Precarious Status Quo: Will Taiwan Become Next Flashpoint in US-China Rivalry?

Shortly before Christmas last year, the Trump administration announced US$11.1 billion arms sales to Taiwan—the largest-ever deal between Washington and the self-ruled island, which includes eight separate purchases, ranging from HIMARS rocket systems and anti-tank missiles to loitering suicide drones. Mandated by the Taiwan Relations Act, the sales aim to bolster Taiwan’s self-defence capabilities and build a credible deterrent against a potential invasion by China, which claims sovereignty over the territory.

The announcement drew an immediate rebuke from Beijing, condemning the sales as a violation of the “One-China” principle and demanding that the US stop supporting “Taiwan independence” separatist activities. Asserting its right to take resolute measures to safeguard national sovereignty, China launched its largest live-fire military drills around Taiwan since 2022.

This deal comes at a critical juncture. On one hand, while the two superpowers have reached a temporary truce regarding trade, critical minerals, and TikTok and scheduled reciprocal visits for 2026, President Trump’s specific stance on Taiwan remains vague. This persists despite President Xi’s recent staunch declaration that the “reunification of China is unstoppable”. On the other hand, Japan—the US’s closest Asian ally—has been facing escalating tensions with China since the newly elected Prime Minister Sanae Takaichi’s parliament statement that Japan could take military action in self-defence if China attacks Taiwan. In retaliation, China has initiated restrictions on outbound tourism, seafood imports, and export controls on dual-use (civilian/military) items.

All these tit-for-tat complexities led to a final, pressing question: Will Taiwan become the next flashpoint for East Asian regional security? To answer this, we must conduct a 360-degree analysis of the three key players involved.

TAIWAN

Let’s start with the central protagonist, Taiwan. The island has long been seen as a strategic card played by both the US and China to navigate their bilateral frictions, carrying significant geopolitical and economic value. Taiwan has been governed independently from Mainland China (formally the People’s Republic of China, or PRC) since 1949 when the then-ruling party of the Republic of China, Kuomintang (KMT), lost the Chinese Civil War to the Chinese Communist Party (CCP) and retreated to the island. After losing the “China” seat at the United Nations to the PRC in 1971, Taiwan has struggled to gain international recognition as a sovereign state due to most countries’ perception shift of “One China” from Taipei to Beijing—including the US. Today, though most citizens have developed a distinct “Taiwanese” identity than “Chinese”, the self-ruled island’s sovereignty remains in a grey zone, creating a persistent, high-stakes geopolitical stalemate known as the “status quo”.

The latest US arms sales were interpreted by the ruling Democratic Progressive Party (DPP) as a reassurance of Taiwan’s security by the Trump administration, which prioritises “preserving military overmatch to deter conflict across the Taiwan Strait” and “maintaining its long-standing policy on Taiwan, including not supporting any unilateral change to the cross-strait status quo”. Concurrently, the Taiwan government is seeking to bolster its self-defence capabilities through a special military budget of NT$1.25 trillion (approximately US$40 billion) over the next eight years, announced by DPP’s chairman Lai Ching-te. However, the proposal has faced multiple rounds of procedural blockades in the opposition-controlled legislature due to a perceived lack of transparency and scrutiny.

Year	Taiwan’s defence budget	The US arms sales to Taiwan
2021	~US$12.8bn	~US$0.75bn
2022	~US$13.5bn	~US$2.4bn
2023	~US$14.5bn	~US$1.8bn
2024	~US$19.1bn	~US$3.1bn
2025	~US$20.2bn	~US$11.4bn

Furthermore, it is unlikely that Lai would be able to secure approval for the unprecedented US$40 billion defence budget without modification, as the ruling party no longer holds a majority, facing a legislature controlled by the main opposition KMT and the critical minority Taiwan People’s Party (TPP). Both opposition parties are wary of further inflaming cross-strait hatred and hostility through the arms sales and defence debate; instead, they advocate for de-escalation and a resumption of dialogue to preserve peace, regional stability, and the status quo, according to those familiar with the matter.

CHINA

Across the strait, Beijing took a hard line in response to the latest arms sales by launching two days of massive live-fire drills and blockade exercises in waters surrounding Taiwan in the last week of 2025, firing rockets and mobilising destroyers and missile launchers. Codenamed as “Justice Mission 2025”, the military drills were the largest-scale exercise since August 2022, when the People’s Liberation Army (PLA) held four days of exercises after the then-Speaker of the US House of Representatives Nancy Pelosi visited Taipei. The PLA underscored the drills as a legitimate and necessary action to safeguard the country’s sovereignty and national unity, a warning to “independence forces” and against external interference, as well as a deterrence “outside the island chain”. At the same time, an aerial footage featuring the Taipei 101 skyscraper went viral on China’s internet titled “So close, so beautiful, ready to visit Taipei anytime”, was later claimed by PLA’s official social media account as filmed by a Chinese drone during “Justice Mission 2025”. Taiwan media also confirmed that the drills came closer than ever to Taiwan’s coast.

China has increased military pressure on Taiwan since 2016, when former DPP chairwoman Tsai Ing-wen became the island’s leader. Tsai refused to affirm the “1992 Consensus”—a tacit understanding reached between the then-KMT government and Beijing that allows both sides to agree on “One China” with each side free to define what “China” means. The consensus is intended to be the cornerstone and prerequisite for a peaceful cross-straits relationship, but was rejected by the DPP, which views accepting the consensus as equivalent to consent of China’s claim of sovereignty over Taiwan. In addition to military pressure, China has adopted more assertive diplomatic rhetoric by staunchly defending its “One China” principle to global audiences at numerous international forums. This principle comprises three aspects: there is but one China in the world, the Taiwan region is an inalienable part of China’s territory, and the Government of the PRC is the sole legal government representing the whole of China. Moreover, Beijing regards “reunification” as the ultimate goal of cross-strait relations and rejects “any attempt to turn back the wheel of history and separate Taiwan from China”.

Date	Drill Name	Trigger
Dec 2025	Justice Mission 2025	Record US$11.1 billion arms sales
Oct 2024	Joint Sword-2024B	Lai’s “Double Tenth” speech
May 2024	Joint Sword-2024A	Lai’s inauguration
April 2023	Joint Sword 2023	Tsai’s meeting with US Speaker McCarthy
Aug 2022	(unnamed)	Nancy Pelosi’s visit to Taipei

Despite the upscaled drills and provocative statements, which serve more as tailored geopolitical messaging to demonstrate dissatisfaction than as a harbinger of perilous consequences, it is unlikely that China will move beyond regional deterrence to break the status quo in 2026 due to both internal and external concerns. Internally, 2026 marks the start of China’s 15th Five-Year Plan, which sets development priorities on industrial upgrading, technological self-reliance, domestic demand, and openness. With “stability” as the core narrative, any imminent cross-strait conflict would undermine China’s long-term efforts to promote stability and modernization. Externally, the one-year tariff truce between China and the US has provided temporary relief, allowing businesses to plan for 2026 with greater certainty and resilience; any abrupt geopolitical shifts would disrupt the private sectors and growth engines of both economies. Additionally, China has been confirmed as the host of APEC 2026, where leaders from member economies, including Taiwan, will meet to set agendas and discuss major regional issues. It is in Beijing’s best interest to foster a peaceful diplomatic environment for the event.

UNITED STATES

Finally, let’s turn the spotlight towards the geographical outsider but geopolitical insider: the US. As China’s primary competitor and Taiwan’s most important international backer, the US has continuously approached cross-strait relations with “strategic ambiguity” for decades—maintaining “One China” as its baseline policy guided by the Taiwan Relations Act, the three Joint Communiques, and the Six Assurances, while simultaneously deterring Beijing and dissuading Taiwan from changing the status quo. This framework helps explain why President Trump downplayed China’s latest military drills as “no worries” and praised his “good relationship with President Xi”, which remarks came after his administration launched the record-breaking arms sales to Taiwan and signed the “Taiwan Assurance Implementation Act” into law that requires the State Department to regularly review and upgrade guidelines for how US officials interact with Taiwan.

Widely recognised as a distinctive and unconventional political figure, Trump’s transactional foreign policy style has raised concerns in Taiwan regarding whether the island might be treated as a bargaining chip in trade negotiations with Beijing. Currently, Taiwan remains at the heart of the global semiconductor supply chain led by the Taiwan Semiconductor Manufacturing Company (TSMC). As the world’s largest chipmaker and a primary supplier to Nvidia, AMD, and Apple, TSMC’s role has become even more critical amid the intensified AI-driven US-China competition for cutting-edge chip production. Consequently, it is a strategic priority for the US to help preserve Taiwan’s “silicon shield”—maintaining the island’s de facto autonomy and deter any Chinese attack. Nevertheless, this assurance may falter as the US concurrently hedges against supply-chain risks by onshoring chip production, as manifested in the new trade deal reached by the US and Taiwan, which reduced US tariffs on Taiwanese goods from 32% to 15% in exchange for US$250 billion committed new investments in the US tech industry. As part of the deal, TSMC agreed to build at least four additional production facilities in Arizona.

For Trump, who sees himself a tough negotiator focused on “winning”, it is in his best interest to sustain the US lead in the global AI race and prevent any short-term escalation in cross-strait relations. However, as the US accelerates its efforts to enhance supply-chain resilience against geopolitical uncertainty, the bigger question remains: how long will the “silicon shield” last, and what happens after Trump?

In a rare, lengthy interview with the New York Times, conducted shortly after launching an unprecedented operation in Venezuela, Trump stated he saw no similarities between his actions in Venezuela and a potential Chinese invasion of Taiwan. While acknowledging he would be unhappy with any change to the status quo, Trump bet that Beijing would not make a move during his term of power. Nevertheless, with geopolitics steering the global agenda in 2026 and lingering doubts regarding Trump’s predictability, tensions across the strait won’t fade away. Still, one thing remains certain: Taiwan will always be a primary issue on the negotiation table between the US and China.