At the Annual Shangri-La Dialogue in Singapore on May 31, US Secretary of Defense Peter Hegseth noted that, “...any attempt by Communist China to conquer Taiwan by force would result in devastating consequences for the Indo-Pacific and the world. There’s no reason to sugarcoat it. The threat China poses is real.” Secretary Hegseth then punctuated his comment with, “...and it could be imminent.”
Since the end of the Obama and Ma (馬英九) presidencies, the United States and Taiwan governments have sought to inject increased resources and urgency into the defense of Taiwan. The stakes could not be higher. Contrary to what was claimed in recent US congressional testimony, a successful attack on Taiwan by People’s Liberation Army (PLA) forces would represent existential issues both for the United States and for many other countries.
Throughout his first term, and now in the nascent periods of his second term, President Trump has consistently demanded that America’s partners and allies be net contributors to their own defense, not net consumers of American power. This means raising defense spending as a percentage of GDP, thereby empowering countries to modernize their militaries and meet the threats posed in their theaters — primarily by Iran, Russia, and the Chinese Communist Party (CCP).
Former president Tsai Ing-wen (蔡英文) oversaw a near 80 percent increase in defense spending over her 8 years, peaking at 2.4 percent of GDP. President William Lai (賴清德) has committed to boosting that commitment further, with a special defense procurement budget later this year that will move Taiwan defense spending to above 3 percent. He noted that this will be a floor, not a ceiling, for future defense spending, as his administration strives toward 5 percent.
The regular defense budget from 2026 through 2029 should produce approximately US$85 million-US$90 billion (NT$2.55 trillion-NT$2.7 trillion) in total defense spending, of which US$30 billion-US$32 billion (NT$900 billion-NT$960 billion) is procurement funds embedded within the budget. Additionally, President Lai’s commitment to a special budget on defense procurement should produce a financial pot of approximately US$18 billion (NT$540 billion) over the next 4 years. This should produce a total procurement budget from 2026-2029 of approximately US$48 billion-US$50 billion (NT$1.44 trillion-NT$1.5 trillion) for domestic and foreign defense procurement.
Taiwan is certifiably moving into a higher gear to respond to the threat posed by the CCP. They are offering a massive surge in available resources, while also responding to the American demand that it contributes more to its own defense. But how should the money be spent?
Since 2020, the last year of President Trump’s first term, and through the Biden Administration, the cadence of arms sales to Taiwan has been impressive. However, the scope of sales has been narrow and focusing exclusively on the so-called asymmetric approach to a kinetic D-Day style invasion of the island. While the word “asymmetric” is highly subjective, in this case it is frequently used to frame platforms and systems that promote a non-conventional approach to the island’s defense, with cheaper, mobile, and ubiquitous weapons and systems deployed across the island. The Biden Administration took a dim view of any requests that do not fall under that definition. In the spring of 2022, they ended efforts to procure M109s, E-2Ds, and MH-60Rs while killing off a domestic program to develop a new fighter to replace the island’s Vietnam War era F-5s and the domestically built Indigenous Defense Fighter (IDF).
As noted, America has pressed Taiwan to address only a D-Day style kinetic attack through asymmetric means, dismissing — until very recently — the importance of responding to grey zone, blockade, and quarantine threats to the island’s sovereignty. Taiwan acquiesced to that approach, because what choice did it have? While the volume and value of sales dropped under President Biden, the cadence of sales continued, albeit with a focus on munitions and sustainment of legacy systems.
In the coming weeks, the Trump and Lai administrations will meet for annual defense talks. There they will agree on a procurement game plan for the coming four years, so the approximately US$48 billion+ in defense procurement will be allocated under an agreed upon approach. Taiwan will be hard pressed to spend that much money on so-called asymmetric platforms and systems, but US policy remains rigidly dogmatic on this subject — even in the face of escalating PLA blockade exercises, expanding coast guard harassment, and extensive grey zone activities.
The so-called asymmetric approach to Taiwan’s defense is incompatible with Strategic Ambiguity, the US’s legacy approach to Taiwan’s defense. If the US is going to continue to deny Taiwan needed equipment because it doesn’t fit a narrow definition of what it believes is required for the island’s defense — while continuing to be ambiguous about where and how it would defend the island — increasingly large gaps in the island’s defenses are going to open if they haven’t already. New vulnerabilities emerge if America supports only some of the challenges Taiwan faces and not all of them.
The concern is that the US will demand Taiwan spend the bulk, if not all, of its new procurement funds on more of the same; so-called asymmetric priorities for sustainment of legacy equipment, NASAMS, HIMARS, CDCMs, and munitions. These are all worthy areas, but they have low utility when addressing the expanding threat Taiwan faces in other domains such as blockade, quarantine, and grey zone. You cannot use HIMARS to break a blockade or disincentivize grey zone activity. You cannot spend US$50 billion on munitions and sustainment.
To fully utilize the next four years’ budget allocation, the US and Taiwan should broaden their outlook to address all the domains challenging Taiwan. Significant resources should be applied to all these areas.
First, Taiwan needs to significantly upgrade its combat capabilities in its territorial waters by accelerating domestic ship production. That means new ships of varying tonnage, including larger ships, with the ability to patrol and hunt the PLAN above and below sea. Taiwan has excellent shipyards and can significantly expand its fleet while also building and integrating American and European sub-systems and munitions to provide the combat capability required. Taiwan’s Anti-Submarine Warfare (AWS) capabilities need to be upgraded too, to provide for a legitimate capability. This will support the expansion of the domestic defense industry while integrating foreign technology and platforms.
Second, Taiwan’s coast guard has some good capabilities but remains too small. Improved training with the US is helpful, but the program needs to be expanded. While domestic ship building capacity should prioritize naval construction, there could also be some capacity set aside for new coast guard construction, particularly in smaller yards. In addition, both sides could look hard at transferring some US Coast Guard vessels to bolster fleet numbers. The US has a large fleet of Sentinel-class cutters that would help greatly by patrolling coastal waters and interdicting the increasingly prevalent Chinese vessels close to shore.
Third, Taiwan will have the largest fleet of modern F-16s in the Indo-Pacific by 2027, and they will play an essential role in managing the island’s air space. That said, the F-16s need to be managed in the grey zone or battle space. Claims that Taiwan’s F-16s will be wiped out on the first day lack credibility. Ukraine’s air force continues to function under heavy pressure, and the forward deployment of America’s own fighters to frontline bases in Japan, South Korea, and even Guam suggest American war planners believe they can survive PLAF and PLAN attack. As Taiwan’s E-2Ks reach the end of their service life, a replacement platform should be procured to provide Taiwan a tactical battle management platform with early warning, command, and control functions.
Fourth, co-production and co-development should be a cornerstone of expanding and deepening defense industry cooperation, with Taiwan’s participation in the Partnership for Indo-Pacific Industrial Resilience (PIPIR) a priority. It is designed to strengthen the defense industrial base by expanding capacity, and to accelerate deliveries to meet the surging threat from the CCP. As Secretary Hegseth noted on May 31, the Australians are building out a capacity to produce Guided Multiple Launch Rocket System (GMLRS) compatible with HIMARS. As Taiwan expands its HIMARS fleet, it will need access to deep magazines of these munitions, and the ability to produce them on island would be a huge plus. It is by no means the only option; Taiwan produces and integrates much of the world’s most complex commercial technology and should be quite capable of investing in production lines for needed defense products, produced under license, while expanding partner and allied capacity.
Fifth, space systems are a growing area of need. Taiwan’s patchwork quilt of approaches to providing space-based intelligence, surveillance and reconnaissance (ISR) coverage along with secure communications is undermining myriad areas of force modernization. While Starlink has been a huge boost to Ukraine’s war effort, Elon Musk’s comments regarding Taiwan sovereignty and Tesla’s supply chain into China complicate the prospect of deployment on the island.
Sixth, lift. In 2010, Taiwan bought 60 Black Hawk helicopters for the army. However, 15 were allocated to the Ministry of the Interior and a further 15 to the air force. The requirement for the army is 120 helicopters. A significant increase in the number of Black Hawks for both disaster relief as well as war time operations is a necessity. Additionally, Taiwan should be looking to develop a set of autonomous lift vehicles that can supply the entire island with munitions, supplies and other materials during war time. This is a significant opportunity for the island’s nascent autonomous drone industry given the absence of major international players.
The Trump Administration is signaling that it wants partners and allies to step up defense spending, and Taiwan is responding positively. The question becomes whether the US is going to put the island in a situation where it’s denying defense procurement requests because of an overly narrow threat assessment, thereby resulting in Taiwan’s failure to breach 3 percent and above. Taiwan would be increasingly vulnerable to both PLA attacks in areas of emerging vulnerability, and US political attacks for failing to surpass 3 percent in defense spending.
Let’s hope not.
Rupert Hammond-Chambers is the president of the US-Taiwan Business Council (USTBC), a senior advisor at Bower Group Asia and sits on the board of The Project 2049 Institute.
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