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Key insights
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Increased Defense Spending: Taiwan plans to boost defense spending significantly to deter Chinese aggression.
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U.S. Support: The U.S. welcomes Taiwan's defense budget as a step towards enhanced security.
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Political Challenges: The defense budget may face opposition in Taiwan's parliament from rival parties.
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What happened
On November 26, 2025, Taiwan's President William Lai Ching-te announced a significant $40 billion defense budget aimed at enhancing the island's military capabilities over the next eight years. This decision comes amid escalating tensions with China, which claims Taiwan as its territory. Lai stated that the goal is to create a defense system that can permanently safeguard Taiwan's democracy. The budget will fund new arms purchases from the U.S. and improve Taiwan's asymmetrical warfare capabilities. Lai's plan is in response to U.S. calls for increased defense spending, with Taiwan aiming for over 3% of its GDP next year and 5% by 2030. However, the proposal may face hurdles in parliament, where the opposition Kuomintang party holds significant influence and has previously opposed such spending. Lai's announcement also coincides with a diplomatic spat between Japan and China regarding Taiwan's security.