On July 16, Bloomberg Businessweek published an interview with former President Trump, where he was asked whether the United States would protect Taiwan if it were attacked. Back in March, Admiral Aquilino, the head of the US Indo-Pacific Command, testified before Congress that China was preparing to attack Taiwan by 2027.
Trump responded by suggesting that Taiwan should pay a fee for US defense assurance, similar to an insurance premium. By not giving a direct answer, Trump’s response continued the US’s past strategy of strategic ambiguity towards Taiwan. It’s a reasonable approach for Trump to seek new sources of income to fund America’s global defense commitments, especially considering the mounting $33 trillion national debt. Generating revenue for the Treasury by providing security for the world is a positive development.
In 2022, President Biden shocked the world by stating that the US would defend Taiwan with force if China were to invade. This stance, though boosting the short-term deterrence against China, also signaled a shift away from strategic ambiguity, potentially motivating Taiwan to bolster its own defense capabilities in the long run.
During his interview with Bloomberg Businessweek, Trump’s ambiguous stance had an immediate impact. Taiwan’s Foreign Minister, Joseph Wu, responded on July 19, emphasizing the need for self-reliance in national defense. Ursula von der Leyen, President of the European Commission, also underscored commitments to Taiwan in a speech on July 18.
In essence, preventing a Chinese military invasion of Taiwan aligns with the interests of the US, Europe, and Taiwan. According to data from the US Department of Defense, back in 1953, US defense spending made up about 11.3% of GDP, playing a crucial role in thwarting North Korean aggression towards South Korea and containing Chinese expansion in Asia. The US’s intervention during the 1954 and 1958 Taiwan Strait crises safeguarded the strategic islands controlled by Taiwan and prevented further Chinese aggression.
In 1954, the US and Taiwan signed the Sino-American Mutual Defense Treaty, with the US pledging to defend Taiwan as a deterrence against Beijing. President Carter unilaterally revoked this treaty in 1979 in favor of establishing trade relations with Communist China in hopes of promoting democratization. Fast forward to today, with no formal defense treaty between Taiwan and the US, the diminishing deterrence calls for a reevaluation of reinstating a treaty.
Trump’s proposal for Taiwan to pay for defense expenses to the US could enhance deterrence and potentially lead to a formal treaty. Currently, the US provides $2 billion in military aid to Taiwan annually, along with $2 billion in Foreign Military Financing loans. The US spends 2.7% of its GDP on defense, while Taiwan only allocates 2.5%.
Taiwan could consider augmenting defense spending by an additional $4 billion to replace US military aid, aligning defense expenditure with that of the US at 2.7% of GDP. This would allow Taipei to negotiate on equal footing, as its unfortunate proximity to Communist China should not necessitate greater defense spending than the US against a common adversary.
Nonetheless, the US’s national interests demand Taiwan to pay a “defense fee.” How much is “defense insurance” worth for Taiwan? Trump might demand at least 5% of Taiwan’s GDP, equating to $40 billion annually, which, given the risks of nuclear war, could be a modest price. However, increasing US defense spending could effectively prevent wars from erupting.
Looking at the broader picture, Taiwan currently has around $19 billion in defense import orders from the US. With the turmoil in Ukraine resulting in billions of dollars in losses and significant casualties, along with Russia issuing nuclear threats to aiders of Ukraine, the US and its allies are effectively sidestepping ground deployments.
This raises another critical question: Even if Taiwan pays a $40 billion defense fee annually, would the US truly risk engaging in a nuclear war with Communist China by 2027? Taipei would undoubtedly ponder this question.
In exchange for premium payments, Taiwan might rightfully demand more commitments from the US. This could include stationing American troops in Taiwan, occasional port calls by US nuclear submarines, and Taiwanese officials participating in US nuclear planning. South Korea received these assurances in 2023, leading to its agreement not to develop its nuclear arsenal. In April, Poland announced its approval for NATO to deploy nuclear weapons on its soil.
As restoring a defense treaty with Taiwan brings with it nuclear risks, on July 17, Beijing suspended military control and non-proliferation talks with the US in response to increased American arms sales to Taiwan. Simultaneously, Taiwan is modernizing its defenses, including developing its submarines, eventually possessing independent maritime nuclear deterrent capabilities.
There are risks in taking no action, as the world continues to evolve and progress.
In conclusion, reinstating a defense treaty with Taiwan carries with it nuclear-level risks. On July 17, Beijing halted military control and non-proliferation talks with the US to express dissatisfaction over increased American arms sales to Taiwan. At the same time, Taiwan is modernizing its defense, including developing its submarines and aiming for independent maritime nuclear deterrent capabilities. Being proactive or reactive both pose risks in the current geopolitical landscape.