Washington Draws a Hard Line: Taiwan Must Pass $38.5B Defense Budget

A proposed NT$1.25 trillion ($38.5 billion) special defense budget remains stalled in Taiwan's legislature, caught in a high-stakes standoff between opposition parties seeking massive cuts to domestic drone procurement and a military establishment warning that such reductions would leave newly restructured combat units effectively disarmed.

The Kuomintang (KMT) and the Taiwan People's Party (TPP) have floated several alternative budget versions in recent months. One KMT proposal would allocate NT$380 billion to cover eight approved U.S. arms sales worth $11.05 billion scheduled for delivery by the end of 2025. Another version proposes NT$800 billion to cover a potential $20 billion in future U.S. sales reported by foreign media.

Crucially, opposition lawmakers want to strip the procurement of 200,000 domestically produced drones and unmanned vessels from the special budget, shifting them instead to the annual defense budget. They argue that drone technology evolves too rapidly to justify massive, long-term bulk purchases that could quickly become obsolete. （Related： Exclusive | Soprano Nadine Sierra: ‘It’s Sort of an Olympian Thing We Do’ ｜ Latest ）

However, the Ministry of National Defense (MND) strongly opposes the cuts, arguing the 200,000 figure is not arbitrary. According to military sources, the number stems from extensive Joint Assessment Office simulations designed to create a comprehensive, multi-layered kill network. The strategy relies on large-scale drone swarms to systematically degrade enemy air defenses and capabilities before ground engagements—a tactic proven highly effective in the Russia-Ukraine war and recent Middle East conflicts.

Restructured Marines Left 'Empty-Handed'

Removing the unmanned systems from the special budget would have immediate, crippling operational consequences for Taiwan's defense forces.

The military recently restructured the Marine Corps' 66th Brigade—tasked with defending the greater Taipei capital region alongside military police—by eliminating its traditional tank and artillery battalions in favor of drone and fire support units. The 99th Brigade is slated for a similar transformation.

Military sources warn that these units have already surrendered their heavy weapons. If the drone procurement is blocked or delayed by shifting it to an already constrained annual budget, the restructured brigades would be left "empty-handed." Without the drones, officials warn, the 66th Brigade cannot fulfill its central garrison duties, leaving the capital's defense network severely compromised. （Related： Exclusive | Soprano Nadine Sierra: ‘It’s Sort of an Olympian Thing We Do’ ｜ Latest ）

Industrial and Budgetary Hurdles

The MND also pushed back against the opposition's argument. Officials noted that while drone hardware remains relatively stable, it is the communication, navigation, and anti-jamming software that evolves rapidly. Consequently, the military's procurement contracts require bidding manufacturers to provide ongoing software and module upgrades throughout the lifecycle of the systems.

Furthermore, shifting the massive drone order to the annual budget is structurally unfeasible. Taiwan’s central government budget is tightly bound by legally mandated spending minimums for education, science, and social welfare. A sudden influx of drone procurement costs—estimated at NT$60 billion annually over five years—would crowd out funding for other critical defense programs, such as domestic submarine production and next-generation frigates.

Large, guaranteed orders through the special budget are also deemed essential to entice domestic manufacturers to invest in the U.S.-backed "non-red" (non-Chinese) supply chain. Without substantial upfront commitments, local defense contractors are unlikely to absorb the financial risks of scaling up production to meet military needs. （Related： Exclusive | Soprano Nadine Sierra: ‘It’s Sort of an Olympian Thing We Do’ ｜ Latest ）

Logistical Flaws and U.S. Pressure

The military also highlighted logistical flaws in the KMT's proposal to only fund the U.S. price quotations for arms sales. U.S. congressional notifications cover the weapons systems but do not include the costs of domestic supporting infrastructure, such as fortifications, vehicle shelters, and logistics centers. Passing a budget that only covers the weapons themselves would leave the MND without the necessary facilities to house and maintain the equipment.

Looming over the domestic political battle is intensifying pressure from Washington. Since the Lunar New Year, the American Institute in Taiwan (AIT) has repeatedly dispatched high-level officials to meet with opposition lawmakers.

According to sources familiar with the discussions, the U.S. has adopted a hardline stance, explicitly demanding that the legislature pass the full NT$1.25 trillion special budget without opposition reductions by March 24, 2026.

With Washington drawing a firm line, it remains to be seen how the KMT and TPP will navigate the intense U.S. pressure while attempting to satisfy their domestic political bases. （Related： Exclusive | Soprano Nadine Sierra: ‘It’s Sort of an Olympian Thing We Do’ ｜ Latest ）