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The Lai Ching-te government shifts gears

Complex developments in Taiwan’s domestic legislative politics may affect the regional security outlook over the next 12 months.

Since his election in 2024, Taiwan president Lai Ching-te has upheld the disciplined foreign policy of his predecessor, Tsai Ing-wen, with some domestic policy innovation. But his party, the Democratic Progressive Party (DPP), does not have a majority in the legislature. The opposition parties, the Kuomintang (KMT) and Taiwan People’s Party (TPP) have sought to capitalise on their combined majority and permanently shift Taiwan’s political centre of gravity to the legislature by initiating a series of laws to expand legislative intervention over the presidential office, revise the constitutional court and restrict the national budget.

The Lai administration has adopted largely tactical responses to the legislature’s actions, including referring laws to the same constitutional court the legislature seeks to undermine.

However, since 2024, dozens of public recall campaigns have sprung up across Taiwan’s legislative districts. Under the constitution, citizens in an electorate can petition the Central Election Commission for a by-election. Thirty-five KMT seats are moving through the legal stages towards that outcome, with a countermovement targeting 15 DPP seats.

While these are grassroots movements, in recent months the DPP has swung its support behind them.

At the same time, there has been a surge in pro-Beijing espionage at senior levels of the political system, as well as scandals involving high-profile PRC-born Taiwanese social media influencers supporting Beijing amid Chinese military activity in the Taiwan Strait. Beijing has been systematically escalating its activity over several years, never allowing it to become normalised to maintain the salience of its threat.

With this febrile atmosphere of divisive politics and growing public anxiety, Lai convened a national security forum including key figures from his administration in March. He gave a speech on Taiwan’s security outlook, putting forward 17 policy measures specifically directed at China’s interference in Taiwan’s political, corporate and public life.

The measures cover espionage, political interference, united front work and corporate leverage. They establish a range of public education initiatives on China-related risks, much stronger rules on public disclosure of individual and organisational links to China, and tighter control over business, religious, cultural and academic exchanges. They include specific measures for younger Taiwanese and the social media landscape and a review of existing regulations and laws on interference in Taiwan’s democratic system. The government will also more firmly apply sedition laws against retired military and government personnel.

In his speech, Lai stated that China met the definition of a ‘foreign hostile force’ and warned against the erosion of Taiwan’s sovereignty, identity and democracy.

Lai has securitised Taiwan’s public life by defining tolerable and intolerable forms of civil society in terms of a hostile China. He has expanded the definition of Taiwan’s security and strengthened policies to protect it.

Lai’s policy announcement demonstrates open democratic practice, but it also highlights how Taiwan’s current relationship with China is also a relationship with its own authoritarian history. The president called for protection of Taiwan’s security from China in the name of a democratic Taiwan; decades ago Chiang Kai-shek made the same call in the name of his military dictatorship. Taiwan today is deeply committed to truth and reconciliation with its authoritarian era, and Lai’s move to encompass public discourse and civil society within a security outlook is inevitably caught up in that process.

Nonetheless, since his speech, Lai’s polling has jumped to its highest level of his presidency so far, suggesting that he is taking the electorate with him.

Meanwhile, the recall movement for legislative seats continues and will lead to a wave of by-elections. This is unprecedented in Taiwan’s democratic history, and it is possible the DPP will regain a legislative majority over the next 12 months.

If that were to happen, it would be a stunning repudiation of Beijing’s multi-domain tactical campaign against the Taiwanese but would also be taken by Beijing as proof that the DPP are irredeemable separatists manipulating the Taiwanese people to hold back unification.

For all the disruption to the international system of recent months, developments in Taiwanese domestic politics could yet make the end of 2025 look even more challenging.

Taiwan worsens its vulnerability to a Chinese energy blockade

Anyone would think that Taiwan, faced with a risk of blockade from China, would be doing all it could to ensure self-sufficiency or at least long endurance without supplies. But in energy security, it is going backwards.

President Lai Ching-te’s government is increasing Taiwan’s dependence on short-term energy imports that China can easily stop. The administration is persisting with an almost decade-long campaign to shut down the island’s nuclear power stations and wants to increase the share of liquified natural gas (LNG) in its energy mix. Progress on renewable-energy capacity has been slow.

Lai’s government is understandably concerned about energy security, as at least 97 percent of the island’s energy is imported. But it also wants to reduce carbon emissions, having established a goal of net-zero by 2050. The Taiwanese government views LNG as a cleaner type of energy and is phasing out the widespread use of coal. Natural gas powered 32 percent of Taiwan’s electricity in 2016. The figure rose to 42 percent last year, and Lai is pushing for it to reach 50 percent by 2030. The drive for LNG grew following Donald Trump’s election as US President. Taiwan plans buy more US LNG over the next decade to help reduce its trade surplus with the United States.

However, LNG is difficult to store long term, which would create problems in the event of a quarantine or blockade. Taiwan is densely populated and has limited space for the fuel’s expensive storage infrastructure. Lu Tsaiying, an energy expert with Taiwan’s Research Institute for Democracy Society and Emerging Technology, notes that Taiwan’s LNG stockpiles would only last 12 days in a crisis. In contrast, coal could last 42 days and crude oil 146 days.

Lu predicts that coal, which currently powers 39 percent of Taiwan’s electricity, and renewables, powering 12 percent, would be the main sources of energy during a blockade, quarantine or even a war. The government would rely on its existing coal powerplants and convert decommissioned coal-fired power stations into emergency back-up plants. She estimates that Taiwan could survive for at least 40 days in this way, and possibly much longer depending on its power-rationing system. Coal can be more easily stored, and its energy density is twice that of LNG. According to Lu, ‘the Taiwan government is increasing strategic coal reserves’.

Although Taiwan has been slow to act, it’s beginning to give unprecedented attention to energy security. In July, Lu’s think tank and the American Foundation for Defense of Democracies will hold tabletop exercises focusing on Taiwanese energy resilience. Taiwan’s state-run power company, Taipower, will provide data. Ranking officials and industry leaders will be invited.

There is also ongoing debate in Taiwan around nuclear power. While nuclear fuel must be imported, it requires very little land relative to the power it generates. Lai’s independence-minded Democratic Progressive Party is avowedly anti-nuclear. When his predecessor, Tsai Ing-wen, first came to power in 2016, she took on a gargantuan task of simultaneously reducing carbon emissions and phasing out carbon-free nuclear energy, which then accounted for 12 percent of the energy mix.

Many renewable-energy projects are now running dramatically behind schedule. Tsai originally aimed for renewables to make up 20 percent of Taiwan’s energy mix by 2025. The government missed this deadline, extending it to the end of 2026. Despite this extension, experts remain sceptical of the Lai administration’s ability to reach its target. Meanwhile, Taiwan’s six aging nuclear reactors have been decommissioned on schedule, with the final one to be decommissioned on 17 May.

Energy shortages in Taiwan present a global security risk, as the island makes about 90 percent of the world’s most advanced chips. The semiconductor industry is especially energy-intensive, and a power disruption of only a few seconds can damage output. Along with many minor power disruptions, Taiwan has suffered three major blackouts over the past seven years. In 2022, one of those major blackouts left more than 5 million homes without electricity and reportedly cost semiconductor, petrochemical and steel businesses more than NT$5 billion.

The Taiwanese government tends to blame blackouts on human error and an over-centralised grid, but critics argue that operating power reserves are insufficient. Artificial intelligence industries also consume enormous amounts of energy, leading some to question whether Taiwan’s power supply can meet growing demand.

Nuclear power was the only domestic issue that significantly divided the Democratic Progressive Party (DPP) and the two opposition candidates during last year’s presidential election. The DPP’s main opposition, the Nationalist Party, wants to pass laws extending the life of the one remaining reactor in southern Taiwan.

On 9 March, Tung Tzu-hsien, the deputy convener of Lai’s climate committee, voiced support for nuclear power, pointing to the importance of Taiwan maintaining manufacturing capacity ‘if war breaks out.’ The US de facto ambassador Raymond Greene told the Taiwanese media that nuclear power was ‘an exciting area for cooperation going forward,’ adding that the US had offered to help Taiwanese government with a transition, if it wanted one. Lu notes that even though the Nationalist Party’s legislation is expected to clear Taiwan’s parliament, Taiwanese laws will still require the reactor to undergo lengthy security checks. This means it will take three to five years before the shuttered reactor is operational again.

Taiwan’s polarised politics risks undermining its resilience and security

Taiwan’s opposition parties—including the once-dominant Kuomintang (KMT)—now wield real power in the legislature for the first time since 2012. But their recent actions have cast serious doubt on their commitment to Taiwan’s long-term security and its ability to withstand Beijing’s growing campaign of coercion.

In January 2024, Democratic Progressive Party (DPP) candidate Lai Ching-te won the presidency, but his party lost its legislative majority, ushering in a divided government. Since then, the opposition coalition has taken an increasingly combative stance, using its control of the Legislative Yuan to obstruct and challenge the Lai administration, including on defence and national security issues.

In early 2025, the KMT, working with the Taiwan People’s Party (TPP), pushed through sweeping cuts to Taiwan’s defence budget. The numbers are stark: NT$8.4 billion (A$394.8 million) was slashed from the DPP’s proposed defence budget, with another NT$90 billion (A$4.23 billion) frozen. Key deterrence programmes were hit, including Taiwan’s indigenous submarine initiative—vital to its asymmetric defence strategy—and a planned drone industry park. Cuts to basic military preparedness needs such as fuel, ammunition, and overseas training further undermine readiness at a time when Taiwan should be reinforcing its deterrence. This sends troubling signals to both Beijing and international partners.

The damage doesn’t stop at military spending. The cuts also targeted civil society initiatives vital to Taiwan’s ability to endure a potential crisis. The Kuma Academy, known for its civilian defence training, had its budget significantly reduced. Similarly, agencies responsible for cybersecurity and combatting disinformation have seen vital funding curtailed. As hybrid threats are growing, such decisions appear deeply short-sighted.

The KMT frames the cuts as a move for fiscal discipline, arguing that trimming defence and resilience budgets ensures taxpayer money is spent efficiently rather than opposing security efforts. Party leaders claim to represent a large segment of voters who favour easing cross-strait tensions and advocate for cost-effective measures that protect Taiwan without unnecessarily provoking Beijing. However, Premier Cho Jung-tai condemned the cuts as ‘suicidal’, warning they would undermine the government’s ability to meet its national security responsibilities. A piecemeal approach to defence reflects a dangerous lack of strategic foresight.

In the past year, the KMT and TPP have also pushed controversial legislative reforms to expand parliamentary powers at the expense of the executive branch. Though framed as moves to enhance accountability, these reforms amount to a power grab, aimed at fundamentally restructuring government to strip authority from the DPP-controlled executive and hand it to the opposition-led parliament. Taiwan’s Constitutional Court struck down several key provisions, including those that would have compelled the president to report regularly to the legislature and expanded lawmakers’ authority to demand sensitive information.

Rather than accept the ruling, the KMT denounced it as politically motivated, framing it as a constitutional crisis. The fallout was dramatic: physical clashes erupted in the legislature, and thousands of citizens protested in the streets in scenes not seen since the 2014 Sunflower Movement. Accusations that the KMT was aligning too closely with Beijing’s interests gained traction—a charge the party denies but has failed to convincingly rebut.

The perception of alignment with Beijing has deepened as the KMT, following the end of pandemic restrictions, resumed a series of high-profile visits to China, framing them as efforts to promote dialogue and improve cross-strait ties. As the figures below show, former KMT president Ma Ying-jeou’s private foundation has also been active, regularly sending delegations across the strait.

Direct contact between the Chinese Communist Party and Taiwan’s opposition political parties and organisations in 2024 and so far in 2025. Source: ASPI’s State of the Strait Database.

Though framed as people-to-people exchanges, these engagements highlight the KMT’s strategic focus on keeping lines open with Beijing, rekindling debate over the risks to Taiwan’s sovereignty. But with Beijing refusing to engage the DPP, there’s a real danger the KMT is offering Chinese leaders a skewed picture of DPP intentions and public sentiment. This is especially troubling given that Taiwan’s younger generations overwhelmingly support the status quo and reject Beijing’s ‘reunification’ narrative.

The KMT and TPP won a legislative majority in 2024 by tapping into economic discontent, demands for stronger oversight of the executive, and voter fatigue with the ruling DPP. While concern over China’s aggression is widespread, views on how to respond differ. DPP supporters back strengthening self-defence, deepening global ties and protecting sovereignty; KMT voters tend to blame the DPP for provoking China and favour a more conciliatory approach.

The DPP and large sections of Taiwanese society have criticised these visits for their lack of transparency and questionable timing, particularly given China’s increasing coercion campaign. In response, DPP legislators proposed a bill requiring lawmakers to disclose the details of any closed-door meetings with Chinese officials and to seek prior approval before such engagements.

At the core of Taiwan’s security challenge lies a hard truth: it faces pressure not only from Beijing, but also from deepening political polarisation. While China poses the most visible threat, opposition obstructionism and partisan dysfunction are undermining Taiwan’s ability to respond. Resilience demands that leaders on all sides put national survival above political point-scoring.

China needs Taiwanese ports to take the island. Mines are the key to protecting them

If China ever makes good on decades of implicit threats to invade Taiwan, most of its ground force will have to land at ports. Relatively little of it can come over beaches, because they ‘lack purpose-built infrastructure for unloading large transports, and because they are inherently exposed positions,’ Ian Easton noted in a 2021 study for the Project 2049 Institute in Virginia.

Even the advent of China’s new elevated beach landing barges—bespoke pieces of equipment that surprised many observers when they appeared in March—may not significantly improve China’s capacity to unload at Taiwan’s 14 suitable beaches. As ASPI’s Erik Davis wrote last year, almost all are ‘overlooked by terrain that would turn the unloading zones into kill zones.’

Easton says, ‘The success or failure of a future invasion of Taiwan would likely hinge on whether or not Chinese amphibious landing forces are able to seize, hold and exploit the island’s large port facilities.’

Defending the most important ports from a large-scale assault from the sea—there are five ports that Easton concluded are top targets—should be the Taiwanese defence ministry’s main priority. And the most effective weapon for this defence should be obvious.

Mines.

Inexpensive, hard to detect and clear and just as capable of deterring an attack as defeating one, sea mines should be Taiwan’s first maritime line of defence. But it’s not clear Taiwanese leaders appreciate this.

Just a handful of mine strikes could sink enough large transports, and drown enough Chinese sailors and soldiers, to blunt an attack. But the Taiwanese navy simply has too few minelayers to quickly lay minefields outside each targeted port—and to refresh those minefields once they’ve been seeded. Especially considering that Chinese forces will undoubtedly target the minelayers once hostilities commence.

The waters around Taiwan are ideal for mines, said Chris O’Flaherty, a retired Royal Navy captain with deep experience in mine warfare. ‘The conditions of Taiwan are much less conducive to [mine countermeasures] than most areas of the world,’ he explained. There’s ‘a lot of rock, and a lot of fast currents, thus MCM [mine clearing] will be slow.’ And Taiwanese anti-ship missile batteries could complicate any mine-clearing effort by shooting at the ships doing it.

A dense minefield at the entrance to each vulnerable port could deter, delay or defeat a Chinese invasion force—if the Taiwanese navy can get the minefields in place in time. In a sortie lasting several hours, a minelayer with a payload of around 200 mines should be able to fill an area of 800 metres by 800 metres with mines a few tens of metres apart.

But a minefield intended to hold up China indefinitely outside just one port might have to measure several kilometres on each side and contain 3,000 or more mines. Even if three minelayers were available at each port, each would have to make several runs to sea over the course of several days to seed this minefield—and that’s assuming none gets sunk while trying.

The job must be done much more quickly.

Bear in mind, Taiwan can’t lay mines until an invasion is imminent, as the same mines that could protect its ports would also close them to commerce. Taipei’s navy could, in theory, lay mines now—leaving just one unmined channel for vessels to enter and leave a port. But the location of the safe channels couldn’t be kept secret, given how much trade travels on Chinese-flagged ships.

Besides, Beijing may very well view an extensive minelaying effort by Taipei as a justification for an attack.

No, the Taiwanese need to lay their mines right before the Chinese attack. But they have just four Min Jiang-class minelayers in service. Another 10 of the 400-ton vessels are under contract or in the planning stage but won’t join the fleet for several years.

Other Taiwanese warships and even commercial vessels could help lay mines—and they’d need to, given how strained even a 14-vessel minelaying flotilla would be trying to mine the approaches to at least five major ports, quickly and potentially while under fire.

But even an intensive mobilization of available vessels might be inadequate. James Winnefeld, a retired US admiral, called on US forces to prepare to aid a Taiwanese minelaying effort. US submarines could release mines from below. Stealth bombers could drop them from above.

Taipei shouldn’t count on Washington, however—especially given the unpredictability of the United States under President Donald Trump. Neither should Taipei assume that a token minelaying effort would suffice.

After all, Beijing may be willing to accept the loss of many ships and many lives in pursuit of its top foreign-policy objective, incorporation of Taiwan. ‘If you are prepared to take heavy casualties, you can overwhelm the minefield and drive through, accepting all losses of people and equipment,’ O’Flaherty says.

The minefields may have to be dense enough to eliminate an attacking fleet rather than merely damaging and frightening it.

Taiwan: the sponge that soaks up Chinese power

Taiwan has an inadvertent, rarely acknowledged role in global affairs: it’s a kind of sponge, soaking up much of China’s political, military and diplomatic efforts. Taiwan absorbs Chinese power of persuasion and coercion that won’t be directed elsewhere while the island remains free.

This means that supporting Taiwan is not merely a moral stance in favour of democracy; it is a strategic and economic necessity. Taiwan’s independence from China anchors the regional order—and maybe even the global order. While it remains separate from China, Beijing is delayed in shifting attention to new, potentially more dangerous fronts.

Every leader of the People’s Republic of China—from Mao Zedong to Xi Jinping—has made ‘reunification’ a non-negotiable part of the party’s mission. Xi has tied Taiwan’s future directly to what he calls the ‘Chinese Dream’ of national rejuvenation. Unification is ‘essential’ to achieving China’s rise as a great power, he says. Party officials have referred to Xi Jinping as the ‘helmsman’ guiding China’s national rejuvenation.

The intensity of this focus is obvious. The Chinese armed forces have made preparing for an invasion and occupation of Taiwan their top strategic priority, developing a vast arsenal of missiles, air and naval forces designed to overwhelm the island’s defences and deter US intervention.

Military exercises simulating blockades or invasion have become normalised. In 2022, just over 1,700 Chinese military aircraft flew into Taiwan’s de facto air defence identification zone, twice as many as in the previous year. In 2024, that figure was more than 3,000. As the graphs below show, in 2024 Chinese aircraft and seafaring vessels were spotted around Taiwan on all but five days of the year. The exceptions were caused mostly by typhoons in the area.

China’s military and paramilitary activities around Taiwan in 2024. Source: ASPI’s State of the Strait Database.

And alongside this military pressure, Beijing wages an unrelenting pressure campaign to isolate Taiwan internationally, intimidate nations that support it and subvert Taiwanese society. This sustained, multi-domain strategy of intensifying coercion reflects just how much of China’s political and strategic bandwidth Taiwan consumes.

China devotes enormous resources to keeping Taiwan under pressure. The Taiwan issue so dominates Beijing’s strategic agenda that it slows, redirects, and tempers other assertive behaviours: it has fewer resources for other domains, including in the South China Sea, along the Indian border, in Africa and in the Pacific islands.

If unification remains the regime’s priority, Beijing must be cautious not to unnecessarily provoke crises elsewhere that could derail its Taiwan plans. Military adventurism in the East China Sea or South China Sea carries the risk of triggering a conflict and diverting resources that might undermine China’s ability to seize Taiwan. So, Taiwan’s function as a sponge for China’s attention is also a check on broader aggression. Beijing would be more emboldened to pursue its other strategic priorities if Taiwan capitulated.

There’s also a domestic angle. The Chinese Communist Party uses Taiwan to fuel nationalist sentiment, to justify defence spending instead of fixing an economy weighed down by structural issues, and to distract from other internal challenges. If the Taiwan issue were solved, the regime would need a new outlet for this energy—potentially one more dangerous for China’s neighbours.

Policymakers must ask a sobering question: what happens if Taiwan is annexed by China? This would not satisfy Beijing’s appetite but rather embolden it. Absorption of Hong Kong has only freed up more resources to focus on coercion of Taiwan.

With Taiwan under its control, China would gain a crucial forward base for power projection. Its navy would have more available resources to operate in the Pacific, threatening shipping lanes and enforcing the rights of internal waters within the Taiwan Strait. China could pressure Japan more aggressively over the Senkaku Islands or enforce dominance in the South China Sea. The Philippines, just south of Taiwan, would be more vulnerable to Chinese coercion.

Moreover, the psychological impact of a Chinese victory would ripple across Asia. US allies might question Washington’s resolve. Smaller countries might accommodate Chinese influence to avoid becoming the next target. The delicate balance of power in the Indo-Pacific would tilt—not towards peace, but towards authoritarian dominance.

Policymakers in Indo-Pacific capitals need to send a clear message: maintaining the status quo in the Taiwan Strait helps preserve the broader stability of the Indo-Pacific. Conversely, abandoning Taiwan would not end China’s expansion; it would accelerate it.

Taiwan may be small in size, but it plays a disproportionate role in shaping Asia’s future. So long as it remains a sponge for CCP attention, the rest of the region has a chance to stay dry.

Anticipating what Trump wants, Taiwan puts money in America first

Taiwan’s President Lai Ching-te must have been on his toes. The island’s trade and defence policy has snapped into a new direction since US President Donald Trump took office in January.

The government was almost certainly behind a deft move by the country’s giant semiconductor company, TSMC, to set up three production facilities in the United States. Also, Lai’s administration has stepped up plans to import the kinds of US products that would catch Trump’s eye. It’s pushing for a hefty rise in defence spending, too.

Anyone would think that Taiwan had done its homework and was ready for the new US administration. Or maybe it’s just faster on its feet than most. Senior Taiwanese officials have been carefully studying Trump’s agenda and looking for items they can enthusiastically support and that advance Taiwan’s interests.

Take TSMC’s announcement in early March that it was sinking US$100 billion into the US to build the chip plants, along with a research and development centre, bringing its total pledged investments in the US to US$165 billion. This came after Trump accused Taiwan of stealing the US’s chip business on the campaign trail and threatened a 100 percent tariff on chips.

In Taiwan, there was an uproar. Many Taiwanese believe TSMC, which makes at least 80 percent of the world’s most advanced chips in Taiwan, is a ‘silicon shield’. They see it as crucial for Taiwan’s geopolitical protection as it gives foreign countries an incentive to protect the country. There were worries that if Lai went along with Trump’s push to reclaim the world’s chip industry for the US, the silicon shield would be weakened.

But Lai understood that, if he appeared to be obstructing Trump’s agenda, diplomatically isolated Taiwan might be discarded. Had Trump not won the US election, TSMC probably would not have announced such a large investment. But the gamble paid off. On the day of the announcement of the deal, Trump appeared happy.

‘I would say it came off as an extraordinary success,’ Chris Miller, author of Chip War and a world expert on the semiconductor industry said at a seminar in Taipei in late March.

‘TSMC managed to put itself in a position of a partnership with the new administration,’ Miller said. ‘All these are wins for TSMC and wins for the U.S.-Taiwan relationship as well.’

‘I don’t think the TSMC announcement solves every issue. But it does put the relationship on a much stronger footing.’

Taiwan’s chip industry is unlikely to see significant changes in the next five years. Building plants in America is a sluggish process. Many experts also reckon TSMC is born of a unique industrial and cultural ecosystem in Taiwan that will be extremely hard to uproot and duplicate in the US.

Lai’s moves don’t stop with chips. He also has plans to buy natural gas from Alaska, announced as early as February. Taiwan historically has one of the strongest environmental movements in Asia and most Taiwanese are highly conscientious about conservation. But Lai and his officials noted Trump’s plans to expand the oil and gas industry.

They also noted Trump believes trade deficits are a threat to the US economy. Lai and his team pragmatically hope the procurements will help reduce the US’s deficit with Taiwan, which in 2024 was its sixth largest, and that this will also help with Taiwan’s energy security.

Currently Australia, Qatar and the US are the three largest suppliers of natural gas to Taiwan, with the US supplying 10 percent. When the Alaskan deal eventuates, it’s highly likely that Taiwan will prefer to reduce imports from Qatar, as it will be unwilling to alienate Australia for strategic reasons.

Then, Lai also moved quickly with plans to buy US agricultural products. Taiwan’s foreign minister announced in late March that Taiwan would send a procurement mission to the US this September. Lai has also promised to push the defence budget to more than 3 percent of GDP this year, up from the planned 2.45 percent.

Of course, Lai’s battle is far from over. The Trump administration is highly unlikely to be content with that level of defence spending and will push Taiwan to spend 5 percent or even 8 percent of its GDP on defending itself. And on 2 April, Trump announced a new wave of tariffs in the US’s most aggressive trade action in nearly a century. Among them was a 32 percent tariff on goods from Taiwan, exempting semiconductors. Outraged Taiwanese officials are protesting. Miller says he expects much more friction and a lot of ‘hard-elbowed’ diplomacy between Taiwan and the US for the next four years.

But Taiwan notably proposes no retaliatory tariffs. Lai is obviously still focused on good relations with Trump.

These early moves say a lot about Lai’s leadership style. He and his independence-minded Democratic Progressive Party have revealed a strong pragmatic streak. Lai has also shown he is able to put himself in the minds of Trump and his supporters and anticipate what pleases them.

TSMC’s $100 billion bet: strengthening ties or weakening Taiwan’s leverage?

Taiwanese chipmaking giant TSMC’s plan to build a plant in the United States looks like a move made at the behest of local officials to solidify US support for Taiwan.

However, it may eventually lessen commitment from Washington since it is a step toward US domestic production of semiconductors, reducing reliance on Taiwanese supply. The US’s friends, particularly Japan and South Korea, may make similar moves as they have much the same incentive as Taiwan to strengthen relations with Washington.

For Taiwan, semiconductors have long been more than an economic asset; they have been a strategic shield. The island’s role as the world’s most advanced chip producer has created an unspoken security guarantee, as its survival matters to the global economy. But as TSMC shifts production to the US, that shield may begin to weaken.

Taiwanese officials understand that economic entanglement with the US strengthens political ties. TSMC’s US$100 billion investment is an effort to deepen those ties and ensure that Taiwan remains indispensable to Washington. The goal is clear: by embedding Taiwan into the US economy, its security will become a priority.

Yet shifting production overseas brings unintended consequences. The more the US secures its own chip supply, the less dependent it becomes on Taiwan. Over time, Washington may feel less compelled to maintain a strong military commitment to the island. The very move intended to guarantee US support could ultimately make Taiwan more expendable.

The transactional nature of US foreign policy under President Donald Trump highlights the risks of Taiwan’s strategy. The US has shown that its commitments are not always permanent. When allies are no longer seen as essential, support can fade. Ukraine has witnessed the limits of US backing.

For the US, TSMC’s investment aligns perfectly with economic nationalism and the push for supply chain security. Bringing semiconductor production home reduces the risks that geopolitical instability presents. It also fits neatly into the broader US-China rivalry, as Washington seeks to curb Beijing’s access to advanced chip technology. But in securing its own position, the US may inadvertently erode Taiwan’s leverage.

Taiwan is not alone in using economic diplomacy to bolster security ties. Japan and South Korea are watching closely, knowing that integrating their industries with the US strengthens their alliances. Both nations are making their own semiconductor investments in the US, mirroring Taiwan’s strategy.

For these allies, the calculation is the same: a deeper economic footprint in the US may translate into stronger security commitments, but the longer-term consequences remain uncertain. If Washington’s dependence on Asian chipmakers diminishes, will its military presence in the region follow suit?

Beijing sees TSMC’s move as both a challenge and an opportunity. On one hand, it accelerates China’s race to achieve semiconductor self-sufficiency. China has already invested billions in its domestic chip industry, knowing that reliance on foreign technology is a vulnerability. If the US and its allies shift production away from Taiwan, China may step up its technological ambitions, or act before Taiwan’s strategic value declines further.

On the other hand, any reduction in reliance on Taiwanese chips makes a US military intervention in a Taiwan conflict less certain. The more the US secures its semiconductor supply, the less important Taiwan becomes to its strategic interests. This shift could embolden China to take a more aggressive stance in the region.

TSMC’s expansion into the US reflects Taiwan’s effort to safeguard its future by deepening ties with its most powerful ally. But this strategy carries risks. Taiwan’s greatest asset, its dominance in semiconductor manufacturing, has made it a linchpin of global stability. As that capability is distributed across multiple locations, Taiwan’s strategic leverage may erode.

Taiwan is making itself indispensable to the US economy in the hope that this translates into an ironclad security commitment. But history has shown that alliances built on economic necessity are not always stronger. As the US moves toward greater self-sufficiency, Taiwan must navigate an increasingly complex geopolitical landscape where economic influence alone may not be enough to ensure its security.

The world is shifting, and Taiwan’s bet on economic diplomacy is a high-stakes gamble. The outcome will shape not just Taiwan’s future, but the broader balance of power in the Indo-Pacific.

To counter China’s coercion of Taiwan, we must track it better

The threat of a Chinese military invasion of Taiwan dominates global discussion about the Taiwan Strait. Far less attention is paid to what is already happening—Beijing is slowly squeezing Taiwan into submission without firing a shot.

Instead of launching a full-blown attack, China is ramping up a full spectrum of coercion: political meddling, economic pressure, information operations, legal manoeuvres, cyberattacks and diplomatic isolation, all conducted within the pressure cooker of constant military threats. The goal? Wear Taiwan down bit by bit until it has no choice but to give in to Beijing’s demand for unification.

ASPI has launched State of the Strait, a weekly Substack that keeps track of all the ways China is putting the squeeze on Taiwan. The international community can’t afford to ignore China’s evolving tactics. These coercive strategies don’t just increase tensions; they create a serious risk of miscalculation that could spiral into a larger conflict. That’s why it’s important to keep a close watch on these developments. By tracking China’s actions, policymakers can better understand where the red lines are, strengthen deterrence efforts and help Taiwan remain a resilient democracy.

Chinese President Xi Jinping’s approach is clear: he’d rather pressure Taiwan into submission over time than launch an all-out invasion. In late 2024, US intelligence reported that while Beijing is still committed to taking control of Taiwan, it’s hesitant to start a direct war. China’s coercion tactics are carefully calibrated to stay just below the threshold of outright war, creating a new normal that benefits the Chinese Communist Party while avoiding an immediate international crisis, reflecting Sun Tzu’s principle of ‘subduing the enemy without fighting’.

Taiwan’s fall would have devastating consequences. A war over Taiwan could cost the global economy up to $10 trillion—far more than the economic damage caused by the war in Ukraine or the Covid-19 pandemic. Even without an actual war, ongoing tensions could cause financial chaos, with global markets taking a hit and a potential $358 billion trade disruption if China were to block imports from G7 nations. If China manages to annex Taiwan without starting a war, this would also send a dangerous message to authoritarian regimes everywhere that democracies aren’t willing to stand up against territorial expansion.

While other think tanks and intelligence analysts do a great job covering China’s military and paramilitary moves, there’s no widely trusted platform that tracks the full range of coercion tactics in one place. That’s where State of the Strait comes in. By compiling and analysing data on all aspects of China’s coercive strategy—not just military actions—it fills a crucial gap and gives a more complete picture of what’s happening.

One example of coercion is when countries engage with Taiwan in ways deemed unacceptable, Beijing typically responds with strong rhetoric in official statements designed to deter further interaction. As the graph below shows, in 2024, Beijing’s most common grievance (representing 48 percent of observations) was foreign governments ‘violating China’s One-China principle’—a broad category that encompassed any action perceived as recognising Taiwan as distinct or autonomous, even if it fell short of full diplomatic recognition. Another 22 percent of criticisms stemmed from foreign officials meeting with Taiwanese counterparts, reflecting former president Tsai Ing-wen’s increased participation in international security forums.

What are China’s reasons for criticising countries engaging with Taiwan in 2024? (Source: ASPI’s State of the Strait Database.)

In another form of coercion, Beijing consistently and deliberately revokes the tariff-free status of Taiwanese exports as a means of leverage and punishment, as indicated in the graph below. Taiwan’s Mainland Affairs Council, which is responsible for cross-strait relations policy, has characterised this form of coercion as ‘economic oppression’. In 2024 alone, China imposed trade restrictions on 169 Taiwanese exports, primarily through the removal of tariff-free status; the only exception was polycarbonate, which faced anti-dumping tariffs. Machinery and parts constituted the largest category of Taiwanese exports, followed by plastics.

China lifted its ban on the import of wendan pomelos, a type of citrus fruit from Taiwan, in 2024. That occurred two weeks before the Mid-Autumn Festival (2 September), but the ban was reinstated a week after the holiday (25 September), along with bans on 33 other Taiwanese imports. The pomelo symbolises prosperity and good fortune in Chinese culture and is often given as a gift during festival times.

On which Taiwanese exports did China put new trade restrictions in 2024? (Source: ASPI’s State of the Strait Database)

This is only data on two coercion tactics from one year. In future, ASPI intends to expand State of the Strait by developing a searchable public database and assessment platform. That interactive tool will visualise coercion data across domains and years, distil key insights and help policymakers track long-term trends with greater clarity.

The goal is simple: to help decision-makers and the public understand how China is ramping up the pressure, how close we are to a tipping point, and how these tactics are affecting Taiwan’s government, society, and decision-making. Over time, State of the Strait will become an essential resource for tracking China’s tactics and shaping the strategies to counter them.

China’s shadow fleet threatens Indo-Pacific communications

China is using increasingly sophisticated grey-zone tactics against subsea cables in the waters around Taiwan, using a shadow-fleet playbook that could be expanded across the Indo-Pacific.

On 25 February, Taiwan’s coast guard detained the Hong Tai 58 after a subsea cable was cut in the Taiwan Strait. The vessel was registered to Togo but crewed entirely by Chinese nationals. It had Chinese characters on its hull and operated under multiple identities with conflicting markings, documentation and tracking data. In another incident in early January, the Shunxing 39—a Chinese-owned vessel flagged under both Cameroon and Tanzania—was implicated in damaging a section of the Trans-Pacific Express subsea cable, an important telecommunications link between Taiwan and the United States.

While China has targeted Taiwan’s undersea cables for years as part of its grey-zone operations, it has subtly shifted tactics. Previously, vessels involved in suspected acts of sabotage were registered to China. Now, they are increasingly operating under foreign flags, forming a shadow fleet. This strategy resembles Russia’s subsea cable tactics in the Baltic Sea.

States such as North Korea and Iran often use shadow fleets—ageing vessels registered under flags of convenience—to get around sanctions, to trade or transport illegal or prohibited goods, or to undertake illegal fishing. The vessels are operated through intricate corporate structures, with shell companies established in one country, management based in another and vessels registered elsewhere again, providing states with deniability. They use deceptive tactics including manipulating identification systems, turning off tracking systems and changing names and flags. If caught, vessels can be easily abandoned and their legal entities dissolved, rendering traditional countermeasures such as sanctions largely ineffective.

Since its invasion of Ukraine, Russia has relied on a large shadow fleet, not only to evade oil sanctions but also to conduct a campaign of hybrid warfare against NATO—including allegedly damaging European subsea cables and critical infrastructure. For example, in December, Finnish authorities seized the Eagle S after it allegedly damaged five subsea cables. The tanker was flagged under the Cook Islands but operated by a Dubai-based company with Indian management. Moscow denied any involvement, pointing to the vessel’s non-Russian links.

China has also surfaced in Russia’s operations. In November, the Chinese-flagged Yi Peng 3—which had departed from a Russian port—was suspected of severing two undersea cables, one linking Lithuania to Sweden and another connecting Germany to Finland. In 2023, the NewNew Polar Bear, a Chinese-flagged but Russian-crewed vessel, was responsible for damaging Baltic subsea cables and a gas pipeline. China admitted the vessel was responsible for the damage, but claimed it was accidental.

These cases highlight the value of shadow fleets as tools of hybrid warfare. Subsea cables are notoriously susceptible to accidental and environmental damage. Proving intent to sabotage and holding parties accountable is very difficult.

Despite this, NATO has been working to expose and deter Russia’s hybrid warfare tactics.

Taiwan has taken note. In January, it blacklisted 52 Chinese-owned vessels suspected of operating as its shadow fleet registered in countries such as Cameroon, Tanzania, Mongolia, Togo and Sierra Leone. Following the recent cable-cutting incidents, Taiwanese authorities publicised detailed evidence—including vessel ownership, flag state and tracking system manipulation details—to pre-empt China’s denial. They have also been tracking and boarding suspicious vessels. Taiwan recently raised the alarm about a Russian-flagged vessel lurking for weeks over a subsea cable, recognising the growing coordination between China and Russia in hybrid warfare operations.

While Taiwan has borne the brunt of these efforts so far, China is unlikely to be overly concerned about deniability over future subsea cable sabotage affecting Taiwan. After all, Beijing’s primary goal is to exert pressure on the island, not conceal its intentions.

However, what happens in the Taiwan Strait will not stay in the Taiwan Strait. China’s shadow-fleet tactics are likely to expand across the Indo-Pacific, where maintaining a level of deniability would be beneficial. China already deploys grey-zone tactics in the region, from intimidation of vessels in the South China Sea and targeted incursions in disputed territorial waters, to strategic infrastructure investments that create leverage over its neighbours. Targeting subsea cable infrastructure is another tactic in Beijing’s coercion toolkit—one that targets connectivity while maintaining plausible deniability and operating in the grey-zones of international law and accountability.

The Indo-Pacific—with its vast maritime distances, congested shipping lanes and uneven surveillance capabilities—is fertile ground for such operations. Frequent accidental cable damage and existing territorial disputes may further complicate attribution and response. The region’s economic ties with China would make coordinating any responses even harder.

From filing patents on subsea cutting technology to unveiling a powerful new deep-sea cable cutting device, China’s clearly gearing up to expand its subsea cable operations. As Taiwan works to protect its critical infrastructure, the rest of the Indo-Pacific should enhance regional cooperation and reassess existing deterrence strategies.

If recent incidents in the Baltic Sea and around Taiwan are any indication, disruptions in the Indo-Pacific are not a question of if, but when. The most effective counter to Beijing’s shadow-fleet operations is exposure through public attribution and communication. After all, a vessel cutting cables near a state’s shores may well be flying a neighbour’s flag but taking its orders from Beijing.

Awful optics: political fighting in Taiwan stalls part of defence budget rise

Political fighting in Taiwan is delaying some of an increase in defence spending and creating an appearance of lack of national resolve that can only damage the island’s relationship with the Trump administration.

The main opposition parties support the policy of President Lai Ching-te to lift spending from roughly 2.45 percent of GDP to more than 3 percent, but recently they’ve been unable to resist playing politics with the defence budget in the legislature.

Since Donald Trump has demanded that the United States’ European allies lift defence spending to 5 percent of GDP, and since Taiwan would be the frontline state in a war with China, the US is unlikely to find 3 percent at all sufficient.

Elbridge Colby, Trump’s nominee to become under secretary of defense for policy, said at his Senate confirmation hearing on 4 March that Taiwan should be spending 10 percent of its GDP ‘or at least something in that ballpark.’

The upper echelons of Taiwan’s ruling Democratic Progressive Party say they’ve understood the signal from Trump and are happy to spend cash on more weaponry. ‘We got that message and we’ll be more than happy to talk about strengthening our defence capability,’ former Taiwanese president Tsai Ing-wen told The Times.

The problem is that Taiwan’s legislature usually needs to approve major US weaponry purchases and government plans for indigenous defence capability development. But the legislature is dominated by parties that are soft on China.

Lai Ching-te was elected last year with around 40 percent of the vote, giving him control of the executive branch of government. But in concurrent legislative elections his independence-minded DPP narrowly lost its majority in the 113-seat parliament to the Kuomintang and its smaller ally, the Taiwan People’s Party.

The government and legislature have since been at loggerheads. Lai has done little to reach out and compromise, while the KMT and TPP have frequently been obstructive. Without providing evidence, the DPP says Beijing is behind their obstructions, while opposition lawmakers say Lai is too dictatorial.

There have been many brawls in the legislative chamber (real brawls, with punching, pushing and shoving) and protests in the streets. The executive branch has rejected bills passed by the legislature and sent them back to parliament for reconsideration. Taiwan’s constitutional court, an important democratic institution, had the sole power of legislative review and could act as an arbitrator. But because of one bill rammed through parliament by the opposition, the court has been temporarily paralysed.

The most worrying development came at the end of January when, hours after Trump’s inauguration. lawmakers voted to slash and freeze parts of Taiwan’s defence spending for 2025. Lawmakers cut 60 percent of the defence ministry’s publicity budget, crucial for recruitment. They also froze half the submarine program budget, 30 percent of military operations expenditure and funding for a drone industrial park.

Alexander Huang, director of the KMT’s International Affairs Department, says opposition lawmakers have cut about 1.3 percent of Lai’s proposed defence budget of NT$647 billion (AU$30.8 billion), which was originally 6.6 percent bigger than last year’s. After the cut, the rise is 5.2 percent, amid 2025 inflation expected to be about 2.0 percent. Huang notes that the frozen funds will be released once relevant government agencies give reports to the legislature, and parliamentarians are satisfied that defence projects are efficient and progressing.

Still, as far as optics go, the damage has been done. At Colby’s hearing, two US senators criticised the Taiwanese legislature’s efforts to cut defence spending. Republican senator Dan Sullivan accused the KMT of ‘playing a dangerous game’ while Colby himself found it profoundly disturbing.

For at least the past two decades, many US policymakers have pushed Taiwan to spend 3 percent of its GDP on defence, but it never reached this target. When Tsai Ing-wen took office in 2016, defence spending was just 1.82 percent of GDP, though she raised it to 2.17 percent in 2023. For many years, the budget was also not used as effectively as it could have been. For instance, until last year, conscription was only four months long, and the training was widely criticised for not being serious, looking more like a summer camp.

Lai this year plans to pass an additional special budget to push defence spending from 2.45 percent to more than 3 percent of GDP. The additional budget, which will likely be spent on US weaponry to demonstrate Taiwan’s resolve to Trump, will still need legislative approval. While mainstream KMT and TPP officials support increased defence spending, some in the opposition who are more pro-Beijing will probably object.

The blow-up between Trump and Ukrainian leader Volodymyr Zelenskyy is driving anti-Americanism in some quarters in Taiwan, especially with pro-China KMT politicians. Fu Kun-chi, the KMT’s legislative caucus whip, who has close ties with Beijing officials, pointed to the way Trump publicly scolded Zelenskyy and said Lai could be next in line.

‘Do we really have to spend 10 percent of Taiwan’s GDP or NT$2.86 trillion, on the military? Can the Taiwanese people shoulder this?” he said, according to the Chinese-language United Daily News.

Political scientists also predict it will be nearly impossible to push Taiwan’s defence budget to 8 percent or even 5 percent in the short term.

The KMT’s Huang, who is also a respected military analyst, noted that Taiwan’s overall government budget spending normally stands at about 12 percent to 13 percent of its GDP, meaning that 8 percent of GDP would amount to about two-thirds of Taiwan’s current government spending.

Huang added that it will be difficult for politicians across Taiwan’s political spectrum, including those in the DPP, to win votes if they propose higher spending and higher taxes.

Andrew Yang, a former KMT deputy defence minister, described a defence spending goal of 5 percent of GDP as ‘mission impossible.’

Well-connected Yang said some influential people in Washington were concerned about Taiwan’s political divisions. Yang said it was most important for Taiwan to convince Washington that the two sides had reached a consensus on defence so that the executive branch and legislative branch could focus on allocating resources. But while Taiwan mostly has the resolve to defend itself, all the squabbling will make this difficult.