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On May 8, Taiwan’s Legislative Yuan broke a grueling six-month stalemate by passing a landmark $25 billion defense budget, catching many observers off guard. The vote brought sudden end to an agonizing legislative deadlock that had pushed U.S.-Taiwanese relations to the edge. For months, long-simmering frustration in Washington over Taiwan’s defense trajectory has threatened to boil over, catalyzed by an unprecedented bipartisan open letter from U.S. senators, demanding that Taiwan authorize the pending defense packages. The optics grew even more fraught as Cheng Li-wun, the newly elected chairwoman of the Kuomintang, Taiwan’s largest opposition party, embarked on a controversial “peace” mission to Beijing to meet with General Secretary Xi Jinping. Media reports have amplified Cheng’s appeals for dialogue alongside her critiques of Washington. This coverage fuels a growing narrative in Washington that the opposition’s refusal to pass President Lai Ching-te’s $40 billion special defense budget, coupled with high-profile overtures to Beijing, signals a compromised ally unwilling to invest in its own survival.
However, this narrative oversimplifies Taiwan’s internal realities, risking misdiagnoses of both the problem and the appropriate policy response. The country’s defense trajectory is the result of complex domestic political bargaining rather than a matter of national “will to fight.” While U.S. media may frame the budget’s passage as a validation of Washington’s pressure campaign, a closer look at the legislative fine print suggests a strained compromise rather than a clear-cut triumph. The $15 billion reduction from the original request and the strict earmarks to U.S. hardware — sidelining the domestic innovation critical to a true “porcupine” strategy — underscore the remaining hurdles in Taiwan’s domestic politics.
Moving forward, Washington should transcend seeing Taiwan through the narrow prism of its own China policy and develop a more granular understanding of the domestic pressures inherent in a vibrant, often divided, democracy. Only by recognizing Taiwan as an autonomous actor with its own internal logic can U.S. policymakers move beyond periodic frustrations and help resolve the legislative bottlenecks that continue to threaten mutual security.
Taiwan’s defense budget impasse began with a series of U.S. demands that seemed strategically unattainable from Taipei’s perspective. During his March 2025 Senate confirmation hearing, Undersecretary of Defense for Policy nominee Elbridge Colby articulated a hardline burden-sharing stance, suggesting that with Beijing’s intensified military buildup, Taiwan should spend ten percent of its GDP on defense. To many Taiwanese policymakers, the sheer scale of this demand bordered on fiscal irresponsibility. With a 14.7 percent tax-to-GDP ratio in 2025, a 10 percent defense allocation is virtually impossible. Jumping from the current 2.45 percent would require a wartime mobilization that would defund major domestic social welfare and healthcare programs. For historical context, the United States only reached such levels during the height of the Korean and Vietnam Wars.
In an attempt to signal resolve while remaining tethered to economic reality, in November 2025, Lai pledged a compromise target of 5 percent of GDP for defense spending by 2030. To realize this vision, he proposed a landmark $40 billion, eight-year “special defense budget,” which aimed to bypass standard legislative caps and long processes, and accelerate procurement from the United States. Washington responded favorably to Lai’s proposal, with the State Department offering welcoming comments and a bipartisan coalition of lawmakers praising the pledge.
From Washington’s perspective, the budget proposal should be a straightforward sell to the Taiwanese public, assuming Taipei has both the fiscal latitude to raise taxes and a clear strategic necessity for the investment. Yet, in reality, it faces a steep uphill battle. Decades of defense neglect have stalled modernization, entrenching institutional inertia. While the current ruling Democratic Progressive Party has reversed this trend — overseeing a 61 percent spending increase since 2019 — this trajectory is likely unsustainable. The political energy required to overcome years of stagnation has now collided with a public and legislature increasingly wary of further spending increases. This resistance was already surfacing in 2021, when the Tsai Ing-wen administration passed an $8.6 billion special budget. That effort marked the beginning of a contentious domestic debate over the sustainability of such rapid increases.
In spite of Taiwan’s lean tax-to-GDP ratio, the climb of this ratio to a 26-year high in 2025 has induced a sense of fiscal exhaustion. Adding a substantial increase to years of steady growth is a daunting political task, let alone a proposal like Lai’s, which is four times larger than previous special budgets. The political reality further complicates this ambition: Following the 2024 elections, Taiwan entered an era of divided government where the ruling party lacks a legislative majority. The Legislative Yuan is now controlled by a coalition of Kuomintang and the Taiwan People’s Party, whose eight seats grant it a decisive “kingmaker” role. This structural shift has erected a formidable barrier: After the opposition stalled the special defense budget eight times, the bill finally moved to the committee stage on March 6, 2026, and endured two months of intense scrutiny before its sudden passage just ahead of the high-stakes Trump-Xi summit.
Facing a hostile legislature, the Lai administration has struggled to reconcile this expenditure with a cohesive national security vision, particularly regarding fiscal trade-offs. Despite budget surpluses driven by semiconductor revenues, the ruling party has yet to present a viable “guns versus butter” strategy to reassure the public. With little public appetite for further tax increases in the near term, significant defense hikes are perceived as a zero-sum threat to prized social programs, rendering them politically untenable. While previous administrations used “special budgets” to circumvent these constraints in allocating surplus revenues to fund big-ticket items like F-16s outside the annual cycle, Lai lacks the legislative majority his predecessor enjoyed to push through such spending.
In an effort to win over skeptics, Lai has framed the special budget as a “strategic investment” in economic security, arguing it will boost domestic defense industries and innovation capacities. However, this narrative has failed to gain traction with both the Taiwanese public and the domestic industrial sector. The opposition likened Lai’s proposal to paying Washington a “protection racket” rather than a necessary investment in the country’s security. Most notably, retired Lt. Gen. and former Kuomintang legislator Herman Shuai dismissed the proposal as a “fantasy,” arguing the plan neither boosts immediate military readiness nor guarantees American intervention during a crisis.
The deadlock lasted for more than six months because the Kuomintang-led opposition coalition had successfully stalled the budget by weaponizing long-standing issues in both U.S. foreign military sales and Taiwan’s own defense spending record. Lai’s proposal includes foreign military sales and ambitious domestic projects intended to bolster long-term defense innovation and production capabilities. The opposition’s critique emphasized secret, runaway spending, leveraging deep-seated skepticism to frame the proposal as a “blank check.” There are two sides to this line of attack. First, a significant initiative such as defense spending should not be passed through “special budgets,” which the opposition claims are opaque by design and shielded from rigorous legislative oversight. Second, they tap into public distrust of domestic procurement, pointing to the corruption scandals that have historically plagued the defense industry.
An opacity narrative has been effective in part because the Ministry of National Defense is pivoting its focus toward acquiring critical but complex capabilities like command, control, communications, and computers (C4). While such systems are essential for national self-defense, their upfront costs are difficult to foresee, and their value is hard to visualize. By contrast, legacy platforms like the indigenous Narwhal submarine, while expensive and of questionable strategic utility, offered a physical manifestation of defense spending. By moving away from visible hardware and toward less visible software and systems, the administration has made its procurement approach vulnerable to claims that money is being funneled into a black hole. The political opposition has also pointed to well-documented and high-profile delivery delays of U.S. arms sales to bolster its criticism of the spending increase.
Standing in stark contrast to the “porcupine” vision, Kuomintang Chairwoman Cheng championed a $12 billion budget — a significantly downscaled framework, though still larger than the special budget passed in 2021. This approach funds only those weapons systems formally approved by the United States, effectively sidelining the early-stage research and development necessary for long-term self-sufficiency. Cheng claimed this version as a constraint on “blank check” spending and, more importantly, signified the return to a lower-profile defense posture that prioritizes de-escalation to maintain peace.
Cheng’s trip to China was intended to cast the Kuomintang as a peaceful alternative to the Lai administration. However, it exposed severe internal fractures, pitting her accommodationist platform against the party’s moderate wing. Driven by intense public pressure to maintain a strong national defense, opposition centrists eventually overrode Cheng’s minimalist budget and engineered a compromise version, proving that domestic political dynamics are ultimately shaping Taiwan’s cross-strait strategy.
Cheng’s visit channeled former president Ma Ying-jeou’s more conciliatory approach as a counterweight to Lai’s defense buildup. During her meeting with Xi, Cheng called for the “institutionalization of peace,” while calling the United States a “catalyst” for conflict. Notably, she appeared willing to back down from asserting Taiwan’s right of autonomy, making claims that suggested alignment with Beijing’s political framework.
The sudden passage of the defense budget exposes domestic pressures facing Cheng that U.S. officials ignore. Cheng is arguably the least experienced and least politically connected leader in Kuomintang’s modern history to visit China. As a former Democratic Progressive Party member who flipped to Kuomintang, Cheng lacks an established base of internal allies within the party. This precarious standing was evident in her chairmanship victory, which she secured by only a razor-thin margin. Furthermore, by embracing a “one China” vision, she has tethered her political fate to an unpopular position, as most of the Taiwanese public prefers the status quo. Despite Cheng’s claim that the visit was a diplomatic success, citing Beijing’s subsequent “ten measures” as a gesture of goodwill, public and internal party skepticism runs deep. Kuomintang voters, especially the youth, disfavor such an “engagement-first and defense-second” approach reminiscent of the Ma Ying-jeou era, seeing it as increasingly disconnected from the reality of Beijing’s aggression toward Taiwan. Recent polling shows that only 34 percent of the Taiwanese public approved of Cheng’s visit, while a majority believed it did little to improve Taiwan’s security situation.
The division within the Kuomintang was evident when Taichung Mayor Lu Shiow-yen — a 2028 presidential prospect — conducted an 11-day tour of the United States before Cheng’s Beijing visit. Lu’s visit served as a strategic signal to both U.S. policymakers and Kuomintang moderates that Cheng’s overtly pro-Beijing posture is an electoral liability. By positioning her faction as a more credible steward of deterrence, Lu showed that the opposition is far from a monolith.
This dynamic reflects the mounting public opinion pressure Kuomintang faces for blocking arms deals. According to the latest poll from Taiwan’s Academia Sinica, approximately 70 percent of the Taiwanese public and up to 61 percent of opposition-leaning voters supported increased defense spending. Furthermore, nearly 51 percent of the public supports raising defense outlays to three percent of GDP, even when such an increase is framed as a U.S. demand.
To escape the “mainstream trap”— the political risk of being perceived as entirely anti-defense— the opposition coalition ultimately converged to pass the $25 billion “middle ground” budget on May 8. Initially championed by Kuomintang centrist leaders like Lu and Eric Chu, this pragmatic framework authorizes funding for key U.S. procurement items contingent on final agreements, ensuring Taiwan can remain flexible. The bill allowed Kuomintang to reassure the public of its ability to balance military readiness with diplomatic engagement, while the Taiwan People’s Party backed the compromise to maintain its focus on fiscal accountability.
Passage of the special budget showed that Cheng was fighting a defensive war in a society where voters no longer trust accommodation alone to guarantee Taiwan’s security. Without tangible “peace dividends,” such as a visible reduction of People’s Liberation Army coercive activity toward Taiwan, party centrists are likely to use the fall 2026 mid-term election to challenge her chairmanship. The divide between the pro-Beijing wing and the moderate wing will continue to shape Kuomintang’s future.
The new special defense budget is a significant yet incomplete victory for Taiwanese national security. While the funding is far greater than previous allocations, the $15 billion decrease from Lai’s original proposal extracts a strategic price by stalling domestic innovation and entrenching reliance on U.S. arms sales, resulting in a compromise that undermines the very “porcupine” resilience Taipei seeks to build.
Scrapping the Strong Bow system — the core of the multi-layered air defense “T-Dome” system — exposes Taiwan to saturation strikes, especially considering U.S. Patriot missile production lags. Similarly, gutting domestic drone initiatives cedes a critical asymmetric edge and a vital industrial opportunity. By failing to foster a local alternative to China’s DJI that holds a 90 percent monopoly, Taipei risks remaining tethered to a supply chain controlled by its primary adversary. Worse still, the reductions risk being perceived as wavering resolve. Indeed, the U.S. State Department noted that while the budget’s passage is encouraging, “further delays in funding the remaining proposed capabilities are a concession to the Chinese Communist Party.”
However, as this analysis suggests, Taiwan’s defense trajectory is shaped less by a lack of resolve than by the inherent friction of domestic politics. Consequently, Washington should move beyond a naming-and-shaming campaign and instead help build a durable consensus for the country’s defense. This requires working with the Lai administration to engage the Taiwanese public directly through transparent, real-time updates on the foreign military sales process. By challenging the “blank check” narrative and clarifying the true status of weapons backlogs, U.S. officials can help resolve the domestic bottlenecks that continue to threaten mutual security in the Indo-Pacific.
A sophisticated U.S.-led messaging campaign in Taiwan has become a strategic necessity. U.S. officials should engage directly with the public through local media and budget watchdogs, even in Mandarin. This engagement could help convey both the technical necessity and the strategic value of complex, “non-shiny” programs. For example, in an interview with the Taiwanese media, the American Institute in Taiwan Director Raymond Greene urged the Legislative Yuan to pass the defense budget and subsequently praised the opposition’s efforts in building consensus towards the special budget. More engagement like this should come directly from the highest levels of the U.S. government.
A shift toward high-visibility public engagement is not just about transparency — it is urgently needed amid the rising skepticism and distrust of America’s credibility. In an era of heightened anxiety, such visibility is essential to proving the U.S. commitment to Taiwan’s defense. Reassuring the Taiwanese electorate is the only way to neutralize the weaponized doubt that disrupted the legislative process. By treating Taiwan as a vibrant democracy rather than a subset of its China policy, Washington can transform a stalled budget into a sustainable foundation for regional stability.
Jessica C. Liao is an associate professor of Asian studies in the Department of National Security and Strategy at the U.S. Army War College and a non-resident senior fellow at the Foreign Policy Research Institute. Previously, she was an associate professor of political science at the School of Public and International Affairs at North Carolina State University. She also served as a 2020 to 2021 Wilson China Fellow. In 2022, she served as an economic development specialist at the U.S. Embassy in Beijing, where she focused on China’s external engagement with Belt and Road Initiative countries.
Kyle Marcrum is an Army officer and director of the China Landpower Studies Center at the U.S. Army War College’s Strategic Studies Institute. He served as the senior defense representative and chief of liaison affairs at the American Institute in Taiwan from 2022 to 2025.
Disclaimer: The authors’ views expressed here are personal and do not reflect the official policy or position of the Department of the Army or any U.S. government entity.
Image: KOKUYO via Wikimedia Commons
