Taiwan plans $40 billion defense budget with missiles and drones for coastal strike missions.

Taiwanese President Lai Ching-te has announced a seven-year, roughly 40 billion dollar supplemental defense budget to harden the island against a potential Chinese attack and accelerate an asymmetric shift in its military posture. The move answers long standing U.S. pressure for higher spending, raises domestic political stakes in Taipei, and adds new weight to the evolving military balance in the Taiwan Strait and the wider Indo Pacific.

Taiwan will inject about 40 billion dollars in additional defense spending between 2026 and 2033, President Lai Ching-te said at a press conference carried by Reuters, framing the package as part of a broader effort worth nearly 62 billion dollars to make any Chinese attack vastly more costly and uncertain. The announcement follows a call in which Chinese President Xi Jinping reiterated Beijing’s claim over the island to U.S. President Donald Trump, while U.S. officials continued to press Taipei to move defense spending toward roughly 5 percent of GDP by 2030. Lai’s message was blunt: national security is not negotiable, and Taiwan intends to shoulder a larger share of the deterrence burden alongside its partners.
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The objective behind these planned investments is to make any cross-Strait operation much more complex for the People’s Liberation Army. (Picture source: Taiwanese MoD)

This new budget envelope is intended to be additional to Taiwan’s core defence spending, which reaches around TWD 607 billion (approximately $18.9 billion) in 2024, or about 3.5% of military expenditure in Asia. The presidency presents the plan as a way to extend modernisation at a time when existing special funds, notably those financing 66 new F-16 Block 70 Fighting Falcon fighter aircraft and a programme to reinforce the navy and air force, start to taper off from 2025.

For 2026 alone, the government plans military outlays of TWD 949.5 billion, or about 3.32% of GDP, crossing the 3% threshold for the first time since 2009 and sketching out a trajectory towards the 5% target by the end of the decade. This trajectory nevertheless depends on a parliament dominated by the opposition, where the Kuomintang leader warns against a policy of “brinkmanship” while avoiding, for the moment, any explicit promise to vote the plan down.

Lai presents this additional spending as much as a political signal as a military choice. Drawing on historical examples, he argues that seeking compromise in the face of aggression brings neither stability nor peace but leads to “enslavement”, and he insists that Taiwanese sovereignty and its democratic system form the core of national identity. This discourse targets both Beijing, which describes these funds as money wasted on foreign arms purchases, and a public opinion tired of constant discussion of war. Kuomintang chairwoman Cheng Li-wun responds by stressing that “the people of Taiwan love peace and firmly desire peace”, a formula that reflects a widespread sentiment, even though polls also show broad support for strengthening the armed forces. The debate is no longer about whether to invest, but about the pace and capability priorities.

According to Defence Minister Wellington Koo, the supplementary budget is to finance new stocks of missiles and drones as well as the “T-Dome” air defence system, conceived as a national shield linking sensors, command centres, and layers of interceptors. Even though detailed characteristics remain limited and will have to be confirmed as programmes develop, the concept points to a networked architecture combining ground-based radars, dispersed launchers, and command nodes in an integrated picture to counter aircraft, cruise missiles, and unmanned systems.

This focus corresponds to Taiwan’s broader shift towards an “asymmetric” posture: smaller, mobile assets that are harder to target, intended to impose high costs on a more powerful adversary at sea, in the air, and in the littoral zone.

Behind this move upmarket, the order of battle still rests on a mix of older and more modern platforms. The army fields around 650 main battle tanks, including nearly 200 M60A3 and 450 CM-11 Brave Tiger, a hybrid combining the M60 chassis, the M48 turret, and a 105 mm gun. The recent commissioning of the first M1A2T Abrams battalion, an export version of the M1A2 with a 120 mm smoothbore gun, advanced thermal sights, and digital fire-control, marks a clear improvement in protection and engagement range compared with previous generations. In parallel, the army is deploying more than 300 CM-34 Yunpao infantry fighting vehicles, which provide protected mobility and fire support for mechanised brigades.

These land forces are backed by a growing missile arsenal and by a dynamic defence industrial base, particularly in the fields of missiles, aerospace and shipbuilding, including a first conventionally powered submarine built locally and expected around this year. The objective behind these planned investments is to make any cross-Strait operation much more complex for the People’s Liberation Army.

Beijing for its part denounces the new spending as a diversion of resources away from social policies and accuses Taipei of allowing “external forces” to dictate its defence choices, a narrative that is hard to reconcile with the scale of China’s own build-up facing Taiwan, including long-range rocket units equipped with PCH-191 launchers and regular Joint Sword exercises that simulate blockade or quarantine scenarios.

The US dimension remains omnipresent. The Taiwan Relations Act obliges Washington to provide Taiwan with equipment “of a defensive character”, and the de facto US ambassador in Taipei, Raymond Greene, welcomes the new package as a “major step” towards maintaining stability in the Strait through stronger deterrence. Deliveries of military equipment, from F-16 Block 70 aircraft to coastal missiles and upgrades to Patriot batteries, come with pressure to adjust priorities: US officials urge Taipei to favour survivable, dispersible systems rather than prestige platforms, while at the same time raising the overall level of spending in line with the island’s economic weight. Politically, Lai insists on the “solid” nature of the relationship with the United States despite fluctuations in China–US relations and competing crises in Europe and the Middle East.

At the Indo-Pacific level, Taipei’s decision to inject tens of billions of additional dollars into defense over the next seven years clearly aligns with a broader, measurable regional trend. According to the Military Balance, military expenditure in Asia is expected to reach around $524 billion in 2024, driven largely by China, as well as by US allies such as Japan, South Korea, and Australia. Taiwan’s share remains modest in absolute terms, but the island’s geographic position at the heart of the first island chain gives it a disproportionate role in any crisis. A more resilient Taiwanese posture complicates Beijing’s planning and intersects with Japanese debates on collective defence, US discussions about forward posture, and trilateral mechanisms linking Washington, Tokyo, and Seoul. In this perspective, the new budget is not just an internal adjustment: it adds another layer to the gradual militarisation of the Taiwan Strait and to China–US strategic competition, with consequences that go well beyond the island’s 23 million inhabitants.