Taiwan's President Lai Ching-te delivers a speech during the inauguration ceremony of M1A2T Abrams Main Battle Tanks in Hsinchu County, Taiwan, Friday, Oct. 31, 2025. Chiang Ying-ying / AP

Taiwan's President Lai Ching-te announced a $40 billion budget for arms purchases on Wednesday. The plans include building an air defense system with high-level detection and interception capabilities called Taiwan Dome, as the U.S. pressures the island to increase its defense spending.

According to the leader, this budget will be allocated over eight years, from 2026 to 2033, and comes after Lai already pledged to raise defense spending to 5% of the island's GDP, as part of his strategy amid China's threats of invasion.

"China's threats to Taiwan and the Indo-Pacific region are escalating," Lai said on Wednesday. "Recently, various types of military intrusions, maritime gray zones and disinformation campaigns have been occurring in Japan, the Philippines and around the Taiwan Strait, causing deep unease and distress to all parties in the region."

"Taiwan, as the most important and most critical part of the first island chain, must demonstrate our determination and take on a greater responsibility in self-defense," he said, referring to the string of islands stretching from Japan's East China Sea through the Philippines in the Pacific Ocean.

Last week, Japan said that it scrambled aircraft after detecting a suspected Chinese drone near its southern island of Yonaguni, which is close to Taiwan.

Currently, Taiwan has set an increase in its defense budget to 3.3% of its GDP for 2026, allocating $949.5 billion Taiwan dollars ($31.18 billion). President Donald Trump has demanded Taiwan raise its defense spending to as much as 10% of GDP, a proportion well above what the U.S. or any of its major allies spend.

The U.S. State Department on Wednesday said it welcomes Taiwan's budget announcement and "supports Taiwan's acquisition of critical defense capabilities, commensurate with the threat it faces."

It also said it welcomes commitments by Lai's administration to increase defense spending to at least 5% of GDP by 2030, "which demonstrates resolve to strengthen Taiwan's self-defense capabilities."

Taiwan, a self-ruled island, is claimed by China. In recent years, China has deployed warplanes, navfy ships and drones toward the island on a daily basis in military exercises as part of its efforts to exert pressure.

Wellington Koo, Taiwan's defense minister, said Wednesday the $40 billion is an upper limit for the special budget and that it will be used to buy precision-strike missiles and work toward the joint development and procurement between Taiwan and the U.S. of equipment and systems.

Lai also said his government would focus on finding ways to increase its defense against Beijing's "psychological warfare" as China attempts to "weaken our unity." He said the government will monitor and increase public awareness of China's interference attempts during major events and elections.

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