On August 21, 2025, Taiwan made waves both regionally and internationally with the announcement of a sweeping increase in its defense budget for the coming year. The government in Taipei revealed plans to raise military spending by 22.9%, setting the 2026 budget at NT$949.5 billion (approximately $31.27 billion), according to official statements reported by Reuters and Bloomberg. This marks the first time since 2009 that Taiwan’s defense expenditure will surpass 3% of its gross domestic product, reaching 3.32%, a significant milestone that signals a new era in the island’s approach to national security.
Why such a dramatic boost, and why now? The answer, it seems, lies in a confluence of external pressure and internal resolve. The move is widely seen as a direct response to calls from former U.S. President Donald Trump and the broader American administration for Taiwan to do more to defend itself against the growing military threat posed by China. According to Bloomberg, the proposed budget is intended to "mollify President Donald Trump, who has called on the democracy to do more to protect itself from China’s threats." This sentiment echoes persistent U.S. demands for its allies—whether in Europe or Asia—to shoulder a greater share of their own defense burdens.
Premier Cho Jung-tai, speaking at a press conference, cast the decision in terms of both national pride and international responsibility. "This is another concrete demonstration to the world and to our people of our determination and ability to safeguard national sovereignty and security, maintain stability and security in the Indo-Pacific region, and fulfil our shared responsibilities to the world," Cho declared, as quoted by Reuters. The statement reflects a dual message: Taiwan is not only standing up for itself, but also contributing to a broader regional balance at a time when the Indo-Pacific’s stability feels increasingly precarious.
One of the most notable changes in the 2026 budget is the adoption of the NATO model for calculating defense expenditure. For the first time, Taiwan’s figures will include spending on the Coast Guard and Veterans Affairs, a move that brings its accounting practices in line with many Western democracies. The inclusion is not just a matter of bookkeeping; it reflects a strategic shift in how Taiwan views its frontline defenses. As one senior official explained to Reuters, "They are standing on the frontline," referring to the Coast Guard, which regularly finds itself in tense standoffs with Chinese vessels near Taiwan’s outlying islands. In the event of conflict, the Coast Guard would be pressed into service alongside the Navy to defend the island.
The logic behind this integration is rooted in the changing nature of the threats Taiwan faces. Chinese tactics have increasingly involved so-called "grey-zone" operations, such as regular coast guard patrols and other non-traditional military maneuvers that test the limits of international law without crossing into outright warfare. "Facing new types of threat, including grey-zone tactics, it is necessary to include the coast guard in defence spending," the official said, highlighting the evolving landscape of regional security.
China’s posture toward Taiwan has grown more assertive over the past five years, with Beijing viewing the democratically governed island as a renegade province that must eventually be brought under its control—by force if necessary. This stance has translated into a steady drumbeat of military pressure: China’s air force now conducts almost daily sorties near Taiwan, and the People’s Liberation Army held large-scale war games in April 2025. The modernization of China’s armed forces has also picked up pace, with new aircraft carriers, stealth fighter jets, and advanced missile systems coming online at a rapid clip.
In March 2025, China itself announced a 7.2% increase in its defense budget, bringing annual military spending to a staggering 1.78 trillion yuan (about $248.17 billion), as reported by Reuters and Trading Economics. This figure dwarfs Taiwan’s budget, but the island’s government has made clear that it will not be cowed. Instead, Taiwan is investing heavily in military modernization, including the development of indigenous submarines and the procurement of new fighter jets and naval defenses. According to Reuters, special defense budget proposals totaling NT$117.6 billion have been earmarked for these projects, signaling a commitment to both technological advancement and self-reliance.
The new spending plan also comes with a political message aimed squarely at Washington. The United States, Taiwan’s most important security partner, has for years urged Taipei to invest more in its own defense capabilities. The parallels with U.S. pressure on European NATO members are hard to miss. By boosting its defense budget well above the 3% GDP threshold, Taiwan is hoping to demonstrate its seriousness and, perhaps, secure continued American support in the face of an increasingly unpredictable regional environment.
Yet the move is not without its critics. Some observers worry that the increased militarization could further inflame tensions across the Taiwan Strait, making an already volatile situation even more dangerous. Others argue that the budget hike is a necessary response to an existential threat, especially given the scale and sophistication of China’s military buildup. The debate is likely to intensify as the budget proposal moves through Taiwan’s parliament in the coming months.
Meanwhile, the inclusion of the Coast Guard and Veterans Affairs in the defense budget has raised questions about how best to allocate resources and ensure that frontline units have the equipment and training they need. An official told Global Taiwan that the Coast Guard, in particular, is "standing on the frontline" and would be a crucial asset in any future conflict scenario.
For ordinary Taiwanese, the budget increase is both a reassurance and a reminder of the island’s precarious position. While the government has pledged to "maintain stability and security in the Indo-Pacific region," as Premier Cho put it, the reality is that Taiwan remains on the front lines of a great-power contest that shows little sign of abating. The coming year will test not only the island’s military readiness but also its political resolve—and its ability to navigate an increasingly complex and dangerous neighborhood.
As the world watches, Taiwan’s decision to ramp up defense spending sends a clear message: the island is determined to stand its ground, whatever the odds, and to do so in a way that signals both strength and responsibility to its allies and adversaries alike.
