In light of the re-election of former US president Donald Trump, an article by David Sacks, a fellow for Asia Studies at the Council on Foreign Relations, recommends that Taiwan increase its defense spending, improve its security partnership with Japan and demonstrate its value as an economic partner to the US.
After taking office in January, Trump will likely apply pressure on Taiwan to increase its defense budget. Although Taiwan raised its defense budget for next year by 7.7 percent to NT$64.7 billion (US$2 billion) — 2.45 percent of its GDP — Trump has proposed that it budget 10 percent of its GDP, an impossible metric.
Taiwan must seriously consider the possibility of gradually increasing its defense budget to 3 or even 5 percent of its GDP within the next few years, or Trump’s dissatisfaction with Taiwan for not having adequately repaid the US might lead him to halt US military aid and threaten to make it pay for US protection.
In an interview with the Wall Street Journal, Trump indicated that if China were to attempt an invasion of Taiwan, he would respond by imposing tariffs of 150 to 200 percent on Chinese goods. When asked if he would use military force to protect Taiwan, his attitude was unclear, emphasizing his positive relationship with Chinese President Xi Jinping (習近平), stating there would be no need for conflict because Xi respects him.
Trump once again plans to use tariffs to solve the “Taiwan problem.” Whether that would be enough to deter China from threatening Taiwan is unclear.
Trump pays close attention to bilateral trade balances, viewing trade deficits as a marker of economic unfairness. Last year, the US’ trade deficit with Taiwan reached US$48 billion. As such, Trump could press Taiwan to buy more US products or ease restrictions to reduce the trade deficit. This focus on economic measures illustrates that his position on Taiwan is oriented toward US economic interests. He could demand that Taiwan pay a “protection fee” to the US to increase defense spending and demonstrate its resolve for self-defense — a proposition that would be difficult for Taiwan to refuse.
Taiwan could take this opportunity not only to complete the delivery of F-16 jets from the US, but also purchase advanced F-35 jets to bolster its defenses against a possible Chinese invasion.
Additionally, weapons systems cooperation — particularly in autonomous drones and other areas — has boosted bilateral military cooperation. Simultaneously, Taiwan could adopt an onshore outsourcing economic model of investing in US manufacturing. For example, Taiwan Semiconductor Manufacturing Co could build more plants on US soil to strengthen economic ties and high-tech connections.
Trump’s re-election represents a path toward US isolationism. Therefore, Taiwan must improve its self-defense capabilities and look to other regional partners, like Japan, for support.
As for Trump’s stance on Taiwan, perhaps the answer lies in his ultimate assessment of US interests. Taiwan should focus less on abstract ideals and values, and instead engage with Trump in a language he can understand — one of business and transactions — to have pragmatic discussions about mutual benefits and meeting each other’s needs.
Faced with a volatile US administration, Taipei must be self-reliant and completely prepared to handle all possible situations. SpaceX has already adopted a policy requiring its suppliers to move their manufacturing operations outside of Taiwan to avoid geopolitical risk. Taiwanese businesses should leverage opportunities to meet customer demand and accelerate their global expansion to help Taiwan remain secure.
Liao Ming-hui is an assistant researcher at the Chung-Hua Institution for Economic Research.
Translated by Kyra Gustavsen
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