Taiwan plans record NT$1.1T military budget for 2027

Taiwan’s Cabinet is preparing to propose a defense budget exceeding NT$1.1 trillion, roughly $34.1 billion, for fiscal year 2027. That would represent a 16% jump from the previous year and the first time the island’s annual military spending has crossed the NT$1 trillion mark.

The budget is expected to maintain defense spending above 3% of GDP, a level Taiwan first hit in 2026. The formal proposal is set to be unveiled on August 20.

The numbers in context

In 2026, total defense spending, which includes coast guard and veterans’ affairs, reached NT$949.5 billion. That figure represented 3.32% of GDP and a 22.9% year-over-year increase.

President Lai Ching-te has set an even more ambitious target: steadily raising defense spending toward 5% of GDP by 2030. For reference, the US spends roughly 3.4% of its GDP on defense.

Why the buildup

Taiwan’s response has centered on asymmetric warfare capabilities, investing in weapons systems designed to make any invasion prohibitively costly, including mobile anti-ship missiles, sea mines, drone swarms, and hardened coastal defenses.

This approach has strong backing from Washington, which has pushed Taiwan to adopt a “porcupine strategy” for years. The US has also accelerated arms sales to the island, though delivery backlogs remain a persistent frustration for Taipei.

Taiwan Semiconductor Manufacturing Company produces the vast majority of the world’s most advanced chips, meaning any military confrontation across the Taiwan Strait would have catastrophic consequences for global supply chains.

What this means for markets and defense industry

Taiwan has been expanding its indigenous defense industrial base while simultaneously purchasing foreign systems. The island launched its first domestically built submarine in 2023, and additional vessels are expected to follow as the program matures.

The formal budget announcement on August 20 will provide more granular detail on where the money is going, whether toward new procurement, personnel, maintenance of existing systems, or research and development.

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