Is Taiwan Really America’s ‘Cash Cow’? Inside the $20 Billion Arms Sales Dispute

On Christmas Eve, Taiwan's Ministry of National Defence posted a light-hearted message announcing that 'Santa Claus' had passed through Taiwan's airspace at 10:41 pm. Military officials jokingly noted that they had 'coordinated with the Indo-Pacific Command'. However, behind this light-hearted facade, defence officials are facing mounting pressure due to foreign media reports citing tracking data from George Mason University which claim that approved but undelivered US arms sales to Taiwan have exceeded USD $20 billion (approximately NTD $697.3 billion). This has fuelled controversy that Taiwan is being treated as a 'cash cow' paying for weapons that America fails to deliver.

Due to the complexity of military procurement, defence officials initially struggled to clarify the situation. However, senior leadership at the Ministry of Defence strongly refuted the claims, stating: 'This figure doesn't exist — the data is completely wrong.' They emphasised that numerous weapons systems had already been delivered and stressed that only USD $2 billion (approximately NTD $60 billion) remained in Taiwan's FRB account — the military procurement account that Taiwan maintains with the US Federal Reserve Bank.

Senior military officials indicated that deliveries of the M1A2T tanks will be completed by 2026, with all 18 High Mobility Artillery Rocket Systems (HIMARS) expected to arrive by early 2027. In terms of missiles, the delivery of Javelin and TOW missiles — which will significantly enhance Taiwan's asymmetric warfare capabilities — has already begun, while the delivery of the 14 units of the Volcano mine-laying system will start in 2026.

Defence Ministry officials revealed that the United States has increased the congressional notification threshold for arms sales from USD$14 million to USD$25 million. Although this may seem a modest increase, it means that certain service components, including training improvements, technical assistance and major weapon spare parts, can bypass extensive procedures. This enables Taiwan to make rapid purchases based on annual requirements and gain flexibility in capability enhancement.

Military officials have noted that the US now treats Taiwan as being on a par with 'NATO Plus' members, reducing the notification period to Congress from 30 to 15 days. Although 15 days may seem a short period of time, the key development is that the current Secretary of Defense, Pete Hegseth, is pursuing defense acquisition reform. He plans to transfer the Defense Security Cooperation Agency (DSCA) to the acquisition, logistics and technology office, enabling direct integration with US defense contractors and operational processes and eliminating redundant policies and acquisition procedures. Officials stated that 'front-end procedural reforms could save months of processing time'.

A seasoned military procurement official cited the longest case he had witnessed: the procurement of heavy torpedoes for Hai Lung-class submarines, which took two years due to departmental disconnects and bureaucratic redundancy. Consequently, the US is eliminating these inefficiencies. In essence, the US is reducing the stringency and timeframes of congressional review while shortening the front-end review and contracting processes of the Defense and State Departments to accelerate operations.​

Taiwan's defense leadership expressed frustration after reading morning reports claiming US arms sales to Taiwan reached nearly $700 billion as of October. The official angrily declared, "This figure doesn't exist," asserting that data from both the Cato Institute and George Mason University contains errors.

Officials explained that these calculations use "congressional notification" amounts rather than "actual pricing amounts," creating significant discrepancies. Congressional notification totals reach $21.541 billion, while actual pricing amounts total $20.022 billion—a difference of approximately NT$46 billion.

The military leadership cited the case of the National Advanced Surface-to-Air Missile System (NASAMS) from approximately one month prior. Originally budgeted at over NTD$30 billion and notified to Congress at that price, the pricing letter slightly reduced the amount to NTD$29 billion;  post-negotiation costs decreased by another NTD$4.9 billion. "Price variations demonstrate the substantial discrepancies—the claimed USD$600+ billion figure simply doesn't exist."

The official explained that among these cases, one item "isn't actually a military purchase" but rather US "military aid" not funded by Taiwan. Congressional notifications don't specify military aid, but including such assistance in calculations creates massive misrepresentation.

Military leadership noted that Taiwan has abandoned previous practices of paying according to pricing letters and now pays based on actual execution schedules. The process requires funds to first enter Taiwan's FRB account in the United States, after which Taiwan pays from the military project account only upon the US completion of specified work. Money transfers to the US only after work completion, but funds remain in Taiwan's FRB account—earning interest—until the US fulfills requirements and Taiwan approves payment.

Defense Ministry officials stated that current military procurement progress shows "no difference compared to any period over the past 25 years," with emerging technologies and drone deliveries actually accelerating. Regarding claims of serious delays, officials questioned whether the previous 150 F-16 fighters were delivered any faster, concluding they were not.

​The military leadership disclosed that the 25 cases currently under execution have a total value of USD $30.1 billion, representing all ongoing projects from 2007 to the present day. This constitutes accurate data. Of these, TOW missiles have been delivered; M1A2T production is complete, with delivery scheduled for 2026; HIMARS systems will arrive progressively in 2027; and Volcano mine-laying systems will be delivered in 2026, pending successful completion of testing. Attack drone systems have been delivered; Link 11 and 16 installations are complete; reconnaissance pods have been delivered; and MQ-9B systems are scheduled for installation in 2026.

Military officials noted that the remaining cases comprise newly submitted projects. TPS-77, TPS-78 and HADR-117 radar contracts remain unsigned as negotiations are ongoing. Officials emphasised that, of the $19 billion already remitted for related cases, over $17 billion has actually been delivered, leaving $2 billion (approximately NTD$ 60 billion) in FRB accounts awaiting payment.

The official stated that this remaining sum is slightly lower than the amounts reported to the Legislative Yuan last month, due to an increase in the number of F-16V aircraft entering production lines from 41 to 56. 'It's like pre-construction housing — new systems are pre-construction, with contractors receiving payment upon reaching certain milestones, not after complete delivery.'

Military leadership explained that external observers easily confuse "total case amounts" with "actual payments." The Defense Ministry had informed the Legislative Yuan that Taiwan suspended F-16V payments in March 2025 when only four aircraft were in assembly, failing to meet the required 32 aircraft threshold. Taiwan declared it would withhold payments until production line progress improved, and now 56 aircraft have entered production.

Military officials noted that "heavy torpedoes" presented unavoidable challenges, as heavy torpedoes are extremely low-consumption items. Not considering naval warfare, how many live heavy torpedo Mark-48s have been fired in exercises over the past decade? The biennial Rim of the Pacific exercises include "sinking exercises" firing two torpedoes to sink target vessels. "That's it—remaining usage rarely involves live heavy torpedo firing, mostly torpedo handling."

The official explained that low consumption and low demand render manufacturing unprofitable for contractors. Fortunately, because Russia and China have significantly expanded military capabilities, many nations are building submarines, reviving torpedo demand. Military leadership noted that Taiwan's heavy torpedo procurement would otherwise be highly pessimistic, having even asked the US whether existing inventory could be retrofitted with new guidance systems. After production lines resumed, Taiwan switched to purchasing new torpedoes.

Military leadership emphasized that regarding funding, budgeting NTD$25 billion doesn't mean consuming NTD$25 billion the following year. Actual military sales cases, such as the F-16V's NTD$245 billion procurement, involved only NTD$4.5 billion in first-year payments. Reviewing budget documents reveals these are reserve funds, with actual production line entry requiring first-year preparation and material costs, raising amounts to approximately NTD$50 billion. Money follows progress schedules rather than complete budgetary allocation. "External claims that the Defense Ministry budgets NTD$11.1 billion and pays another NTD$11.1 billion the following year are simply untrue!"

Complex military procurement issues remain difficult for the general public to understand, making the narrative of Taiwan as a "cash cow" paying America over NT$660 billion without receiving goods perplexing. Military leadership stated that the situation differs entirely, calling such attacks "profoundly unfair" to military personnel engaged in force development and weapons acquisition. Officials noted that negotiation processes with the US involve confidential tactics that cannot be disclosed, but emphasized that amounts represent dynamic data. Claims that Taiwan paid money while America owes extensive military sales "completely contradict the facts."