Taipei, Taiwan – Taiwanese President Lai Ching-te announced on Wednesday a special $40 billion defense budget aimed at bolstering the island’s military capabilities, including the construction of the Taiwan Dome, a high-tech air defense system designed for advanced detection and missile interception. The funds will also be used to purchase arms and military equipment from the United States, as part of Taiwan’s ongoing efforts to deter a potential Chinese invasion.

The special budget is set to be allocated over eight years, from 2026 to 2033, complementing Lai’s broader plan to raise Taiwan’s defense spending to five percent of GDP amid intensifying Chinese threats.

Strategic Goals of Taiwan’s Defence Spending

President Lai emphasized the strategic importance of Taiwan within the first island chain, stretching from Japan through the Philippines, and stressed the need for self-reliant defense capabilities:

“Taiwan, as the most important and most critical part of the first island chain, must demonstrate our determination and take on a greater responsibility in self-defense,” Lai said.

The budget will fund multiple initiatives, including:

• Taiwan Dome multi-layered air defense system to protect military forces, critical infrastructure, and civilians from missile attacks.
• Precision-strike missiles for long-range deterrence.
• Joint development and procurement with the U.S. for advanced military systems.
• Measures to counter psychological and information warfare by China targeting Taiwan’s population and elections.

Defense Minister Wellington Koo described the $40 billion budget as an “upper limit,” highlighting that it will enhance Taiwan’s capability to respond to conventional and unconventional threats.

Regional Security and International Context

The announcement comes amid rising tensions in the Indo-Pacific, including a diplomatic feud between China and Japan. Japanese Prime Minister Sanae Takaichi suggested Japan could intervene militarily if China attacks Taiwan, a remark that drew criticism from Beijing. President Lai framed Taiwan’s defense initiative as part of a broader effort to ensure regional stability and security:

“We hope China can understand that each country in the Indo-Pacific region has a responsibility to its peace and stability… Instead, it has continued to raise threats and attacks toward neighboring countries,” Lai said.

The plan also follows increased pressure from the U.S., with President Donald Trump urging Taiwan to significantly increase its defense spending to enhance deterrence against Chinese aggression.

Military Context and Chinese Pressure

Taiwan has faced daily incursions by Chinese warplanes, navy vessels, and drones, as Beijing seeks to assert military dominance over the island. Lai stressed that the special defense budget is not tied to Taiwan’s trade or tariff negotiations with the U.S., but is a clear demonstration of Taiwan’s commitment to safeguarding its sovereignty.

The investment in the Taiwan Dome and U.S.-sourced weapons systems aims to bolster Taiwan’s joint combat readiness, missile defense, and asymmetrical warfare capabilities, ensuring the island can respond effectively to potential Chinese attacks while maintaining regional stability.