Taiwanese President Lai Ching-te has unveiled a special defense budget of $40 billion USD (about NT$1.25 trillion) spread over eight years, one of the island’s most ambitious efforts yet to strengthen deterrence against China. The plan, covering 2026 to 2033, will fund major arms purchases, largely from the United States, and bankroll a new multilayered air-defense network known as the “Taiwan Dome”. The system is intended to provide high-end detection and interception against missiles, drones, and aircraft that could be used in a Chinese attack.
The special package comes on top of Taiwan’s regular defense allocation. For 2026, the government has proposed a defense budget of about NT$949.5 billion (roughly $31.18 billion), equal to 3.3% of gross domestic product. Lai has pledged to raise overall defense spending to at least 5% of GDP by 2030, presenting the new fund as a central part of that long-term trajectory.
Announcing the proposal in Taipei, Lai said China’s military pressure and “gray zone” tactics have intensified around the island and in neighboring waters. He pointed to more frequent Chinese air and naval activity near Taiwan, along with disinformation and cyber operations affecting Japan, the Philippines, and the wider Indo-Pacific region, arguing that Taiwan must assume greater responsibility for its own security.
U.S. Pressure And Regional Security Concerns
The move also reflects expectations from Washington that Taiwan shoulder a larger share of the defense burden. The U.S. State Department welcomed the plan, saying it supports Taiwan’s acquisition of “critical defense capabilities” commensurate with the threat from China and praised Lai’s commitment to reach 5% of GDP in defense spending before the end of the decade. At the same time, U.S. President Donald Trump has pushed for even higher levels, at one point urging Taiwan to spend up to 10% of GDP on defense, a proportion exceeding that of the United States and many of its major allies.
Taiwan, a self-governed democracy of about 23 million people that Beijing claims as its territory, has long relied on U.S. arms sales to maintain a qualitative edge over China’s far larger forces. Recent packages have included M1A2T Abrams main battle tanks and upgraded F-16V fighter jets, as well as coastal defense missiles and other precision systems designed to make any invasion attempt more difficult and costly.
Building The ‘Taiwan Dome’ And Asymmetric Capabilities
A cornerstone of the proposal is the Taiwan Dome, also referred to as “T-Dome”, a planned multilayered air- and missile-defense system modeled in part on Israel’s Iron Dome. Beginning in 2026, the project aims to integrate radar and early-warning networks with interceptor missiles and anti-drone systems, creating a defensive architecture able to engage incoming threats at multiple ranges. Officials say the objective is to make it far harder for an adversary to succeed with a large-scale missile barrage at the outset of a conflict.
Defense Minister Wellington Koo has described the $40 billion figure as an upper ceiling for the special budget and said the money will be used to acquire precision-strike missiles, expand joint development with the United States on new systems, and strengthen Taiwan’s ability to sustain a prolonged campaign if deterrence fails. The government is also emphasizing asymmetric capabilities such as mobile missile units, small surface vessels, and unmanned platforms, which many analysts see as more cost-effective than large traditional platforms in a Taiwan contingency.
Political Hurdles And Long-Term Commitments
Although there is broad consensus in Taiwan on the need to bolster defenses, the special budget faces political tests at home. The island’s legislature is controlled by the opposition Kuomintang (KMT) and the smaller Taiwan People’s Party, both of which support stronger defense in principle but have criticized aspects of Lai’s security agenda. Lawmakers are expected to scrutinize the pace of spending and the mix of domestic versus foreign procurement as they debate the proposal.
Some critics worry about the long-term fiscal impact of committing $40 billion in additional defense funding through 2033, particularly as Taiwan confronts an aging population and rising social-welfare costs. Supporters counter that the island has already moved in this direction, pointing to a $9 billion special budget approved in 2021 for weapons procurement, and argue that the new plan extends that earlier effort over a longer horizon.
