Taiwan can well afford a $40 billion special defence budget given its booming economy, President Lai Ching-te said on Saturday, citing a U.S. emphasis on collective burden-sharing.
Lai’s proposed spending, which he says is needed to better face a rising threat from China, has been bogged down in parliament, where the opposition, which has a majority of seats, complains that the plans are unclear and says it cannot sign “blank cheques”.
Marking the 30th anniversary of Taiwan’s first direct presidential election, when China fired missiles into the waters around the island hoping to influence the result, Lai said in a speech that his government was determined to defend Taiwan and its hard-won democratic system.
“With Taiwan’s economic growth, we can absolutely afford it,” he said of the eight-year special defence spending plan. “If we look at the United States’ National Security Strategy, the U.S. emphasises collective defence and burden-sharing.”
Tech powerhouse Taiwan, the dominant producer of advanced semiconductors, has boomed thanks to demand for artificial-intelligence applications. Its economy expanded at its fastest pace in 15 years in 2025.
The Trump administration has pushed its allies to boost defence spending, something Lai has enthusiastically embraced.
Lai said Taiwan will use AI to establish a real-time defence system while promoting its defence industry. “In other words, our defence budget is not only a budget for national defence, but also a budget for economic and industrial development,” he said.
On Friday, parliament authorised the government to sign for some $9 billion in arms deals with the United States even though the spending plans have not been approved yet by lawmakers, to ensure contract deadlines are not missed.
China views Taiwan as its own territory and has never renounced the use of force to take the island under its control. Lai rejects Beijing’s sovereignty claims, saying only the island’s people can decide their future
China held its most recent war games around Taiwan in December, and its warships and warplanes regularly operate around the island.
