Taiwan's chronic underinvestment in defense. Like the United States, Taiwan finances defense spending through both annual budgets and stand-alone special budget legislation. The annual central government budget funds most of the country's day-to-day defense needs, like personnel, operations, training, and readiness. Special budgets finance large, multi-year programs that cannot easily be absorbed within the annual budget cycle, are not subject to a fixed end-of-year deadline, require only a simple legislative majority, and can be financed through borrowing that is partially exempt from the usual debt-ceiling constraints. Once passed, funds are generally locked in, limiting annual reprogramming and reducing exposure to recurring political negotiations.

Taiwan has relied on this mechanism repeatedly over the past two decades for crisis response and rapid large-scale investment. In recent years, special budgets have funded pandemic relief under COVID-19 legislation as well as major defense procurements and indigenous weapons development. Notably, the 2022–2026 Air-Sea Combat Power Enhancement Special Budget supported the research, development, and production of missiles, air defense systems, naval vessels, and other weapons. According to the SIPRI Military Expenditure Database, Taiwan's defense budget hovered around $10 billion from 2009 to 2019, rising to $12 billion in 2020 and reaching only $16 billion in 2024. For comparison, nearby Singapore spent $15 billion on defense in 2024 despite being a smaller economy and not being threatened by the region's largest military power. For Taiwan, this long period of modest defense spending has likely left capability gaps that require accelerated investment. The proposed special defense budget's centrality to Taiwan's future lies less in how much money is spent than in how it is spent. Yet while the headline spending increase is certainly significant, the defense budget's centrality to Taiwan's future lies less in how much is spent than in how the money is spent, aligning with the Lai administration's focus on asymmetric capabilities designed to raise the costs for China should it choose to attack. This is particularly important given Taiwan's rapidly changing security environment, which increases the importance of front-loaded readiness to meet daily Chinese aerial and maritime incursions. Shortly after announcing the special defense budget, Taiwan's Ministry of Economic Affairs outlined priority areas for defense industrial development for 2026-2029. As reported by the Economic Daily News, these priorities include unmanned systems such as drones and uncrewed surface vessels, aerospace, shipbuilding, military robotics, and satellite technologies. While separate from the defense budget itself, these industrial priorities closely mirror the capability areas emphasized by Lai in the rollout of the special defense budget. The Lai administration's focus on unmanned systems, military robotics, and aerospace platforms complements key elements of the special defense budget. These include T-Dome, a defensive concept that emphasizes layered sensors, interceptors and command-and-control systems designed to blunt an initial missile salvo from China, thus buying critical decision-making time in a crisis or conflict. Lai's government also aims to position Taiwan as a leading producer and exporter of drones. The United States has vowed to assist that effort, though many Taiwanese are concerned about its reliability as a strategic partner. According to a poll conducted earlier this year, 59 percent of respondents in Taiwan worry that the Trump administration might reach an agreement with Beijing that would undermine Taiwan's national interests, and more than 40 percent believe U.S. defense commitments to the island will decline during the second Trump administration. Still, the Pentagon's announcement this week of an $11 billion arms package for Taiwan-its biggest ever-should help alleviate some of those concerns. The primary obstacle to the new special defense budget will be getting it through Taiwan's fractious legislature. Although the island's major political parties all emphasize the importance of national defense, the opposition parties that control the legislature have raised concerns about the scale of borrowing required by the budget. Already, the legislature's Procedure Committee has delayed a full debate on the bill by demanding further explanation of its necessity from Lai's government. Taiwan's highly polarized political environment deepens the possibility of a legislative impasse. In response to these challenges, the American Institute in Taiwan, which functions as a de facto U.S. embassy, has intensified its public messaging. Through public statements and television interviews, Greene has argued that increasing defense investment benefits all stakeholders in Taiwan. The effectiveness of this message in breaking the current political deadlock could help determine the fate of the budget. What happens next depends on negotiations between Lai's Democratic Progressive Party and the opposition coalition dominated by the Kuomintang and the Taiwan People's Party. Those talks could produce a practical compromise that involves splitting up and sequencing the special defense budget to pass it. Breaking the proposal into smaller, phased components could make oversight more manageable and appeal to opposition lawmakers who prefer not to support a single, sweeping package. The Lai administration may also opt to narrow the budget's scope or highlight priority capabilities to bring fence-sitters over to its side. U.S. signaling will also matter, along with AIT's level of engagement and follow-through on the recently announced arms package. Amid persistent skepticism about the U.S.'s reliability, Taiwan has taken steps to explore deeper defense cooperation with European partners. This was underscored in remarks by Taiwanese delegates at the 2025 Warsaw Security Forum in September, including Vice Minister of National Defense Hsu Szu-chie. Diversifying Taiwan's defense partners beyond Washington could shape how the special defense budget is ultimately structured and implemented. The stakes are high. The scale and scope of Taiwan's defense spending over the next 5-10 years will send clear signals to Washington, Beijing and observers around the world as to whether Taiwan can credibly deter any attempt by China to use force to change the status quo. Bryce C. Barros is a Taiwan-based associate fellow at GLOBSEC's GeoTech Center and formerly served as a national security adviser in the U.S. Senate. His work focuses on aligning Indo-Pacific and Euro-Atlantic security policies across government, think tanks and industry. Follow him on X at @barros_bryce. The views expressed are the author's own and do not reflect the official positions of the United States Government, GLOBSEC, or any other affiliations.

Warsaw Security Forum in September, including Vice Minister of National Defense Hsu Szu-chie. Diversifying Taiwan's defense partners beyond Washington could shape how the special defense budget is ultimately structured and implemented. The stakes are high. The scale and scope of Taiwan's defense spending over the next 5-10 years will send clear signals to Washington, Beijing and observers around the world as to whether Taiwan can credibly deter any attempt by China to use force to change the status quo. Hon Brian Scavo