On November 26, 2025, Taiwan’s President William Lai Ching-te unveiled a bold new plan: a supplementary defence budget of US$40 billion, or roughly NT$1.25 trillion, to be spent over the next eight years. This ambitious investment, Lai said in an article published by The Washington Post, is designed to reinforce Taiwan’s ability to defend its democracy against rising military pressure from China. The announcement marks the largest peacetime boost to Taiwan’s military spending in recent history, and it’s already sending ripples across the region.
Lai’s government intends to raise Taiwan’s military expenditure to 3.3% of its gross domestic product (GDP) in 2026, up from previous levels, and then further increase it to 5% by 2030. For context, the projected defence spending for 2026 alone is T$949.5 billion (about US$30.3 billion), crossing the 3% threshold for the first time since 2009. The funds will go towards modernizing Taiwan’s arsenal, with specific allocations for advanced missiles, drones, and the island’s new T-Dome air defence system—a move that signals a clear commitment to deterring threats from across the Taiwan Strait.
“As part of this effort, my government will introduce a historic US$40 billion supplementary defence budget, an investment that underscores our commitment to defending Taiwan’s democracy,” Lai wrote in his op-ed. He added, “We aim to bolster deterrence by inserting greater costs and uncertainties into Beijing’s decision-making on the use of force.” According to The Washington Post, Lai’s framing of the spending is not just about territorial defense; it’s about safeguarding democratic values in the face of growing authoritarian pressure.
The United States, which maintains legal commitments to support Taiwan’s self-defense despite lacking formal diplomatic ties, quickly welcomed the proposal. Raymond Greene, director of the American Institute in Taiwan—the de facto U.S. embassy—voiced strong support, saying the U.S. backs Taiwan’s efforts to rapidly acquire “critical asymmetric capabilities.” The U.S. has long encouraged Taiwan to focus on weapons and strategies that would maximize its military effectiveness against a much larger Chinese force, and Lai’s plan appears to align closely with these recommendations.
According to South China Morning Post, the supplementary budget will fund not only the procurement of advanced weaponry but also the development and deployment of the T-Dome air defence system. This new system is expected to significantly enhance Taiwan’s ability to respond to aerial threats, including drones and missiles—technologies that have become central to modern warfare. In addition, the budget will allow Taiwan to maintain and upgrade its existing arsenal, ensuring that the island remains prepared for any contingency.
While Lai did not specify exactly how the government will finance the increased defence spending, the scale of the commitment is drawing scrutiny at home. Taiwan has been running a budget deficit, which must be financed through borrowing. Critics, including some opposition lawmakers, have raised concerns that the focus on defence could come at the expense of social welfare and other essential services. “We cannot let military spending crowd out the needs of our people,” said Kuomintang chairwoman Cheng Li-wun, urging the government to balance security with social priorities.
Opposition voices have also warned that the spending hike could escalate tensions in the region. “We must pursue peace and restraint,” said one lawmaker, cautioning against actions that might provoke further confrontation with Beijing. Their concerns are not unfounded: China’s government responded swiftly and critically to Lai’s announcement, accusing Taiwan of “wasting resources on weapons” and allowing “external powers” to influence its decisions. According to Chinese officials, such moves only serve to destabilize the region and increase the risk of conflict.
Yet Lai has been clear that his government will not compromise on national security. “Taiwan will not back down when it comes to defending our democracy,” he said, framing the increased spending as a necessary response to what he described as “increasing military pressure from China.” His administration continues to pursue an asymmetric defence strategy, which prioritizes cost-effective, high-impact capabilities—such as mobile missile launchers, advanced drones, and robust air defence systems—over traditional large-scale military platforms.
This asymmetric approach is designed to maximize Taiwan’s ability to deter aggression from a much larger adversary. By focusing on technologies that can inflict significant costs in the event of an attack, Taiwan hopes to make any potential military action by Beijing a far more complicated and risky proposition. As Lai put it, “We aim to bolster deterrence by inserting greater costs and uncertainties into Beijing’s decision-making on the use of force.”
The U.S. response has been unequivocally positive. American officials have long advocated for Taiwan to strengthen its defences, particularly in the face of China’s rapid military modernization. The support from Washington is not just rhetorical; it includes the sale of advanced weapons systems and ongoing military cooperation. The Biden administration has repeatedly emphasized the importance of peace and stability in the Taiwan Strait, viewing Taiwan’s security as integral to the broader regional balance.
China, for its part, has consistently opposed any efforts by Taiwan to enhance its military capabilities, viewing such moves as steps toward formal independence. The Chinese government maintains that Taiwan is a part of its territory and has not ruled out the use of force to achieve unification. In recent years, Beijing has ramped up military exercises near Taiwan, sending warplanes and ships into the island’s air defense identification zone on a regular basis. These actions, according to Taiwanese officials, underscore the need for a robust and modern defense posture.
At home, Lai’s announcement has sparked a lively debate about the island’s future. Supporters argue that the increased spending is a prudent investment in security, especially given the unpredictability of cross-strait relations. They point to the growing sophistication of China’s military and the importance of deterrence in maintaining peace. Critics, however, worry about the potential economic impact and the risk of an arms race. Some fear that escalating military budgets could divert resources from education, healthcare, and other vital areas.
Despite these concerns, the government appears determined to press ahead. Lai’s administration has emphasized that defending democracy is not negotiable, and that Taiwan must be prepared for any scenario. The supplementary budget, they argue, is a reflection of the seriousness with which the government takes its responsibilities.
As tensions continue to simmer in the Taiwan Strait, all eyes will be on how Lai’s plan unfolds. The coming years will test not only Taiwan’s resolve but also the durability of its alliances and the wisdom of its strategic choices. For now, the message from Taipei is clear: Taiwan is investing in its future, determined to defend its democracy—no matter the cost.
