Taiwan’s President, Lai Ching-te has disclosed a special $40 billion budget for arms purchases, including to build a Taiwan Dome, an air defense system with high-level detection and interception capabilities, as the US pressures the island to increase its defense spending.

Currently, Taiwan has set an increase in its defence budget to 3.3% of its GDP for 2026, allocating $949.5 billion New Taiwan Dollars ($31.18 billion). US President, Donald Trump has demanded Taiwan raise its defense spending to as much as 10% of GDP, a proportion well above what the U.S. or any of its major allies spend.

The special budget for arms purchase will be allocated over eight years, from 2026 to 2033, and comes after Lai already pledged to raise defense spending to 5% of the island’s GDP, as part of an ongoing strategy amid China’s threats of invasion.

In his address, Lai made reference to China’s threats to Taiwan and the Indo-Pacific region, saying that they are “escalating.”

“Recently, various types of military intrusions, maritime gray zones and disinformation campaigns have been occurring in Japan, the Philippines and around the Taiwan Strait, causing deep unease and distress to all parties in the region.”
Lai Ching-te

Lai added that Beijing had intensified its “infiltration and influence campaign,” using a range of tools to interfere in Taiwan’s politics and society as it seeks to sway public opinion and undermine the island’s democracy. He also cautioned “unprecedented military buildup” by Beijing and “intensifying provocations in the Taiwan Strait, in the East and South China Seas, and across the Indo-Pacific.”

Referring to the string of islands stretching from Japan’s East China Sea islands through the Philippines in the Pacific Ocean, Lai asserted, “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.”

Taiwan, a self-ruled island, is claimed by China. In recent years, China has deployed warplanes, navy ships and drones toward the island on a daily basis in military exercises as part of its efforts to exert pressure.

Lai had previewed the announcement in an op-ed for an American news agency, saying that the special budget would be used to purchase arms from the US. However, he told reporters today that the budget has nothing to do with the government’s ongoing tariff negotiations with the US.

Wellington Koo, Taiwan’s Minister of national defence, said that the $40 billion is an upper limit for the special budget and that it will be used to buy precision-strike missiles and toward the joint development and procurement between Taiwan and the US of equipment and systems.

Taiwan To Increase Defence Against China’s “Psychological Warfare”

Lai also said his government would focus on finding ways to increase its defense against Beijing’s “psychological warfare” as China attempts to “weaken our unity.” He said that the government will monitor and increase public awareness of China’s interference attempts during major events and elections.

Lai also commented on an escalating feud between China and Japan, which started after Japan’s conservative leader said that the country might get involved militarily if China makes a move against Taiwan. The remarks incensed Beijing.

Lai stated that Japanese Prime Minister, Sanae Takaichi‘s comments appeared to be focused largely on the stability of the region.

“We hope China can understand that each country in the Indo-Pacific region has a responsibility to its peace and stability, and that we especially hope China, as a major power in the region, would also demonstrate the responsibilities of a major power.” Lai said.
Lai Ching-te

Instead, he said, China has continued to raise threats and attacks toward neighboring countries. “This is not the way a responsible major power acts,” he added.