Taipei, 14 March 2026 – Taiwan’s strong economic growth means it can afford to increase defence spending significantly, President Lai Ching-te said, defending a proposed US$40 billion special military budget aimed at strengthening the island’s defence capabilities.
The eight-year spending plan is intended to help Taiwan counter growing military pressure from China, which claims the island as its territory and has stepped up military exercises and operations around it.
Defence Spending Linked to Economic Strength
President Lai said Taiwan’s economic performance makes the increase manageable. The island’s economy expanded at its fastest pace in 15 years in 2025, supported largely by global demand for advanced semiconductors used in artificial-intelligence applications.
Taiwan is home to some of the world’s most advanced chip manufacturers and plays a central role in global technology supply chains, providing a strong fiscal base for defence investments.
Lai also argued that boosting defence spending aligns with calls by the United tStates for allies to increase their own defence contributions under a strategy of collective security and burden-sharing.
Defence Budget Faces Parliamentary Resistance
Despite government support, the proposed spending package remains stalled in Taiwan’s parliament, where opposition lawmakers, who hold a majority of seats, have criticised the proposal for lacking sufficient financial details.
However, Taiwan’s legislature has already authorised the government to sign around US$9 billion in arms agreements with the United States to avoid missing procurement deadlines for weapons systems such as HIMARS rockets and anti-tank missiles.
Additional U.S. arms packages, including advanced missile defence systems, are also reportedly under consideration.
AI and Defence Industry Development
Taiwan’s leadership says the new spending would also support domestic defence-technology development.
Plans include building a real-time AI-enabled defence system, strengthening Taiwan’s defence industry and accelerating the modernisation of military capabilities.
Lai stressed that defence investment should not only enhance national security but also contribute to economic and industrial development.
Rising Geopolitical Stakes
China has never ruled out using force to bring Taiwan under its control and continues to conduct regular naval and air exercises near the island.
Taiwan’s government rejects Beijing’s sovereignty claims, maintaining that the island’s future should be determined by its own people.
The debate over military spending reflects the growing geopolitical tension in East Asia, where Taiwan’s security remains a focal point of strategic competition between China and the United States.
