For too long, Taiwan’s defense procurement has been framed by opposition forces in the Legislative Yuan as a “fiscal burden” or a “protection fee.” The Chinese Nationalist Party’s (KMT) coalition with the Taiwan People’s Party (TPP) has exploited this narrative to block the NT$1.25 trillion (US$39.7 billion) defense bill, using legislative delays as a tool to signal compliance to Beijing while sabotaging the Taiwan-US security partnership. However, this deadlock can be broken by shifting the paradigm from political persuasion to economic motivation. The key lies in a strategy that US President Donald Trump’s administration is uniquely positioned to lead: Turning tariffs into a powerful incentive for national defense.
The core of this strategy is simple yet transformative. The US should establish a mechanism where Taiwanese companies involved in the defense supply chain — whether through manufacturing, component processing or technical integration — are granted substantial tariff offsets on their exports to the US. To qualify, these firms must demonstrate that their supply chains have been completely decoupled from the Chinese market for at least two years. By doing so, defense procurement is no longer just government expenditure; it becomes a “competitive engine” for Taiwan’s most vital industries.
This “incentive-driven defense” model offers three decisive advantages:
First, it shatters the opposition’s political blockade. When the passage of a defense bill is directly linked to the profit margins and global competitiveness of Taiwan’s industrial giants — the very base of the opposition’s financial support — the political landscape changes instantly. Business leaders would no longer sit on the sidelines. When they realize that “blocking defense is blocking profit,” the pressure on KMT and TPP lawmakers to cease their obstructionism would become overwhelming and immediate.
Second, it accelerates the strategic decoupling from China. In the past, many Taiwanese firms hesitated to support defense initiatives for fear of losing market share in China. This mechanism forces a clear-eyed financial choice: Stay tethered to a shrinking, risky Chinese market or align with the US to secure a tariff-free future. This not only bolsters Taiwan’s security, but also completes the supply chain restructuring that Washington has long advocated for.
Third, it is a “zero-cost strategy” for the US taxpayer. This approach does not require congressional appropriations or foreign aid packages. Instead, it utilizes trade policy as a strategic lever to motivate an ally to voluntarily arm itself. It transforms Taiwan from a “recipient of aid” into a “proactive strategic partner” that pays its own way through industrial participation.
Using tariffs as the ultimate incentive for defense procurement is the key to unlocking the current political stalemate. It ensures that national security is no longer an excuse for partisan gridlock, but a guarantee of industrial prosperity. By aligning national defense with corporate profit, Taiwan can bypass the pro-Beijing forces in the legislature and ensure that its defense capabilities are modernized with the speed and efficiency that the geopolitical situation demands.
Joshua Tin is an economist.
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