U.S.-Taiwan Relations in a New Era

U.S.-Taiwan Relations in a New Era Responding to a More Assertive China
Updated June 2023

Politics and Diplomacy

U.S. diplomacy should focus on deterring Chinese aggression, signaling to China and Taiwan that it opposes unilateral changes to the status quo, and ensuring that any future arrangement between China and Taiwan be arrived at peacefully and with the assent of the Taiwanese people. To achieve these goals, the United States should work to increase Taiwan’s resilience and ability to counter Chinese coercion. Washington’s approach to Beijing should focus both on making clear the risks and costs of using force against Taiwan and on reassuring it that Washington does not seek to permanently separate Taiwan from China. In support of these objectives, the United States should: 

Maintain its One China policy while emphasizing that such a policy is predicated on China pursuing a peaceful resolution of cross-strait issues. 

The U.S. One China policy is the foundation of modern U.S.-China relations, and its flexibility has also allowed Washington to build a robust unofficial relationship with Taipei. Despite the decades-long success of the One China policy, calls to abandon it and recognize Taiwan as an independent country have recently grown louder.176 On one level, this position is understandable given that the CCP has never governed Taiwan and the desire to recognize Taiwan’s achievements. As the history of negotiations between the United States and the PRC over normalization reveal, however, Beijing will not accept such a course and would sever its relations with Washington if the latter were to recognize Taiwan as an independent country. Animosity between the United States and China would heighten immeasurably, and any attempts to build guardrails between the countries or manage competition would founder. Any prospect of U.S.-China cooperation on global issues from climate change to nonproliferation, however remote, would disappear. U.S. allies and partners, for their part, would view the U.S. abandonment of its One China policy as irresponsible and destabilizing, placing stress on U.S. efforts to enlist their support in balancing China. 

A U.S. decision to walk away from its One China policy could also trigger a conflict. China’s 2005 Anti-Secession Law threatens, “In the event that the ‘Taiwan independence’ secessionist forces should act under any name or by any means to cause the fact of Taiwan’s secession from China, or that major incidents entailing Taiwan’s secession from China should occur, or that possibilities for a peaceful reunification should be completely exhausted, the state shall employ nonpeaceful means and other necessary measures to protect China’s sovereignty and territorial integrity.”177 While Beijing purposely leaves these conditions vague, U.S. recognition of Taiwan as an independent country could trigger a PRC use of force against Taiwan. 

The current political framework has allowed the United States to pursue its interests with both Taiwan and China, and cross-strait stability it has afforded has enabled Taiwan to prosper and remain secure. Still, while the U.S. One China policy remains the best approach for managing cross-strait relations, the policy leaves enough room for adjustment and should be tweaked. The Taiwan Relations Act states that it is U.S. policy “to make clear that the United States decision to establish diplomatic relations with the People’s Republic of China rests upon the expectation that the future of Taiwan will be determined by peaceful means.”178 Senior U.S. officials should publicly and emphatically articulate this linkage between continued U.S. adherence to its One China policy and the PRC refraining from using force against Taiwan—in other words, that the U.S. One China policy is conditional on the PRC’s approach to Taiwan. Publicly and consistently making this point would serve as a warning to leaders in Beijing that they should not expect Washington to maintain the status quo if they increase their coercion of Taiwan. 

The United States should also seek to establish high-level, regular diplomatic interactions with China with the aim of communicating both the extent and limits of its Taiwan policy and its concerns with the PRC’s coercive behavior. In recent years, U.S.-China diplomacy has become too infrequent and too conditional, increasing the risk of misjudgment and miscalculation. Even in an increasingly contentious bilateral relationship, such diplomacy should not be viewed as a favor one side bestows on the other but instead be pursued regardless of the state of relations to further U.S. interests and bring greater transparency to the most sensitive issues, in particular Taiwan. Finally, although decades-long efforts to establish crisis communications mechanisms have faltered, the United States should continue to attempt to establish hotlines to prevent incidents from escalating into full-fledged crises. Whatever their success, good-faith attempts at diplomacy can demonstrate to China, as well as to U.S. allies and partners, that the United States seeks to responsibly manage U.S.-China relations and is not looking to provoke a conflict.   

Avoid symbolic political and diplomatic gestures that provoke a Chinese response but do not meaningfully improve Taiwan’s defensive capabilities, resilience, or economic competitiveness. 

A perennial debate in U.S. policy toward Taiwan is what the balance should be between symbolic versus substantive initiatives. Advocates of pursuing more symbolic steps argue that doing so increases deterrence by highlighting to the PRC the high-level importance the United States attaches to Taiwan. They also emphasize that such steps show the Taiwanese people that they have the support of the United States, thus increasing their confidence. While these are valid points, major symbolic steps are more likely to elicit a strong rebuke from the PRC that targets Taiwan and undermines its security and prosperity. Quiet but substantive steps to build U.S.-Taiwan relations, by contrast, are less likely to provoke a PRC response and can still meaningfully strengthen Taiwan. 

The two most symbolic gestures in U.S.-Taiwan relations over the past three decades have also prompted the most forceful PRC responses. When Taiwanese President Lee Teng-hui visited the United States and gave a speech at Cornell University in 1995, the PRC responded by firing missiles near Taiwan’s coast, sparking the third Taiwan Strait crisis. In 2022, after Speaker Pelosi visited Taiwan, the PRC conducted its most extensive military exercises to date, fired missiles around and even over Taiwan, and banned hundreds of Taiwanese goods, leading many to term this sequence the fourth Taiwan Strait crisis. The PRC used Speaker Pelosi’s visit as a pretext to demonstrate its military capabilities and change the status quo, as it erased the median line in the Taiwan Strait and normalized military activities much closer to Taiwan. In addition, it took the opportunity to spread the narrative that the United States was a destabilizing and provocative actor—an accusation that found purchase in parts of Southeast Asia. 

During these same three decades, however, the United States has done much to tangibly build U.S.-Taiwan relations, and those steps that have been kept out of the public eye have not garnered such a strong response. These range from enhanced trade discussions to growing military-to-military cooperation and joint efforts to promote Taiwan’s international space. Beijing feels compelled to respond to events that garner international media attention but less urgency to do so when interactions are kept private. 

Focusing on substantive improvements in U.S.-Taiwan relations—and not providing the opening that symbolic gestures offer Beijing to alter the status quo—is a more sustainable long-term path for the relationship. It is also worth paying a greater price to pursue needed substantive interactions, for instance enhanced military-to-military ties, but it is often harder to justify the cost of symbolic steps. There could be times when symbolic gestures are warranted; for instance, if the United States believes China is preparing to use force against Taiwan, a high-level visit or visible movement of military assets could be necessary to deter China. The day-to-day management of the relationship, however, should largely be conducted out of the public eye; but such a course will be increasingly difficult, given the deterioration of U.S.-China relations and the desire of politicians to be seen as supporting Taiwan.  

Explain to the American people why Taiwan matters and why they should care about its fate.  

The United States has a vital strategic interest in defending Taiwan as well as a legal obligation to maintain the capacity to come to its defense and ensure that it has adequate weapons to meet its defensive needs. Many national security professionals appreciate Taiwan’s importance to the United States, from its geographic position at the center of the first island chain and its role as the global hub of semiconductor manufacturing, to its willingness to work with the United States as a trusted partner on transnational issues. Those in national security positions also generally appreciate that Taiwan’s future will have enormous implications for U.S. alliances in the Indo-Pacific and the United States’ position in the world’s most economically important region. In a bitterly divided Congress, Taiwan receives overwhelming bipartisan support, making it one of the few unifying issues. 

To some extent, the American people grasp the stakes in the Taiwan Strait. According to one recent survey, favorable ratings for Taiwan have never been higher, while a majority of those Americans polled stated that if China were to attack Taiwan they would support imposing sanctions on China, arming Taiwan, and using the U.S. Navy to prevent China from imposing a blockade. The same poll, however, found that only 40 percent of those surveyed would support direct military intervention on Taiwan’s behalf.179 These findings mark a big increase from a decade ago, when only 23 percent expressed support for using military force to defend Taiwan, but still fall short of a majority. 

The U.S. government should prioritize educating Americans about why they should care about Taiwan’s fate and the effect that a PRC attack would have on their lives and livelihood. Yet no official above the level of assistant secretary of state has devoted a speech to Taiwan since the United States terminated diplomatic relations with the island in 1979. This should change, with a public speech from the secretary of state that outlines the stakes, U.S. interests, and objectives of U.S. policy toward Taiwan. In addition, diplomats in residence should speak about Taiwan at college campuses, and lower-level officials should travel outside of Washington to discuss the issue with Americans. 

Create additional international and multilateral forums that allow Taiwan to have its voice heard and contribute to resolving global issues, in a way that does not suggest Taiwanese independence. 

Taiwan’s international isolation has real costs for the world. In December 2019, Taiwanese health officials heard of people falling sick with a mysterious ailment in the Chinese city of Wuhan and attempted to report it to the World Health Organization (WHO), only to be ignored.180 Had Taiwan been a full member of the WHO, the organization likely would have been forced to follow up the report, which could have enabled a faster response to the COVID-19 outbreak. Despite being home to one of the world’s ten busiest airports, Taiwan is not a member of ICAO, the main international body that oversees international civil aviation. Taiwan is also excluded from the International Criminal Police Organization (Interpol), which facilitates the sharing of data on crimes and criminals, enabling countries to address cross-border crime. China’s attempts to exclude Taiwan from international forums also diminishes Taiwanese people’s confidence in their government, increasing Taiwan’s vulnerability to Chinese coercion. For all these reasons, it is in the U.S. interest to promote Taiwan’s meaningful participation in international organizations and even create new platforms to facilitate Taiwan’s full membership. 

In addition to petitioning UN organizations to include Taiwan in some fashion, the United States has attempted to find creative ways to showcase Taiwan’s capabilities and get around its exclusion from international organizations. The most notable example of this effort is the Global Cooperation and Training Framework (GCTF), which was launched in 2015 and convenes workshops to demonstrate Taiwan’s expertise in public health, law enforcement, disaster relief, democratic governance, and women’s empowerment, among other issues, to countries around the world. Originating as a bilateral U.S.-Taiwan initiative, the GCTF is now jointly administered with Australia and Japan, indicating that additional countries see the benefits of amplifying Taiwan’s international voice. In addition, the Trump administration launched the Consultations on Democratic Governance in the Indo-Pacific Region initiative and a Pacific Islands Dialogue platform with Taiwan, both of which aim to assist countries in addressing governance issues and development needs while giving Taiwan a voice. 

The United States should pursue a multifaceted strategy to ensure that Taiwan can participate and lend its expertise to regional and global issues. First, it should continue to highlight the costs of excluding Taiwan from organizations such as the WHO, ICAO, and Interpol and press the organizations to include Taiwan as an observer because full membership is not possible. With a realistic understanding that China will continue to block Taiwan’s participation in these organizations, the United States should invest more in programs such as the GCTF. It should also reinforce Taiwan’s diplomatic partnerships, especially those in the Americas, by pursuing joint development projects with Taiwan. Recalling ambassadors or threatening to withhold aid from countries that switch recognition to the PRC will be less effective than offering to build capacity and contribute to economic development in these countries. Finally, the United States should seek to establish new international organizations that include Taiwan as a full member, such as a new global health entity that is not under the sway of China. 

Promote people-to-people ties between the United States and Taiwan. 

People-to-people ties, by bringing different populations together through educational and cultural initiatives, help build and reinforce bonds between countries. In the case of U.S.-Taiwan relations, boosting people-to-people ties would help Americans develop a richer understanding of Taiwan’s culture and history, while simultaneously providing the benefits of having Americans study Mandarin in Taiwan. 

There is vast scope to increase people-to-people ties. Prior to the COVID-19 pandemic, only 23,369 Taiwanese university students studied in the United States per year, while just 1,270 Americans studied in Taiwan. By contrast, during the same academic year, nearly nine times as many Americans studied in China and nearly four times as many studied in South Korea.181 

The United States has established a range of programs to encourage more exchanges with Taiwan. The U.S. State Department offers the Critical Language Scholarship Program, the Gilman Scholarship Program, and the National Security Language Initiative for Youth, all of which offer Americans the opportunity to immerse themselves in Taiwanese culture and the Mandarin language. The United States sends Fulbright Scholars to Taiwan, a program that continues to grow. In 2020, the United States and Taiwan partnered to establish the U.S.-Taiwan Education Initiative, which expanded existing Mandarin and English language programs in the United States and Taiwan and supported the creation of the Taiwan Center for Mandarin Learning.182 Taiwan has also opened more than thirty facilities in the United States to teach Americans Mandarin, offering a welcome counterpoint to the PRC’s Confucius Institutes, which promote Beijing’s political narrative. 

Given the urgent need for Americans to learn Mandarin, the State Department’s Bureau of Educational and Cultural Affairs and the Department of Education’s Office of Elementary and Secondary Education should collaborate with their counterparts in Taiwan’s Ministry of Foreign Affairs and Ministry of Education to build a curriculum for middle and high school students. Congress should then offer grants to promote the new curriculum across the country. Indeed, this effort would not only strengthen Americans’ interest in Taiwan, but also weaken the influence of PRC education programs like the Confucius Institutes. 

Congress should also appropriate funding to the State Department’s Bureau of Educational and Cultural Affairs to increase support for cultural and language immersion programs with the express purpose of sending more students to Taiwan. Every year, the Critical Language Scholarship Program, Fulbright Program, Gilman Scholarship Program, and National Security Language Initiative for Youth should send more students to Taiwan. Congress should also appropriate more funding to expand the Taiwan Fellowship Act, which allows ten federal employees to live in Taiwan for a two-year fellowship. This act, established in the FY 2023 NDAA, enables U.S. government employees to study Mandarin and Taiwanese history and politics and then work in a Taiwanese government agency, parliamentary office, or another approved organization. Congress should triple this program to thirty fellows per year. 

NDAA: National Defense Authorization Act FY: fiscal year GCTF: Global Cooperation and Training Framework Interpol: International Criminal Police Organization ICAO: International Civil Aviation Organization WHO: World Health Organization ICAO: International Civil Aviation Organization PRC: People’s Republic of China CCP: Chinese Communist Party

Economics

The United States has an interest in helping Taiwan reduce its economic ties with the PRC, which is a potential source of leverage that China can exploit during a crisis. In addition, given its heavy reliance on Taiwan for semiconductor manufacturing, the United States needs to ensure that Taiwan remains a trusted economic and trading partner. Yet, despite the compelling rationale to deepen economic ties with Taiwan, already a top ten trading partner for the United States, the economic leg of U.S.-Taiwan relations has been largely neglected. It is past time for an ambitious U.S.-Taiwan economic and trade agenda. In particular, the United States should: 

Negotiate a bilateral trade agreement with Taiwan.  

In 2021, Taiwan stood as the United States’ eighth-largest trading partner, with two-way trade exceeding $114 billion. The United States is also Taiwan’s second-largest trading partner, accounting for over 13 percent of Taiwan’s total trade.183 The United States trades more with Taiwan than it does with France, India, Italy, or Vietnam. 

Despite this deep trade relationship, a bilateral trade agreement (BTA) has proven elusive, primarily due to U.S. frustration with Taiwan’s discriminatory trade policies—specifically, restrictions on U.S. agricultural products. In 2020, however, President Tsai removed the largest impediments, opening Taiwan’s market to U.S. pork with ractopamine, as well as U.S. beef products from cattle aged thirty months and older, which had been banned for more than a decade. Despite Tsai’s initiative and her strong desire for a BTA with the United States, the United States has not reciprocated. Instead, in June 2022 the Biden administration, after excluding Taiwan from its Indo-Pacific Economic Framework (IPEF) discussions, announced the creation of a “U.S.-Taiwan Initiative on 21st-Century Trade.”184 Although this is a step in the right direction, the new trade initiative will not cover market access, arguably the most important element of a BTA. 

It is past time for the United States and Taiwan to negotiate a comprehensive BTA. Despite opposition to trade agreements in Congress, a BTA with Taiwan has strong bipartisan support and could very well be one of the few trade deals that can be accomplished in the current political environment.185 Concluding a BTA with Taiwan would have multiple benefits for the United States. The office of the U.S. Trade Representative (USTR) has identified remaining Taiwanese barriers to U.S. agricultural products, as well as restrictions in the pharmaceutical and medical device sectors and issues with copyright enforcement, all of which could be addressed during negotiations.186 More importantly, USTR can focus trade negotiations on establishing high-standard labor and environmental protections, in the process standardizing and internationalizing those clauses that it incorporated into the United States-Mexico-Canada Agreement (USMCA). A U.S.-Taiwan trade agreement that included such provisions would give the United States greater leverage to include them in future negotiations with other partners. 

Although a BTA has economic logic, it has an even more compelling strategic rationale. China is attempting to economically marginalize Taiwan by keeping it out of multilateral trade pacts; Taiwan is not a member of the Regional Comprehensive Economic Partnership (RCEP), and while it has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), China has voiced its opposition. China is also pressuring countries not to sign bilateral trade agreements with Taiwan, despite the fact that China signed an Economic Cooperation Framework Agreement with Taiwan in 2010. As a result, Taiwan has only two free trade agreements with countries in the Indo-Pacific, New Zealand and Singapore. 

Negotiating a BTA with Taiwan would send a strong signal of U.S. support, boosting Taiwanese confidence in U.S. commitments and in the island’s future. It would help Taiwan approach the PRC from a position of strength and also send a message to China that its attempts to coerce Taiwan will not work. Finally, a U.S.-Taiwan BTA would give other countries in the region the cover that they are seeking to negotiate trade agreements of their own with Taiwan, which would in turn assist Taiwan in reducing its economic ties with the PRC. Although countries do not want to be the first to enter such negotiations with Taiwan due to Chinese threats of economic retaliation, more countries would likely be willing to follow on the heels of U.S. initiatives. 

Diversify supply chains in critical sectors to reduce the risk from potential Chinese economic retaliation. 

A critical difference between the war in Ukraine and a potential conflict over Taiwan is that the United States and its allies are far more reliant on economic ties with China than they were with Russia. They thus risk China concluding that economic sanctions would hurt the countries doing the sanctioning far more than China and that it can act against Taiwan with little risk of being subjected to significant economic penalties. 

A few data points illustrate how reliant the United States and its partners are on trade with China. Whereas nearly 7 percent of China’s imports come from the United States, 19 percent of U.S. imports are from China. Nearly 8.5 percent of China’s imports come from Japan, but nearly 26 percent of Japanese imports are from China. Similarly, nearly 23 percent of the European Union’s (EU) imports are from China, but less than 12 percent of China’s total imports come from the EU. China is also Taiwan’s largest economic partner, accounting for a quarter of Taiwan’s total trade and nearly 22 percent of Taiwan’s imports.187 Indeed, most of those countries that the United States would turn to for assistance during a Taiwan conflict—Australia, the EU, Japan, and South Korea—all count China as their largest trading partner. 

To this point, much of the focus in Washington and Western capitals has been on reducing their reliance on China for strategic inputs where China holds a dominant market share and reshoring critical industries. For instance, China accounts for 60 percent of global rare earth mining and 85 percent of rare earth processing capacity, giving it control over elements that are crucial for advanced commercial and military products.188 China refines 68 percent of the world’s nickel, 40 percent of all copper, 59 percent of lithium, and 73 percent of cobalt. It is also responsible for most of the world’s production of mineral-rich components that are needed for battery cells.189 And China dominates the market for APIs, which are the primary components of any medical drug.190 

Focusing on strategic sectors is necessary but not sufficient. Instead, the United States and its allies should conduct a comprehensive assessment of those sectors where China’s weight by itself is a cause for concern and coordinate on ways to collectively reduce their economic reliance on China. Although complete decoupling is not feasible or desirable, economically distancing from China is necessary. The United States could help itself by also joining the CPTPP and championing Taiwan’s membership in the trade bloc, using this grouping to set high standards for regional trade and promote integration among the United States and its allies and partners. The United States should also assist Taiwan in diversifying its economy away from China by coordinating with Taiwan on its New Southbound Policy that seeks to increase trade and investment ties with Southeast Asia. 

Build resiliency in global semiconductor manufacturing. 

Semiconductor supply chains have been a model of efficiency, with a typical chip designed in the United States, manufactured in Taiwan, tested and packaged in Southeast Asia, and placed into a product in China or another manufacturing hub before being shipped to customers around the world. This complex global supply chain has allowed countries to specialize in their comparative advantages and ultimately enabled consumers to purchase cheaper products. At the same time, it has created large vulnerabilities. If an earthquake struck TSMC’s facilities in Taiwan and forced production of chips to halt, many companies would be unable to source the chips they need. A geopolitical earthquake, which is becoming increasingly likely, would be even more devastating. 

The United States needs to walk a fine line, increasing the resiliency of this critical supply chain while enabling Taiwan’s world-leading semiconductor manufacturers to continue to thrive. It is unrealistic to believe that U.S. industrial policy can reshore the bulk of semiconductor manufacturing, and pushing too hard for this objective could weaken Taiwan and advantage China. Indeed, the PRC is pushing the narrative through friendly Taiwanese media outlets and disinformation campaigns that the United States seeks to hollow out Taiwan, with the objective of building resentment of the United States and cynicism regarding its intent. 

At the same time, the United States should ensure that it has enough manufacturing capacity to produce advanced logic chips at scale for national security, datacenter, and other vital applications. The CHIPS and Science Act is a good start, as was persuading TSMC to establish production facilities in Arizona. To make these bets work, however, the United States will need to bolster efforts to supply the right workers for these facilities. This means reforming its immigration policies to attract and retain engineers, providing more federal funding for basic research and development, and funding educational initiatives that train the types of workers that are needed to operate these plants. 

Raise awareness of the economic consequences of a Chinese blockade or attack on Taiwan with allies and partners and coordinate with them to prepare sanctions on China. 

China’s strategy is to isolate Taiwan and make this a trilateral issue between Washington, Beijing, and Taipei. The economic consequences of a Chinese blockade or attack on Taiwan, however, demonstrate that countries around the world have a stake in cross-strait peace and stability. Simply put, no country would be excluded from the economic carnage of a conflict in the Taiwan Strait, which would throw the world’s economy into a severe depression by destroying supply chains, forcing production lines to grind to a halt, sending stock markets plummeting, and threatening global shipping. Once countries are aware of the consequences, and the fact that their economies would not be spared even if they choose to remain neutral during a conflict, they could be more willing to contribute to deterring China from using force. 

To raise awareness of the global consequences of a war over Taiwan, the U.S. government should conduct country-by-country analysis of the fallout of a major conflict, which U.S. embassies should then share with host governments. The United States should then work with its allies and partners to prepare a sanctions package that would go into effect immediately following a Chinese blockade or invasion. Policymakers could use the sanctions imposed against Russia following its invasion of Ukraine as a baseline, while also considering more severe financial sanctions. The United States and its allies should preview these sanctions to China, making clear the economic costs of an attack. Although the prospect of sanctions will not be decisive and is likely already factored into Xi’s calculus, this strategy would bolster deterrence by demonstrating that sanctions would be deep, immediate, and imposed by many of the world’s major economies.  

Work with Taiwan to reduce the PRC’s economic leverage and respond to its economic coercion. 

Taiwan relies far more on trade with China and access to the Chinese market than vice versa, a reality that provides Beijing with leverage over Taiwan during a crisis. As previously noted, China is Taiwan’s largest trading partner, accounting for nearly 23 percent of its foreign trade, a number that increases to 30 percent if Hong Kong is included. Conversely, trade with Taiwan accounts for less than 5 percent of the PRC’s total foreign trade. While the PRC needs access to Taiwanese products—above all semiconductors—in order to manufacture many of its exports, if it chose to forcefully pursue unification, it would do so with awareness and acceptance of the economic costs. There is a danger that the PRC concludes that it is better prepared than Taiwan to absorb the economic consequences and can exploit Taiwan’s economic reliance on trade with China to force the island into submission. 

The United States should urge Taiwan to reduce its exposure to the PRC market and assist it in doing so. Congress should provide the U.S. Development Finance Corporation with additional funding earmarked toward investing alongside Taiwan in Southeast Asia as part of the New Southbound Policy, which aims to rebalance Taiwan’s economic ties by increasing its presence in Southeast Asia.  

In addition to helping Taiwan rebalance its trade relations, the United States should work with Taiwan to counter PRC economic coercion against the island. To this point, the PRC has banned the import of hundreds of Taiwanese products as well as the export of certain Chinese products to Taiwan. It also pressures Taiwanese businesspeople to publicly denounce and reject Taiwanese independence as a prerequisite to conducting business in China.191 These steps are all taken to punish Taiwan’s government for enacting policies China dislikes and to exact a toll on the voters who supported those politicians.  

Thus far, the PRC has refrained from banning those imports that it needs and cannot purchase elsewhere, such as semiconductors and some information and communications technology (ICT) products. For products with available substitutes, however, China has begun to decrease its purchase of Taiwanese products in favor of sourcing from elsewhere. Overall, the economic effects of China’s coercion have been relatively limited and largely only felt by the agricultural sector. More significant, though, is that this continued economic pressure threatens to undermine the confidence of the Taiwanese people in their government. It also represents a form of political interference, given that the PRC often targets products and sectors that come from DPP-leaning counties, in an effort to persuade voters not to elect DPP candidates.  

Left unchecked, Chinese economic coercion of Taiwan threatens its autonomy and the ability of the Taiwanese people to decide their future. As substitutes for Taiwanese products become more readily available elsewhere, the PRC will have more leverage to target larger sections of Taiwan’s economy and inflict significant economic damage. 

The United States should work with its allies and partners to establish an Indo-Pacific Economic Coalition (IPEC), a complement to IPEF that would work to increase economic resilience in the region. In response to any unilateral bans on goods or services, members would consult and decide on multilateral sanctions that they would impose against the aggressor. IPEC does not need dozens of members to be successful: Australia, Japan, the Philippines, South Korea, and Taiwan have all been the target of unilateral Chinese bans, but, along with the United States, they account for nearly 35 percent of the PRC’s total imported goods.192 

Once IPEC is established, the Department of State’s Bureau of International Security and Nonproliferation (ISN) should collaborate with the Department of Commerce’s Bureau of Industry and Security (BIS) to pinpoint the PRC’s most vulnerable industries. Based on the members of the economic collective-resilience bloc, ISN and BIS should determine which sanctions would apply maximum pressure on Beijing. The list of sanctions should then be shared with the United States’ IPEC allies to enable a coordinated and collective economic response. Indeed, the economic collective-resilience bloc would act as a deterrent against Beijing’s continued economic coercion of Taipei. 

IPEC should also have a mechanism to support the victims of China’s coercive tactics, which could include a common fund that could make up for lost revenues by purchasing those products as well as a campaign that raises public awareness of China’s coercion. For instance, after China banned Taiwanese pineapples in 2021, Taiwan began a campaign advocating for people to purchase its “Freedom Pineapple.”193 The messaging succeeded in garnering the sympathy of many like-minded states: in particular, Japan’s consumption of Taiwanese pineapple spiked by 645 percent, more than making up for lost revenue.194 

IPEC: Indo-Pacific Economic Coalition IPEF: Indo-Pacific Economic Framework DPP: Democratic Progressive Party CHIPS and Science Act: Creating Helpful Incentives to Produce Semiconductors and Science Act TSMC: Taiwan Semiconductor Manufacturing Company CPTPP: Comprehensive and Progressive Agreement for Trans-Pacific Partnership API: active pharmaceutical ingredient BTA: bilateral trade agreement BTA: bilateral trade agreement PRC: People’s Republic of China

Security

Buttressing deterrence in the Taiwan Strait should be the United States’ top priority in the Indo-Pacific. If deterrence breaks down and a war erupts, it will be nearly impossible for the United States to pursue its other interests in the region. The war in Ukraine should act as a cautionary tale and inform the U.S. approach to deterrence. Even though the United States has led a coalition to aid Ukraine and punish Russian aggression, the threat of massive sanctions and military assistance ultimately did not deter Putin. In the case of Taiwan, it will be important to lay the groundwork for a sanctions regime ahead of time and preview the costs of aggression to China, but doing so will not be decisive. Instead, only by orienting its military posture in the region for a Taiwan conflict and enlisting the help of its allies can the United States meaningfully alter Xi’s cost-benefit analysis and prevent an attack. The U.S. objective should be to ensure that Xi concludes an attack would not succeed and the costs would far outweigh any potential benefits. Achieving this outcome will be difficult but doable with the correct mix of policies. In particular, the United States should: 

Prioritize Taiwan contingencies as the DOD pacing scenario and ensure DOD spending supports capabilities and initiatives critical to success, securing the United States’ ability to effectively come to Taiwan’s defense. 

Although the Taiwan Relations Act does not commit the United States to Taiwan’s defense, the law does state that it is the policy of the United States “to maintain the capacity…to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.”195 Pursuant to this legal obligation, the U.S. Indo-Pacific Command maintains an operations plan to resist Chinese aggression against Taiwan. To continue to meet its legal requirements and ensure that it could defend Taiwan at a reasonable cost, the United States needs to address its gaps with urgency and prioritize preparing for a Taiwan conflict above all other contingencies.  

Assistant Secretary of Defense Ely Ratner was correct in identifying a Taiwan contingency as the “pacing scenario” for the Department of Defense. Unfortunately, this specific designation was not included in the 2022 National Defense Strategy. To make this a reality, all of the military services need to develop their capabilities and operational concepts to maximize their effectiveness to deter and, if necessary, prevail in a conflict over Taiwan. DOD should prioritize those capabilities most relevant for a conflict in the Taiwan Strait, principally resilient Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR), along with space-based assets for a contested environment, long-range anti-ship and anti-submarine missiles, joint air-to-surface standoff missiles, long-range stealth bombers, medium-range ballistic missiles, submarines, electronic warfare capabilities, and networked unmanned systems. It should also focus on distributing its forces throughout the first island chain by increasing its access to Japan’s western islands and the Philippines, while hardening U.S. facilities in Guam and Japan. 

The most applicable lesson from the war in Ukraine as it relates to Taiwan is that the playbook the United States has used to assist Ukraine would not work in the case of a Chinese invasion of Taiwan. Indirect U.S. support in the form of weapons and intelligence will not be enough; absent direct U.S. military intervention, Taiwan’s military likely does not have the ability to resist a Chinese invasion. Thus, preparing for a direct intervention should be DOD’s top priority. U.S. officials should also publicly stress that though there are parallels between Ukraine and Taiwan, there are also fundamental differences—above all the U.S. interests at stake in the Taiwan Strait—and thus China should not assume that the United States would limit its assistance to indirect support of Taiwan. 

Focusing on a single PRC timeline, whether it be 2027, 2030, or 2049, is a mistake. The fact is that the PLA has been preparing for a Taiwan conflict for decades and will soon have a viable operational plan. One can only speculate about Xi’s intentions and sense of urgency, but if he feels compelled to use force because events are moving beyond his control, he could do so even if the PLA is not fully prepared. Therefore, the priority focus should be on strengthening deterrence in the near term, even as the United States continues to invest in building a more robust force structure for the future. The United States needs to be ready to fight now, in five years, and in a decade. Anything less would be catastrophic for U.S. interests and a failure to abide by U.S. law.  

Fundamentally shift U.S.-Taiwan security relations to prioritize building Taiwan’s self-defense capabilities.  

For years, Taiwan’s military focused on fighting a conventional war of attrition against China. Thus, it prioritized purchasing F-16 fighter jets to counter China’s fourth-generation jets, Abrams tanks to match China’s tanks, and large surface warships that could target the PLAN at sea. The United States enabled this approach, selling these legacy platforms to Taiwan, and the U.S.-Taiwan security relationship centered on foreign military sales (FMS). Thus, the United States has sold Taiwan nearly $50 billion of military hardware since 1950, on par with Japan and exceeding Australia and South Korea.196 

Arming Taiwan, while necessary, is no longer sufficient. Instead, a fundamental shift in U.S.-Taiwan military-to-military relations is required. FMS will still make up a major portion of the relationship, but the United States needs to do much more to build Taiwan’s capacity. Currently, Taiwan’s military conducts largely scripted exercises, its junior leaders are not empowered to make battlefield decisions, and its training is inadequate. The reality is that only sustained U.S. attention, training, and pressure can change these dynamics. A U.S. program for Taiwan should be no less ambitious than the training that the United States provided to Ukraine from 2014 to 2022, which significantly improved its defensive capabilities and helped enable it to fend off the Russian invasion. Still, it took nearly eight years of sustained investment to build Ukraine’s capabilities to this point. A similar process has not yet begun with Taiwan—and it might not have eight years. 

Given the sensitivities of sending U.S. military personnel to Taiwan, the United States should focus on training Taiwan’s military in the United States, which it already does with Taiwan’s F-16 pilots. This has the added benefit of reducing the PRC’s ability to collect intelligence on Taiwan’s training and capabilities. The United States should invite Taiwan to rotate more and larger units through U.S. facilities for training. The United States should place a particular focus on providing combined arms training to Taiwan’s ground forces, which will be critical to defeating a Chinese invasion force. The training should expand to include joint exercises and incorporate Taiwan’s active-duty military as well as its reservists. As Taiwan lengthens mandatory military service from four months to one year and overhauls its training methods for conscripts, the United States should offer to help shape this program. 

The United States also needs to do more to ensure that it can fight effectively alongside Taiwan’s military. Currently, the two armed forces do not have interoperability and would fight separately. To build complementarity, INDOPACOM should establish a common operating picture with Taiwan and standing intelligence sharing platforms, and should invite Taiwan to multilateral exercises such as the Rim of the Pacific (RIMPAC) and Red Flag. Flag officers of up to three-star with relevant portfolios, who would command the numbered fleets and numbered air forces that would lead any fight to defend Taiwan, should visit Taiwan. The United States should also explore expanding the number of American officers who observe Taiwan’s military exercises and vice versa.  

Given Taiwan’s declining population, it could need to rapidly incorporate women into its conscripted force, which it has been hesitant to do. As Taiwan grapples with this challenge, the United States should share best practices with Taiwan’s Ministry of National Defense. The U.S. Cyber Command should also establish a high-level dialogue with Taiwan on cyber defenses and offensive cyber capabilities. 

Seek greater clarity from allies on the assistance they would provide during Taiwan contingencies and work to improve their capabilities and define roles and responsibilities. 

The United States’ most notable advantage over China is its strong network of alliances in the Indo-Pacific. The PRC might believe that it could soon neutralize U.S. military power in the Taiwan Strait, but contending with the United States, Australia, and Japan would be an entirely different matter. Although U.S. allies are becoming increasingly open about their willingness to support U.S. intervention on behalf of Taiwan, more clarity is needed so that the United States can begin to discuss roles and responsibilities with its allies and develop a more integrated war plan. 

Japan is by far the most critical variable for a defense of Taiwan.197 Japan hosts fifty-four thousand U.S. troops, who would be called upon to come to Taiwan’s defense. These forces would need to be allowed to operate from bases and other installations in Japan. This contingency includes the Seventh Fleet, which is the largest of the U.S. Navy’s forward-deployed fleets and has the United States’ only forward-deployed carrier strike group. The United States’ only forward-deployed Marine expeditionary force is headquartered in Okinawa (with an air group with operational F-35 and KC-130J squadrons in Iwakuni) and offers a “ready force” capable of responding to a crisis and conducting major combat operations. Kadena Air Base, the United States’ largest military installation in the Indo-Pacific not on U.S. territory, is in Japan and is one of only two U.S. air bases (both in Okinawa) from which fighter jets can conduct unrefueled operations over Taiwan. In short, without the use of bases in Japan, U.S. fighter aircraft would be unable to effectively join the fight. The United States would find it nearly impossible to respond promptly and effectively to Chinese aggression against Taiwan without being able to call on these assets and facilities. 

Preparing for a conflict in the Taiwan Strait should become a major priority for the U.S.-Japan alliance and should drive force posture and bilateral operational planning and exercises. The United States and Japan should seek to integrate their intelligence, surveillance, and reconnaissance (ISR) capabilities, in particular their space-based assets, and should explore building a common operating picture with Taiwan. In addition, the United States should privately explore with Japan the potential to include Taiwan’s military in select exercises. Japan’s decision to establish a joint operational headquarters would enable the planning and execution of integrated operations between the United States and Japan. The United States should also seek to leverage Japan’s Southwest Islands, rotating troops through those areas and building up ammunition and critical supplies there. The United States should also harden its facilities in Japan and exercise operating from civilian airfields. Most important, the allies should have regular, serious dialogues that allow each side to communicate expectations of the other and pave the way for smooth prior consultation during a crisis. 

Beyond Japan, it will be important for the United States to enlist the support of other allies in the region, above all Australia and the Philippines. It is imperative for the United States to ensure that AUKUS is a success, which means expeditiously resolving any export control issues, so that Australia can field a nuclear-powered submarine within a decade and develop a more potent blue water navy. Such a capability would complicate PLA planning, especially given its relative weakness in anti-submarine warfare (ASW). Now with access to nine locations in the Philippines, the United States should build facilities in these areas, pre-positioning ammunition and materiel and rotating troops. 

Place the U.S. defense industrial base on a wartime footing now to ensure that the U.S. military has the capabilities it needs to deter Chinese aggression and prioritize arms deliveries to Taiwan.  

The U.S. defense industrial base is not prepared for a protracted conflict over Taiwan, a reality that the war in Ukraine has helpfully revealed but also exacerbated. If the United States chose to intervene in a conflict over Taiwan, the U.S. military would require munitions likely in excess of what is currently in DOD’s stockpile. In particular, the United States could run out of long-range, precision-guided munitions, which would be crucial to a defense of Taiwan, in less than one week.198 

The war in Ukraine has highlighted the need for the United States to shift its defense industrial base onto a wartime footing and has begun to galvanize long overdue changes. Still, ensuring that the U.S. military has the capabilities for a war over Taiwan and that it can deliver to Taiwan what it needs will take years, which is why changes need to occur now. The FY 2023 NDAA gave the Defense Department new authorization to award multiyear contracts for certain munitions that are critical for Ukraine and even Taiwan, including PAC-3 air defense missiles, HIMARS, guided multiple launch rocket systems (GMLRS), Stingers, Javelins, long-range anti-ship missiles, and joint air-to-surface standoff missiles.199 DOD should fully leverage this authority in order to give companies the certainty about a pipeline of orders for which they need to open new production lines. Congress should also expand and fully fund this authority to cover most munitions. In addition, the president should consider invoking the Defense Production Act to create a reserve of essential munitions components. 

The assistant secretary of defense for industrial base policy should evaluate supply chains for critical weapons, identifying those that have single points of failure or for which the United States relies on imported components from potential adversaries. There is only one company, for instance, that can manufacture the rocket motor for the Javelin missile, while another single company builds the engines for most cruise missiles. U.S. defense contractors also heavily rely on China for some rare-earth minerals. Congress should appropriate funds to DOD that would enable it to make investments in bringing additional suppliers of critical components online.  

Another weakness in the U.S. defense industrial base is shipbuilding, in particular the ability to build and sustain submarines. U.S. submarines would be a critical asymmetric advantage in a conflict over Taiwan, able to target China’s amphibious landing force and go largely undetected due to China’s shortcomings in ASW. Yet the number of submarines available for such a mission is inadequate.200 Maintenance delays are a major issue; in FY 2021, the submarine fleet lost nearly 1,500 days while submarines waited for maintenance, an increase from 360 days in FY 2016.201 This situation will only be compounded by the U.S. Navy’s recent decision to temporarily close four nuclear-certified submarine dry docks due to seismic concerns.202 The United States should seek to incentivize dry dock construction by offering long-term low-interest loans. 

The other side of the coin is ensuring that Taiwan has the weapons that it needs pre-positioned on the island before a conflict begins. A critical difference between Ukraine and Taiwan is that it will be much more difficult to resupply Taiwan during a conflict, which means that Taiwan needs to have everything that it needs on the island at the beginning of a conflict. Currently, however, the United States has yet to deliver $19 billion of weapons that it has committed to sell to Taiwan.203 This backlog includes Stinger anti-aircraft and Javelin anti-tank missiles, as well as HIMARS, all asymmetric capabilities that would complicate PLA planning and execution. The United States has sent so many Stinger and Javelin missiles to Ukraine that it would take thirteen years and five years, respectively, to rebuild the U.S. inventory, which would take priority over delivering items to Taiwan.204 To mitigate this issue, Congress should appropriate funds to replace equipment that the United States transfers to Taiwan from its stockpiles through Presidential Drawdown Authority, which would enable the United States to more quickly deliver weapons to Taiwan. 

Beyond addressing the backlog of arms deliveries to Taiwan, the United States should also pursue coproducing weapons with Taiwan. Taiwan is developing and producing its own unmanned aerial vehicles and ramping up production of its indigenous missiles; the United States should assist Taiwan in optimizing these capabilities. 

Conduct a joint study with Taiwan of its war reserve munitions, ability to produce weapons during wartime, and stockpile of essential goods, as well as a separate study on early-warning indicators.  

Russia’s invasion of Ukraine has demonstrated the munitions-intensive way of modern warfare. Meanwhile, Taiwan’s geography underscores the importance of it having significant stockpiles of weapons on the island when a conflict begins. Resupplying Taiwan during a conflict will be extraordinarily difficult; Taiwan will need to be able to fend off a Chinese assault and prevent a fait accompli for long enough to enable U.S. intervention. As of now, however, Taiwan does not have the quantities of vital munitions that it needs. 

The war in Ukraine has also reinforced the importance of developing societal resilience. If the PRC blockades Taiwan or strikes critical infrastructure, as Russia is doing in Ukraine, Taiwan will be unlikely to function and remain cohesive for the length of time it would take for the United States to intervene.  

The United States and Taiwan should seek to identify critical gaps and create a roadmap to address them. In particular, the two sides should look at Taiwan’s existing stockpile of munitions, its capacity to manufacture weapons during wartime (including potential companies that it can repurpose for such an effort), the rate at which Taiwan’s military would use munitions during a war, and the percentage that it would lose to Chinese attacks. Beyond weapons, the two should evaluate Taiwan’s energy reserves, communications infrastructure, and medical and food supplies. They should discuss how Taiwan can stockpile critical supplies prior to a conflict and how it would ration them during one. The study should also evaluate what the United States would need to supply Taiwan with during a blockade or attack and how best to deliver it. The objective should be to build an understanding of how long Taiwan can likely hold out in the face of a PRC invasion or blockade, to extend that time frame, and to ensure that operations plans are synced with that reality. 

Although the PRC is taking steps now to prepare for a conflict in the Taiwan Strait, it would need to make additional, highly visible moves preceding an attack, which would likely include everything from stockpiling and rationing critical goods to moving troops to the coast opposite Taiwan, erecting field hospitals, and requisitioning civilian ships. Ukraine served as an example of how declassifying intelligence and indicators can help raise awareness of an impending conflict and bring together a coalition. The United States should similarly seek to develop a robust set of early warning indicators, in consultation with Taiwan, that it could then publicize prior to a conflict. 

ASW: anti-submarine warfare HIMARS: high mobility artillery rocket system NDAA: National Defense Authorization Act FY: fiscal year AUKUS: trilateral security agreement between Australia, the United Kingdom, and the United States INDOPACOM: U.S. Indo-Pacific Command FMS: foreign military sales PLAN: People’s Liberation Army Navy PLA: People’s Liberation Army DOD: U.S. Department of Defense

Conclusion

The United States has vital strategic interests at stake in the Taiwan Strait. Protecting those interests requires that the United States deter a conflict over Taiwan and maintain the capacity to come to Taiwan’s defense at a reasonable cost. Given shifts in the military balance of power and China’s growing assertiveness throughout the Indo-Pacific, however, deterrence is dangerously eroding, and the United States and China are drifting toward war. At the same time, a conflict over Taiwan is not inevitable. To avoid a conflict that would likely devastate Taiwan, China, and the United States, as well as trigger a deep global depression, the United States should take prudent but firm steps to reestablish a position of strength.  

The United States needs to raise the cost of Chinese aggression against Taiwan, with the aim of persuading Xi Jinping that an attack on Taiwan will not succeed and would come at the cost of achieving his modernization objectives. To accomplish this task, DOD should make Taiwan its pacing scenario and resource it accordingly. The United States should make enhancing coordination with Australia, Japan, and the Philippines on Taiwan contingencies a top priority for the alliances, and it should help build Taiwan’s military capacity by enhancing training. The United States should also initiate intense consultations with its allies and partners on the scope of a sanctions package that would be introduced immediately after a Chinese blockade or attack, while urgently working to lessen economic dependence on China.  

As the United States is taking these steps, it should also make clear that it continues to abide by its One China policy, opposes any unilateral changes to the status quo, does not seek Taiwan’s permanent separation, and would support any resolution of cross-strait differences that occurs peacefully and with the consent of the Taiwanese people. Pursuant to this, the United States should largely eschew symbolic gestures, which are apt to prompt a harsh PRC response and raise concerns in Beijing that Washington is moving away from its One China policy. 

Some experts could argue that such steps to bolster deterrence are either too risky or that the costs of a conflict with China are too steep, so the best path forward is to reduce the U.S. commitment to Taiwan and hope for China’s forbearance. Such a proposal, however, fails to adequately reckon with what the world would look like the day after the PRC forcefully annexed Taiwan. Above all, it would be a tragedy for Taiwan’s twenty-three million citizens and one of Asia’s freest societies. For the United States, it would also mean the loss of an important partner and vastly diminished influence in the world’s most economically important region. China would be able to project power far beyond its shores, limiting the United States’ ability to operate in the Indo-Pacific and posing a greater threat to U.S. allies, who would come to question their reliance on the United States. The United States cannot wish away the stakes and instead needs a bolder strategy to protect its vital strategic interests in the Taiwan Strait.

PRC: People’s Republic of China DOD: U.S. Department of Defense
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