Executive Summary

Taiwan–U.S. relations are entering a new phase in 2026, characterized by the simultaneous deepening of security cooperation, growing economic and technological interdependence, greater emphasis on burden-sharing, and heightened uncertainty over the future direction of U.S. policy.

The second Trump administration has not fundamentally altered the longstanding U.S. approach to Taiwan. The Taiwan Relations Act (TRA) remains a central legal foundation of U.S. relations with Taiwan, including U.S. policy to provide Taiwan with defensive articles and maintain the capacity to resist coercion that would threaten the security or social and economic system of the people on Taiwan.

At the same time, the policy environment under President Donald Trump differs significantly from that of the Biden administration. The Trump administration has placed greater emphasis on burden-sharing, reciprocal economic benefits, domestic industrial capacity, and the direct contribution of partners to U.S. strategic objectives. This has increased uncertainty over how Washington may calibrate its commitments to Taiwan in response to changing U.S. economic and strategic priorities.

The security relationship remains substantial. In June 2026, Secretary of State Marco Rubio stated that there had been “no change” in U.S. policy toward Taiwan and that Washington continued to support preservation of the status quo. However, a pending U.S. arms package reportedly worth approximately $14 billion has become a visible indicator of the political sensitivity surrounding arms transfers to Taiwan. President Trump described the package as a potential “bargaining chip” in discussions with China, while senior U.S. officials subsequently emphasized that the timing of the sale was not contingent on Chinese demands.

Taiwan has responded by placing greater emphasis on self-defense. On August 20, 2026, Taiwan’s Executive Yuan approved a proposed 2027 defense budget of NT$1.1225 trillion, equivalent to approximately 3.01 percent of GDP. The proposal represents a significant increase in defense spending and includes greater emphasis on drones, missiles, asymmetric capabilities, and military modernization.

Economic and technological relations are also becoming increasingly important. In February 2026, the United States and Taiwan reached an Agreement on Reciprocal Trade. The U.S. Trade Representative stated that the agreement would deepen bilateral investment and commercial opportunities, strengthen the high-tech strategic partnership, and enhance supply-chain resilience. For qualifying Taiwanese-origin goods, the U.S. committed to apply a tariff rate of 15 percent or the applicable U.S. Most-Favored-Nation rate, whichever is higher, subject to the agreement’s provisions.

Semiconductors therefore remain one of the most important structural links between Taiwan and the United States. Taiwan’s position in advanced semiconductor manufacturing gives it substantial economic and strategic importance to the United States, particularly in artificial intelligence and advanced computing. Yet the expansion of Taiwanese investment in the United States also creates a long-term policy challenge: Taiwan must strengthen supply-chain resilience and its international economic position without allowing excessive outward investment to weaken its domestic technological ecosystem.

The central question for Taiwan is therefore no longer simply whether the United States supports Taiwan. The more consequential questions are:

How much strategic and economic cost is Washington prepared to bear for Taiwan; how much of the burden will Taipei be expected to assume; and how can Taiwan preserve policy space when U.S. policy toward China becomes more transactional?

The most likely trajectory for 2026–2028 is neither a fundamental rupture nor an unconditional strengthening of the relationship. Instead, Taiwan–U.S. relations are likely to evolve toward a more integrated but more demanding framework in which security, trade, technology, supply-chain resilience, and burden-sharing are increasingly interconnected.

I. The Strategic Foundation of Taiwan–U.S. Relations

The basic institutional framework of the relationship remains intact.

The Taiwan Relations Act of 1979 provides the legal basis for the United States’ unofficial relationship with Taiwan. It states that it is U.S. policy to maintain commercial, cultural, and other relations with the people on Taiwan; to regard peace and stability in the Western Pacific as matters of U.S. interest; to provide Taiwan with defensive arms; and to maintain the capacity to resist coercion that would threaten the security or social and economic system of the people on Taiwan.

The TRA, however, does not constitute a formal U.S. security guarantee to Taiwan. This distinction remains important when assessing the future of the relationship.

U.S. policy continues to combine support for Taiwan’s self-defense with a broader objective of preserving stability across the Taiwan Strait. Secretary of State Marco Rubio’s June 2026 statement that U.S. policy toward Taiwan had not changed and that Washington sought to preserve the status quo provides the clearest recent public indication that the Trump administration has not formally abandoned this framework.

Consequently, the central change under the second Trump administration should not be interpreted as a fundamental transformation of U.S. policy toward Taiwan. Rather, the more significant development concerns how the existing policy is implemented and what Washington expects Taiwan to contribute in return.

II. Security Cooperation: Deeper Capabilities, Greater Emphasis on Self-Defense

Security cooperation is likely to remain the most politically sensitive component of the relationship.

The United States continues to view Taiwan’s ability to defend itself as an important element of deterrence in the Taiwan Strait. At the same time, Washington increasingly emphasizes that Taiwan must strengthen its own defense capabilities rather than rely excessively on external assistance.

Taiwan’s proposed 2027 defense budget illustrates this trend.

On August 20, Taiwan’s Executive Yuan approved a proposed defense budget of NT$1.1225 trillion, equivalent to 3.01 percent of projected GDP. The proposal includes the regular defense budget, special defense allocations, military pensions, and Coast Guard expenditures under the methodology used by the Taiwan government.

The significance of the proposal extends beyond its numerical size. It represents an attempt by Taipei to demonstrate a greater willingness to assume responsibility for its own defense.

The budget also emphasizes capabilities that are particularly relevant to Taiwan’s asymmetric defense requirements, including drones, missiles, and other modernization programs.

This development is broadly consistent with a growing policy consensus in Washington that Taiwan should invest more heavily in capabilities that can strengthen deterrence and improve its ability to withstand coercion.

Nevertheless, increased defense spending alone will not determine the credibility of Taiwan’s deterrence. The effectiveness of future investment will depend on procurement speed, ammunition and stockpile resilience, command and control, reserve mobilization, civil defense, infrastructure protection, communications resilience, and the ability to sustain operations during a prolonged crisis.

The strategic implication is therefore clear:

Taiwan’s contribution to deterrence will increasingly be evaluated not only by the size of its defense budget, but by the operational effectiveness and resilience generated by that spending.

III. Arms Sales and the Politics of Strategic Uncertainty

U.S. arms sales remain an important instrument of the Taiwan–U.S. security relationship, but developments in 2026 demonstrate that their political timing can become a source of uncertainty.

The Trump administration inherited a major security relationship with Taiwan, including a substantial arms-sales pipeline. In June 2026, Secretary Rubio stated that the United States had approved an approximately $11 billion arms sale to Taiwan in December 2025 and that another package worth approximately $14 billion remained under review.

The latter package became politically controversial after President Trump described it as a potential bargaining chip in his discussions with Chinese President Xi Jinping.

This generated concern in Taiwan because it raised the possibility that arms transfers could become linked, at least politically, to broader U.S.–China negotiations. However, this should not be interpreted as evidence that the United States has adopted a policy of trading Taiwan’s security interests to obtain concessions from Beijing.

Indeed, in June 2026, senior U.S. officials stated that the pending arms sale did not hinge on negotiations with China, even though China regularly raises the issue in discussions with Washington.

The more cautious conclusion is therefore that:

U.S. arms sales to Taiwan remain a significant component of deterrence, but the timing and political management of future sales may become less predictable under a more transactional administration.

For Taiwan, this reinforces the importance of reducing dependence on the assumption that U.S. arms deliveries will always arrive rapidly during a crisis. Domestic defense production, stockpiles, repair capacity, distributed logistics, and interoperability should therefore receive greater attention.

IV. Trade and Investment Are Becoming Strategic Issues

Economic relations have become an increasingly important pillar of Taiwan–U.S. relations.

On February 12, 2026, the United States and Taiwan reached an Agreement on Reciprocal Trade under the auspices of the American Institute in Taiwan (AIT) and the Taipei Economic and Cultural Representative Office (TECRO). According to the U.S. Trade Representative, the agreement is intended to strengthen bilateral trade and investment, expand U.S. manufacturing, reduce tariffs and non-tariff barriers, increase investment and procurement, and strengthen supply-chain resilience.

For Taiwan, the agreement is strategically important because it links trade policy to broader questions of technology, investment, and economic security.

For the United States, Taiwan’s importance extends beyond bilateral trade. Taiwanese companies are deeply integrated into global technology supply chains, particularly in semiconductors and advanced electronics.

The emerging economic relationship can therefore be understood as a form of strategic economic interdependence.

Taiwan benefits from:

· access to the U.S. market;

· closer integration with U.S. technology ecosystems;

· stronger supply-chain partnerships;

· expanded investment opportunities; and

· greater economic alignment with the United States.

The United States benefits from:

· increased investment by Taiwanese companies;

· greater resilience in critical technology supply chains;

· stronger semiconductor and advanced-manufacturing capacity;

· closer integration with Taiwan’s technology sector; and

· diversification of production away from excessive concentration in China.

This relationship is mutually beneficial, but it also creates asymmetrical policy pressures.

As Washington increasingly links trade and investment to national security, Taiwan may face stronger expectations to increase investment in the United States, align export controls with U.S. policy, and support U.S. efforts to restructure critical technology supply chains.

The challenge for Taipei is to ensure that economic integration with the United States produces mutual resilience rather than unilateral dependence.

V. Semiconductors: Strategic Asset and Structural Vulnerability

Semiconductors represent one of the strongest structural links between Taiwan and the United States.

Taiwan’s semiconductor industry is central to global advanced-chip production and has become increasingly important to U.S. strategies concerning artificial intelligence, advanced computing, and supply-chain resilience.

This gives Taiwan considerable strategic importance.

However, the relationship should not be reduced to the assumption that semiconductor dependence automatically guarantees U.S. military intervention in a Taiwan Strait crisis.

Economic interdependence can increase the costs of conflict for all parties, but it does not eliminate strategic uncertainty.

At the same time, the United States is actively encouraging greater domestic semiconductor manufacturing capacity. Taiwanese companies’ investments in the United States therefore represent both an opportunity and a potential structural challenge for Taiwan.

The policy dilemma is straightforward:

Taiwan needs to expand its international industrial presence while preserving the domestic technological ecosystem that generates its competitive advantage.

This requires a more sophisticated approach to overseas investment.

Taiwan should encourage international expansion in areas such as mature-node manufacturing, packaging, supply-chain services, and selected downstream activities while maintaining strong domestic capabilities in core research and development, advanced manufacturing, engineering talent, and strategic infrastructure.

The objective should not be to prevent Taiwanese companies from investing overseas. Rather, it should be to ensure that internationalization does not become technological hollowing-out.

VI. The Trump Administration as the Principal Variable

The second Trump administration is likely to remain the single most important variable affecting the future trajectory of Taiwan–U.S. relations.

President Trump’s foreign-policy approach places greater emphasis on direct national interests, reciprocal economic benefits, burden-sharing, and transactional diplomacy than was typical during the Biden administration.

This does not mean that the United States has abandoned its strategic interests in the Indo-Pacific or its long-standing policy toward Taiwan.

Instead, it means that Taiwan may increasingly need to demonstrate its value in terms that resonate with multiple U.S. constituencies:

· national security;

· defense burden-sharing;

· industrial investment;

· semiconductor and AI leadership;

· supply-chain resilience;

· trade;

· technology;

· and regional deterrence.

The May 2026 Trump–Xi summit in Beijing demonstrated the importance of the U.S.–China relationship to Taiwan’s strategic environment. The summit generated concern in Taipei about whether Taiwan could become a subject of broader U.S.–China bargaining.

At the same time, Rubio subsequently emphasized that U.S. policy toward Taiwan had not changed.

This contrast illustrates a central feature of the Trump-era policy environment:

Presidential rhetoric, formal policy, congressional preferences, bureaucratic implementation, and military planning do not necessarily move in the same direction or at the same speed.

Taiwan therefore needs to distinguish carefully between political statements and actual policy implementation

VII. Four Major Trends for 2026–2028

1. Security cooperation is likely to become more capability-oriented

The United States is likely to continue supporting Taiwan’s self-defense, while placing greater emphasis on Taiwan’s own defense investment and operational readiness.

The key issue will increasingly be capability rather than rhetoric.

Taiwan should therefore prioritize resilience, distributed capabilities, asymmetric systems, stockpiles, mobilization, and continuity of government and communications.

2. Economic relations will become increasingly securitized

Trade, tariffs, investment, semiconductors, AI, export controls, and supply-chain resilience are increasingly interconnected with national security.

This means that economic negotiations should no longer be treated as separate from strategic policy.

Taiwan will need an integrated approach that combines trade policy, industrial policy, technology policy, and national security.

3. Taiwan’s defense policy will become more self-reliant

Higher defense spending is likely to become a structural feature of Taiwan’s policy environment.

Taipei’s proposed 2027 defense budget of NT$1.1225 trillion, equivalent to 3.01 percent of GDP, demonstrates this direction.

The challenge will be to convert higher spending into usable capabilities.

4. Taiwan–U.S. relations will remain highly sensitive to U.S.–China relations

Taiwan cannot completely separate its relationship with Washington from the broader U.S.–China strategic relationship.

Periods of U.S.–China tension may increase Taiwan’s strategic importance while simultaneously increasing the risk of military escalation.

Conversely, periods of U.S.–China stabilization may reduce immediate tensions but create concerns in Taipei about whether Taiwan could receive less attention in Washington’s broader China policy.

This creates a structural dilemma:

For Taiwan, both U.S.–China confrontation and U.S.–China accommodation can generate different forms of strategic risk.

VIII. Scenario Assessment, 2026–2028

Scenario 1: Strengthened Strategic Cooperation

Under this scenario, Washington continues to view Taiwan as an important component of Indo-Pacific deterrence and technology supply-chain resilience.

The United States continues arms transfers, defense cooperation, technology coordination, and economic engagement, while Taiwan continues increasing defense spending and deepening economic integration with the United States.

Implications

Taiwan–U.S. relations would move toward a more comprehensive strategic partnership without becoming a formal alliance.

Taiwan’s policy priority

Taipei should use this environment to strengthen defense readiness, expand technology cooperation, and build broader regional partnerships.

Scenario 2: Transactional but Stable Cooperation

This is arguably the most important scenario for policymakers to prepare for.

Under this scenario, the United States continues supporting Taiwan but increasingly links policy decisions to questions of economic benefit, defense burden-sharing, investment, and broader U.S. strategic priorities.

The relationship would not deteriorate fundamentally, but policy implementation could become less predictable.

Potential manifestations could include:

· stronger U.S. pressure for increased Taiwanese defense spending;

· greater expectations for Taiwanese investment in the United States;

· closer alignment on technology and export-control policies;

· greater U.S. emphasis on reciprocal economic benefits; and

· greater uncertainty over the timing of selected security decisions.

Taiwan’s policy priority

Taipei should avoid interpreting every U.S. demand as evidence of strategic abandonment while simultaneously avoiding excessive dependence on Washington.

Scenario 3: Partial U.S.–China Strategic Stabilization

A sustained period of U.S.–China stabilization could create a more complicated environment for Taiwan.

Washington could continue supporting Taiwan’s self-defense while reducing the political visibility of Taiwan-related issues in order to manage the broader bilateral relationship with Beijing.

Such a development would not necessarily mean a reduction in practical security cooperation.

However, Taiwan could face greater diplomatic pressure to avoid actions perceived in Washington as increasing cross-Strait tensions.

Taiwan’s policy priority

Taipei should strengthen communication with Washington while maintaining its own crisis-management mechanisms and regional partnerships.

Scenario 4: Taiwan Strait Crisis

This scenario has the lowest predictability but potentially the greatest consequences.

A major military, maritime, or coercive crisis involving Taiwan would force the United States to make decisions under severe time pressure concerning military assistance, intelligence support, sanctions, logistics, alliance coordination, and possible military intervention.

The uncertainty surrounding U.S. intervention is precisely why Taiwan should not base its defense planning on the assumption that the United States will automatically intervene militarily.

Instead, Taiwan’s objective should be to develop sufficient capabilities to:

1. raise the cost of coercion;

2. delay and complicate any attempt at rapid military action;

3. preserve government and military command structures;

4. maintain critical communications;

5. sustain essential infrastructure and logistics; and

6. create time and political space for international assistance.

IX. Policy Recommendations for Taiwan

1. Establish a U.S. Policy Early-Warning and Monitoring Mechanism

Taiwan should establish or strengthen an institutional mechanism capable of monitoring changes across the entire U.S. policymaking system.

Particular attention should be paid to:

· the White House;

· Department of State;

· Department of Defense;

· Department of Commerce;

· Office of the U.S. Trade Representative;

· Congress;

· U.S. defense industry;

· major think tanks; and

· state and local governments.

Taiwan should distinguish between:

presidential statements, formal executive policy, congressional legislation, bureaucratic implementation, and actual military activity.

These should not be treated as interchangeable indicators.

2. Make Self-Defense Capability the Core of Taiwan’s Security Strategy

Higher defense spending should be accompanied by a stronger emphasis on practical military resilience.

Priority areas should include:

· unmanned systems;

· counter-drone capabilities;

· precision strike;

· air and missile defense;

· coastal and maritime denial;

· cyber defense;

· resilient communications;

· space-based capabilities;

· reserve mobilization;

· civil defense; and

· protection of critical infrastructure.

The objective should be to create a defense system capable of continuing to function under sustained pressure rather than simply maximizing the number of major weapons platforms.

3. Prevent Overseas Investment from Becoming Industrial Hollowing-Out

Taiwan should continue expanding investment in the United States where such investment strengthens bilateral economic relations and improves supply-chain resilience.

However, government policy should ensure that critical R&D capabilities, advanced manufacturing expertise, engineering talent, and strategic supply-chain functions remain firmly rooted in Taiwan.

The appropriate objective is:

internationalization without technological hollowing-out.

4. Diversify Strategic Partnerships

Taiwan should avoid excessive dependence on any single external partner.

In addition to the United States, Taiwan should strengthen practical cooperation with:

· Japan;

· Australia;

· the Philippines;

· South Korea;

· European partners; and

· other technologically advanced economies.

Priority areas should include:

· maritime security;

· cyber resilience;

· disaster response;

· critical infrastructure;

· semiconductor supply chains;

· telecommunications;

· energy security; and

· civil defense.

A broader network of partnerships would increase Taiwan’s resilience to changes in U.S. policy.

5. Maintain Strong U.S. Engagement Without Excessive Politicization

Taiwan should maintain communication across the full U.S. policy spectrum rather than relying excessively on presidential-level engagement.

The U.S. Taiwan policy process involves multiple actors, including the executive branch, Congress, defense and diplomatic institutions, industry, think tanks, and civil society.

Taiwan should therefore develop a diversified communication network covering:

the executive branch + Congress + defense institutions + industry + think tanks + state and local governments.

Such diversification would reduce the risk that Taiwan–U.S. relations become overly dependent on the preferences of a single administration or political figure.

X. Conclusion: Toward an Era of High Interdependence and High Uncertainty

Taiwan–U.S. relations are unlikely to experience a fundamental rupture during 2026–2028.

The structural foundations of the relationship remain strong. The Taiwan Relations Act continues to provide a legal framework for U.S. policy; Washington continues to support Taiwan’s self-defense; bilateral trade and investment are becoming more strategically significant; and Taiwan remains an important component of global advanced semiconductor supply chains.

At the same time, the relationship is becoming more demanding.

The second Trump administration is placing greater emphasis on burden-sharing, economic reciprocity, industrial investment, and direct U.S. interests. This means that Taiwan is likely to face stronger expectations regarding defense spending, investment in the United States, technology cooperation, and supply-chain alignment.

The result is not necessarily a weaker relationship.

Rather, it is a more interdependent but more conditional relationship.

Taiwan’s strategic value to the United States remains substantial. Yet strategic value should not be confused with an unconditional security guarantee.

Similarly, closer economic integration with the United States can strengthen Taiwan’s international position, but it can also create new forms of economic dependence if Taiwan does not preserve sufficient domestic technological capacity.

The central strategic challenge for Taiwan over the next several years is therefore to balance four objectives:

stronger security cooperation with the United States; greater self-defense capability; deeper economic and technological integration; and preservation of strategic autonomy.

The most appropriate strategy is not to choose between dependence on the United States and strategic isolation.

Instead, Taiwan should pursue a layered strategy:

U.S. engagement as the principal external security relationship; self-defense as the foundation of national security; diversified international partnerships as strategic insurance; and technological and industrial capabilities as the principal source of long-term leverage.

From 2026 to 2028, the most likely evolution of Taiwan–U.S. relations is therefore a shift from a relationship centered primarily on security cooperation toward a broader framework combining security, trade, technology, investment, and supply-chain resilience.

The central policy question is no longer simply whether Washington will continue to support Taiwan.

It is whether Taiwan can build sufficient national resilience and strategic value to remain an indispensable partner even when U.S. priorities change.

Core Assessment

The defining feature of Taiwan–U.S. relations in the second Trump administration will be neither abandonment nor unconditional alignment, but negotiated interdependence.

Taiwan’s ability to navigate this environment will depend on whether it can strengthen its own defense capabilities, preserve its technological advantages, diversify its international partnerships, and maintain a stable and pragmatic channel of communication with Washington.

The objective should not be to make Taiwan dependent on U.S. support.

The objective should be to make Taiwan sufficiently resilient that U.S. support becomes a force multiplier rather than the foundation of Taiwan’s security.

Selected Sources

1. American Institute in Taiwan (AIT), Taiwan Relations Act, April 10, 1979.

2. Office of the United States Trade Representative (USTR), Fact Sheet on U.S.-Taiwan Agreement on Reciprocal Trade, February 12, 2026.

3. Reuters, Rubio: no change in U.S. policy on Taiwan, June 2, 2026.

4. Reuters, Senior U.S. diplomat says Taiwan arms sale does not hinge on China, June 25, 2026.

5. Central News Agency / Focus Taiwan, Cabinet approves 2027 budget proposal, defense spending at 3.01% of GDP, August 20, 2026.

6. Reuters, Trump’s Kim gambit deepens doubts over U.S. reliability at a key moment for Asia, August 24, 2026.

7. Bloomberg, Xi’s Threat to Trump Cements Taiwan as Top U.S.-China Risk, May 14, 2026.