"Geopolitical shifts and international upheaval are interconnected. What matters most for Taiwan is reducing its own variables, holding steady — and military procurement and national defense are the top priorities." As Taiwan's defense budget remains deadlocked in the Legislative Yuan, and internal divisions within the Kuomintang (KMT) over procurement costs deepen,Jason Hsu (許毓仁) — who shuttles between Washington and Taipei — could not conceal his anxiety.
A former KMT legislator and now a senior fellow at the Hudson Institute, Hsu had just wrapped up a Washington think tank delegation visit to Taiwan in late April. In a candid interview with The Storm Media before flying back to the United States, he spoke with characteristic directness, his concern for Taiwan's situation unmistakable.
In Hsu's assessment, the budget stalemate risks branding Taiwan as an "irresponsible ally" in the eyes of President Donald Trump — an opening Beijing could exploit by signaling to Washington that Taiwan itself does not prioritize its own defense. Meanwhile, Chinese military incursions, deliberate undersea cable sabotage, and cyberattacks continue unabated. China's 'salami-slicing' tactics, in Hsu's view, have never stopped.
For Hsu, dialogue and war preparedness are not in conflict. His prescription: "Speak softly, carry a big stick." The precondition, he adds, is that Taiwan must first pick up the stick.
Inside Taiwan's Defense Budget Deadlock: What Each Party Actually Wants
Taiwan's Special Defense Budget Proposals
President Lai Ching-te has proposed a special defense budget of approximately NT$1.25 trillion (US$ 38.5 billion). The proposal has been blocked by opposition parties ten times. When the Legislative Yuan's new session opened in March, a cross-party consensus was reached to refer all versions to committee — but no agreement on specific provisions has been reached, and the bill remains in negotiation.
- Executive Yuan Version
The Executive Yuan's draft — formally titled the "Special Act on Procurement for Strengthening Defense Resilience and Asymmetric Capabilities" (強化防衛韌性及不對稱戰力計畫採購特別條例草案)— sets a ceiling of NT$1.25 trillion (US$ 38.5 billion), to be executed over eight years through 2033. The administration frames the proposal around the need to build "asymmetric capabilities" to counter a potential Chinese Communist Party (CCP) invasion. Planned procurements include precision artillery, long-range precision strike missiles, unmanned vehicles and counter-drone systems, air defense and anti-armor missiles, AI-assisted command and control systems (C5ISR), and equipment co-developed or co-procured with the United States. The stated objectives are to build a "Taiwan Shield," develop a non-China-dependent supply chain, and strengthen AI and command systems.
- KMT Version
The main opposition Kuomintang (KMT) has put forward a rival bill — the "Special Act for Strengthening National Defense and Military Procurement from the United States"(強化國防及對美軍事採購特別條例草案) — though the party has yet to reach internal consensus on the total amount. The current KMT central position proposes NT$380 billion (US$ 11.7 billion) plus an unspecified "N," covering arms already publicly announced by the U.S. side, with the additional "N" amount to be reviewed and approved by the legislature once Washington issues a Letter of Offer and Acceptance for further items.
The KMT emphasizes support for government-to-government Foreign Military Sales (FMS) and opposes Direct Commercial Sales (DCS), which it characterizes as lacking oversight guarantees and prone to corruption.
Significant divisions persist within the KMT, however. Some KMT legislators support earmarking NT$800 billion (US$ 24.6 billion), and at least one legislator has claimed that supporters of the higher figure constitute a majority within the caucus — indicating that internal consensus remains elusive.
- Taiwan People's Party Version
The Taiwan People's Party (TPP) has introduced its own bill — the "Special Act for Safeguarding National Security and Strengthening Asymmetric Capabilities" — with a proposed budget of NT$400 billion (US$ 12.3 billion), structured on an annual appropriation basis.
Both the KMT and TPP versions omit funding for the "Taiwan Shield" initiative, C5ISR systems, and domestic defense industry (DCS) items.
Is Taiwan Handing Trump a Reason to Walk Away?
The timing of the budget impasse is acutely sensitive. A Trump-Xi summit was expected around May 14, with both sides potentially circulating a summary of key discussion points as early as May 7. Hsu has warned that if the budget remains unresolved by then, Trump may conclude that Taiwan is unwilling to shoulder its own defense responsibilities — and label it an "irresponsible ally." Beijing, he argues, would be quick to exploit the opening.
"Just as I said, we need to reduce all possible variables," Hsu said. "When Taiwan cannot define its own stance on defense and security budgets — when it cannot even achieve internal consensus — it becomes very easy for others to manipulate that ambiguity. Xi Jinping could very easily tell Trump, 'Look, Taiwan doesn't even care about its own defense,' or 'Taiwan just wants peace, it doesn't need weapons.' He could easily plant exactly that message with Trump."
In such a scenario, Hsu argued, Trump's transactionalist instincts could lead him to view Taiwan as a tradeable asset — a bargaining chip to extract concessions from China that benefit the U.S. domestically and boost prospects for the 2026 midterm elections.
Taiwan's Window of Survival: Hold Long Enough, and Help Will Come
Beyond the Washington dynamic, the budget stalemate is sending inconsistent signals to regional partners. Japan and the Philippines, Hsu said, are beginning to question Taiwan's position, potentially undermining years of carefully cultivated mutual trust.
Hsu pointed to Japan under Sanae Takaichi's government as a case in point. Tokyo has moved toward full defense integration with Washington, passing a record-high defense budget and advancing revisions to its defense posture — including expanded weapons export policies.
According to a report by Kyodo News, Japan's defense-related expenditures for fiscal year 2026 totaled approximately 10.6 trillion yen (US$ 72 billion), representing about 1.9 percent of Japan's 2022 GDP. On weapons exports, reporting by NPR and Nippon.com notes that on December 22, 2023, the Kishida Cabinet revised the implementation guidelines of the "Three Principles on Transfer of Defense Equipment," for the first time permitting the export of fully assembled "finished product" weapons licensed for production outside Japan — and immediately approved the export of Patriot PAC-3 missiles to the United States. This marked Japan's first postwar export of finished lethal weapons.
The Takaichi government has since pushed further, scrapping a restriction that previously limited exports to five categories of non-combat equipment — rescue, transport, alert, surveillance, and minesweeping — and in principle allowing exports of complete weapons systems, including fighter jets, missiles, and destroyers, to 17 countries that have signed defense equipment transfer agreements. Australia recently signed a contract to purchase three Mitsubishi Heavy Industries Mogami-class frigates and co-build eight more — Japan's largest arms sale on record.
The Indo-Pacific Defense Forum (IPDF) has also reported that Japan's Ministry of Defense announced in August 2025 that the Type 12 surface-to-ship missile would be deployed ahead of schedule in March 2026 — one year earlier than originally planned. Then-Defense Minister Gen Nakatani described the adjustment as unavoidable given "the severe and complex security environment," stressing the need to "possess the capability to deter and repel invasion anywhere."
A Crisis Group report further notes that under President Ferdinand Marcos Jr., the Philippines is modernizing its military capabilities, accelerating a shift from internal security toward external threats — increasing defense procurement, expanding military partnerships, and deepening its alliance with the United States, including enlarging the number of bases available to U.S. forces. China's increasingly assertive posture in the South China Sea and its activities around Taiwan have been central drivers of Philippine concern.
Hsu explained that Taiwan sits at the center of the first island chain. If its defensive capacity weakens due to budget paralysis, Taiwan becomes a structural gap in the Indo-Pacific security architecture — one that would allow China to operate freely across the East and South China Seas, directly threatening the security of neighboring partners. He also stressed that Taiwan must be capable of sustaining resistance long enough to buy time: the longer Taiwan can delay an adversary, the greater the window for allied coordination and intervention. If procurement delays result in Taiwan being overwhelmed quickly, that window narrows dramatically.
Strength and Diplomacy: Taiwan Doesn't Have to Choose
China's military pressure has risen steadily since then-U.S. House Speaker Nancy Pelosi's visit to Taiwan in August 2022, and has not eased — even as the so-called "Davidson Window" of 2027 has been reconsidered by some analysts. Admiral Samuel J. Paparo, Commander of U.S. Indo-Pacific Command, told the Senate Armed Services Committee in April that Taiwanese public polling data showed a significantly higher willingness to defend the island than Ukraine had demonstrated at a comparable point. Yet the defense budget that most concretely signals that resolve remains stalled in the legislature. Paparo has stated that regardless of what messages opposition leaders convey during visits to China, the single most concrete and critical indicator remains one question: whether Taiwan is willing to pass its defense budget.
On the gap between high public willingness to defend Taiwan and the legislature's budget impasse, Hsu offered his own read: "I think the KMT and the DPP share the same goal — Taiwan's national security and defense. They just differ on method." He noted that the KMT emphasizes dialogue, while the DPP seeks peace through strength. "But these two are not in conflict," he said, invoking the Theodore Roosevelt dictum: "Speak softly, carry a big stick."If Taiwan goes to the negotiating table empty-handed, it would be knocked down in a single blow — as if surrendering in advance were the only option left.
No Shots Fired — Yet. How China Is Quietly Wearing Taiwan Down
While a full-scale war in the Taiwan Strait has not materialized, the CCP has deployed a range of hybrid threat instruments to pressure Taiwan.
According to Taiwan's National Defense Report, these include: drone circumnavigation flights and coast guard or government vessel incursions into Taiwan's prohibited and restricted waters — classified as "gray zone harassment"; intelligence penetration of critical Taiwanese targets and the recruitment of Taiwanese citizens as informants; economic coercion through targeted industry bans; cognitive warfare and narrative operations aimed at displacing U.S. and allied influence; a composite "three warfares" campaign encompassing public opinion warfare, psychological warfare, and lawfare; as well as cyberattacks and latent threats in waters surrounding the Taiwan Strait.
On the gray zone dimension, the frequency of PRC threats has increased markedly in recent years. According to data from China Power, a project of the Center for Strategic and International Studies (CSIS) in Washington, People's Liberation Army (PLA) activities in areas surrounding Taiwan reached a record high in 2025. Based on Taiwan's Ministry of National Defense figures, the PLA conducted 3,764 incursions into Taiwan's Air Defense Identification Zone — a 22.4 percent increase over 2024, which had itself broken the previous annual record.
A parallel trend is visible at sea. From May 2024 onward, the monthly average of Chinese naval vessels operating in waters surrounding Taiwan was 221 — a 42 percent increase from the monthly average of 156 recorded between August 2022 and April 2024. Since May 2024, Chinese naval deployments have not fallen below 190 vessels in any single month, compared with a low of just 104 vessels in the same period in 2022. In 2025, the PLA conducted two large-scale exercises around Taiwan: "Strait Thunder-2025A" in April and "Justice Mission-2025" in late December. The latter simulated a blockade and encirclement of Taiwan, applying pressure through both military exercises and coordinated online propaganda.
Severed Cables, Market Panic, Psychological Warfare: China's Playbook Against Taiwan
The sabotage of Taiwan's undersea cables has also drawn Hsu's sustained attention. In March of this year, he was invited to testify before the U.S.-China Economic and Security Review Commission, presenting findings on China's campaign of disruption against Taiwan's submarine cable infrastructure. He noted at the time that Taiwan currently connects to the global internet through just 24 cables — cables that underpin its semiconductor manufacturing ecosystem, financial markets, civilian communications, and both government and military command systems.
In a subsequent Facebook post, Hsu detailed the documented incidents: in February 2023, two cables linking Taiwan to Matsu were severed within six days — first by a Chinese fishing vessel, then by a freighter dragging its anchor. Between January and February 2025, Taiwan recorded four additional cable damage incidents. One vessel involved flew a Tanzanian flag but was controlled by a Hong Kong-based company with Chinese crew members; the ship deliberately disabled its positioning system before severing a critical trans-Pacific cable.
A second vessel — the Hong-Tai 58 — was accused in February of maneuvering in a "Z-pattern" through a prohibited anchoring zone off the coast of Tainan, using its anchor to sever the "Taiwan-Penghu No. 3" submarine cable. Hsu noted that before cutting the cable linking Taiwan to the Penghu archipelago, the vessel had operated under two different names and three different national registrations. "This," he said, "is a shadow maritime network designed for deniable gray zone operations."
In the interview, Hsu said that of Taiwan's 24 cables, 15 are currently in a damaged state. While some degradation is attributable to natural aging or unrelated factors, he said the deliberate sabotage by Chinese vessels in recent years has brought the vulnerability into sharp relief. He identified three strategic objectives behind the cable attacks: isolating Taiwan by severing communications; triggering financial and stock market panic as a form of psychological warfare; and probing the response speed and tolerance thresholds of allied nations.
As an illustration, Hsu described how systematic cable damage causing trading delays or halts could generate market panic — creating an entry point for disinformation and propaganda, at which point psychological warfare operations begin. "It's like a domino effect," he said.
On Taiwan's near-total dependence on foreign vessels for cable repair — the island does not operate a single cable repair ship of its own — Hsu recommended that Taiwan build its own repair vessel within three years, and pursue joint maintenance cooperation with Japan to improve resilience.
Hsu framed economic disruption, diplomatic obstruction, and cable sabotage as components of the same gray zone strategy. "Modern warfare doesn't begin with a missile," he said. "It works through gray zone tactics — slicing away, piece by piece, like cutting salami. By the time actual conflict arrives, you find you're no longer capable of resistance."
He therefore argued that the defense budget must be anchored in a comprehensive strategic vision — one that integrates land, sea, air, cyber, and critical infrastructure domains, with concrete responses to asymmetric warfare.
Could Drones Be Taiwan's Next TSMC?
Hsu drew a distinction between two channels for arms acquisition: Foreign Military Sales (FMS), conducted government-to-government, and Direct Commercial Sales (DCS), conducted through private channels. Broad cross-party consensus exists on FMS, he noted, but DCS — which involves technology transfer and domestic defense industry development — faces greater skepticism from the opposition, which has raised concerns about corruption risks.
"Given the current composition of the Legislative Yuan, the KMT absolutely has the tools — legislative oversight, strict budget scrutiny, even budget freezes — to ensure commercial procurement proceeds properly," Hsu said. "Don't throw the baby out with the bathwater. The most critical item right now is unmanned aerial vehicles, and they've been excluded. That is the single biggest problem."
A report published in late April byDSET found that Taiwan's export of fully assembled drones to Europe surged from 2,574 units in 2024 to 107,433 units in 2025 — an approximately 41.7-fold increase. Exports were concentrated in Poland and the Czech Republic, with possible onward transfer to Ukraine. Lithuania has also emerged as a quietly aligned partner, with Taiwanese firms investing there as a component production or inventory base, and as a maintenance and support hub for the European drone market.
"Since the war in Ukraine began, much of the fighting has depended on drones and asymmetric capabilities," Hsu said. "I've been to Ukraine myself to observe. That dimension — drones — is actually more important than people realize. And given Taiwan's strength in the ICT industry, we absolutely have the opportunity to turn drone manufacturing into a second national pillar" — a reference to Taiwan Semiconductor Manufacturing Company's role as the "silicon shield" at the center of the global chip supply chain.
Hsu also noted that the United States is actively expanding its defense industrial base and has expressed interest in establishing production facilities across the Indo-Pacific. He argued that delays in Taiwan's defense budget and arms procurement — particularly on the commercial sales side — risk causing Taiwan to miss its window to join international supply chain construction. One such mechanism, he said, is the Taiwan Blue Sky Act, which establishes an expedited pathway for strengthening equipment imports, exports, and technology transfer with the United States.
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