Taiwan President William Lai has announced that the country will increase its defence budget to at least 3% of its GDP in 2025. This announcement came just hours after US President Donald Trump reaffirmed his plan to impose tariffs on Taiwanese semiconductor imports, according to the Taipei Times.

Speaking at a press conference in Taipei on Wednesday after his first major national security meeting of the year, Lai said the government would introduce a special budget to reach the 3% target. He stressed Taiwan's commitment to protecting its sovereignty, strengthening its self-defence, and improving national security in response to growing threats from authoritarian regimes. Taiwan's decision to increase defence spending is part of its broader plan to strengthen its strategic position while also addressing trade imbalances with the US.

Over the past eight years, the US has approved $26.26 billion in arms sales to Taiwan, including $18.76 billion during Trump’s first term from 2017 to 2021, Lai said. He reaffirmed Taiwan’s commitment to speeding up military modernization and strengthening defence ties with the US. "We are a player, not a pawn," Lai said in response to a question on whether Taiwan runs the risk of becoming a mere "pawn" in the ongoing geopolitical struggle between the US and China. Taiwan is an essential part of the region and the world. Lai's comments came after Trump's statements in Washington earlier that day, where he reiterated his plan to impose tariffs on semiconductor imports, according to the Taipei Times.

Trump asserted that Taiwan had "taken our [the US'] chip business away" after signing a presidential memorandum, emphasising that the proposed economic measures would encourage "fair" and "reciprocal" trade. The goal of the tariffs, which may go into force as early as April, is to close the trade deficit that the US has with several countries, including Taiwan. Taiwan has consistently been among the top 10 countries contributing to the US trade deficit.

During his presidential campaign, Trump urged Taiwan to significantly increase its defence budget and contribute more to its security cooperation with the US. Under former President Tsai Ing-wen, Taiwan's defence budget gradually increased from NTD 365.8 billion ($11.2 billion) in 2016 to NTD 606.8 billion last year. However, it still did not reach the 3% of GDP target that Tsai had promised. Lai’s proposed budget increase will need legislative approval before it can be implemented.

For the current fiscal year, the Cabinet allocated NTD 647 billion for national defence, making up 2.45% of GDP. However, the opposition-led legislature has already reduced the budget by NTD 8.4 billion and frozen another NTD 89.9 billion, according to the Directorate-General of Budget, Accounting, and Statistics, as reported by the Taipei Times. The central government budget has not been finalized yet, as lawmakers are still working on their revisions after making several cuts and freezing some expenditures.