Taiwan President Lai Ching-te called on democracies in the Indo-Pacific to unite against threats to regional stability, as the island faces pressure from Beijing and concerns that Donald Trump's rapprochement with China could come at Taiwan's expense. In his National Day address in Taipei on Saturday, Lai welcomed the United States and China managing their competition through dialogue, but said maintaining peace requires "a correct understanding of how history has unfolded." He stressed that democracies in the Indo-Pacific must join forces to ensure the status quo is not changed.
Lai's speech came two weeks after Trump hosted Chinese President Xi Jinping in Washington, where the two leaders agreed to mutual tariff cuts. Xi urged Washington to explicitly oppose Taiwanese independence, a departure from the longstanding US position. US Ambassador to China David Perdue later said American policy on Taiwan was unchanged. Senior Taipei officials have worried that Taiwan could be "on the menu" in Trump's talks with Xi, particularly as the administration has held up an arms package for the island potentially worth as much as $14 billion. Washington has nonetheless continued engagement with Taipei, including allowing a visit from former President Tsai Ing-wen.
Lai proposed a record NT$1.12 trillion ($35 billion) defense budget for 2027 and pledged to raise defense spending to 5% of gross domestic product by 2030. Taiwan is also strengthening its domestic drone industry and investing in missiles and air defense systems, while the military has introduced more realistic exercises. Beijing considers Taiwan part of its territory and has vowed to bring the island under its control, by force if necessary.
Taiwan's economy is enjoying its strongest expansion in decades, driven by surging global demand for AI, and the government raised its 2026 growth forecast to 11.05%. Lai also pledged to spread the benefits of growth through higher wages, cash handouts, tax relief and expanded welfare. He marked the 30th anniversary of Taiwan's first direct presidential election, declaring, "Taiwan cherishes peace, but we will not give up our freedom. We are open to exchanges, but will not accept subordination."
Source: Bloomberg Markets · Summarized by HeadlinesBriefing