After Taiwan’s Legislative Yuan passed a trimmed-down version of the National Defense Special Act on Friday (May 8), the United States Department of State promptly issued a statement expressing encouragement for the budget approval after delays but also gave a clear warning that “further postponing funds for other planned defense capabilities is a concession to the People’s Republic of China.”
According to Reuters, a spokesperson for the U.S. State Department emphasized that the U.S. supports Taiwan’s access to “critical defense capabilities commensurate with the threats it faces,” which align with the Taiwan Relations Act and the U.S.’s over 45 years of longstanding commitments.
This strongly worded commentary reflects Washington’s deep concerns that Taiwan’s reduction in defense spending may weaken its deterrence against China.
President of Taiwan, Lai Ching-te, had sought an additional $40 billion in defense budget to better deter the escalating threats from China.
Despite the lack of formal diplomatic relations, the U.S. remains Taiwan’s most important international supporter and weapons supplier, strongly advocating for increased military spending in Taiwan. Beijing has repeatedly demanded the U.S. to stop arms sales to Taiwan.
After months of political wrangling, the Legislative Yuan ultimately passed the “Defense of National Security and Strengthening Asymmetric Warfare Procurement Special Act” with 59 votes in favor. The final approved budget limit is NT$780 billion (approximately $25 billion), much lower than the initially proposed NT$1.25 trillion (approximately $40 billion).
The approved version splits the budget into two waves allocation: the first wave of NT$300 billion supports the procurement of M109A7 self-propelled howitzers, Seahorse systems, and other military equipment from the U.S.; the second wave of NT$480 billion will be allocated pending confirmation of pricing details from the U.S.
However, the opposition party deleted 12 procurement and independent research and development projects, including various unmanned aerial and naval drones, AI digital command systems, and the expansion of military production lines.
The Ministry of National Defense issued a warning with 5 points, cautioning that the special act completely excludes commercial procurement and commissioned projects, creating a combat effectiveness gap. Of particular concern is the “Tien Kung Mid-range Anti-Ballistic Missile System,” developed by the National Chung-Shan Institute of Science & Technology as the core of the “Taiwan Shield” air defense system.
The Ministry of National Defense stated: “Failure to acquire it in a timely manner will severely affect air defense operational effectiveness.”
President Lai Ching-te also expressed on social media that while he is pleased with the approval of the first wave budget, he emphasized, “Any gap will affect the integrity of the overall defense system. Any delay will increase the collective security risks borne by the Taiwanese people.”
The opposition party insists on fiscal discipline and oversight. Kuomintang Chairperson, Johnny Chiang, criticized the government’s original version as a “blank check,” with unclear content that cannot be given a blank authorization.
Chairman of the People First Party, James Soong, emphasized that while strengthening defense, “corruption is absolutely not allowed,” ensuring that Taiwan gets the weapons it pays for.
In contrast, the Democratic Progressive Party Faction criticized the opposition parties for jointly passing the “40% discount” version, which they consider dismantling defenses for aggressors. Legislator Fan Yun pointed out that the international community is looking favorably upon Taiwan’s development of unmanned vehicles and counter systems, but the opposition parties deleted this future star of the global non-red supply chain, which is akin to self-sabotage.
Jack Burnham, an analyst at the China Project of the Foundation for Defense of Democracies (FDD), pointed out that this budget cut will not only impact weapon procurement but could also severely affect the indigenization of Taiwan’s defense industry.
In his article, Burnham stated that while the size of this additional budget could ensure that the two upcoming major arms sales do not affect basic expenses, it does not continue the progress made in domestic industrial production, especially the inability to enter the global non-red supply chain through large-scale production of drones. This will have negative cascading effects on Taiwan’s long-term economic growth and industrial upgrading.
He believes that in the absence of promoting the indigenization of the defense industry, even if defense spending continues to rise in absolute terms, Taiwan still relies on the Foreign Military Sales (FMS) program with the U.S. to obtain complex systems from Washington. This means that any slowdown in U.S. production will have significant chain reactions on Taiwan’s military procurement progress.