Key Takeaways:
A $14 billion US arms package for Taiwan remains stalled while Beijing warns of war over the island, testing American deterrence in the Indo-Pacific.
The US has held off approving a $14 billion weapons package for Taiwan that includes PAC-3 air defense missiles and counterdrone systems, even as President Xi Jinping warned President Trump that missteps on Taiwan could lead to war, according to a Wall Street Journal op-ed by Seth Jones published Tuesday.
"The failure to deliver key defensive systems undermines a core logic of preventing war in the Indo-Pacific, known as deterrence by denial," said Seth Jones, president of the Defense and Security Department at the Center for Strategic and International Studies.
Beyond the pending $14 billion deal, the US has a $30 billion backlog of approved arms deliveries to Taiwan dating to the Biden administration, including F-16 fighter jets, M142 High Mobility Artillery Rocket Systems, Harpoon coastal defense systems and Altius drones. Taiwan's Defense Ministry reported that of 23 major US defense items promised over the past decade, only five have been fully delivered, three partially delivered and 15 not yet delivered at all.
The delays risk emboldening China at a time when the People's Liberation Army has rehearsed blockade and invasion scenarios involving missiles, drones, ships and aircraft, with Xi ordering the PLA to be ready for a successful invasion by 2027. The US is delivering roughly $4 billion of arms to Taiwan annually, meaning it could take a decade at the current pace to clear the backlog — a timeline Jones called "too late to help Taiwan."
The core strategic logic — convincing Beijing it cannot achieve its military objectives through force — hinges on Taiwan having credible self-defense capabilities. The Taiwan Relations Act of 1979 legally commits the US to provide "such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability." Yet the delivery gap has widened as China's military buildup accelerates across air, land, naval, space, cyber and nuclear domains.
The last time US arms deliveries to Taiwan faced comparable delays was during the early 2000s, when Beijing's objections slowed approvals and pushed delivery timelines past five years for several major systems. That period coincided with a measured PLA modernization pace. Today's environment is different: China's defense budget has grown at an average of 7.2 percent annually since 2020, and its military exercises around Taiwan have become more frequent and complex.
The uncertainty has already registered in financial markets. Taiwan Semiconductor Manufacturing Co., the island's most valuable company and a linchpin of the global semiconductor supply chain, has seen its ADRs trade with elevated volatility relative to the Philadelphia Semiconductor Index. Defense contractors including Lockheed Martin Corp. and RTX Corp. could benefit from new orders if the package is approved, though the delay has kept those expectations in check.
Safe-haven assets have drawn interest as geopolitical risk premiums widen. Gold has held above $2,300 an ounce in recent sessions, while the Taiwan dollar has weakened against the greenback as investors price in prolonged uncertainty. Regional allies including Japan, South Korea, Australia and the Philippines are watching closely — US credibility in the Indo-Pacific depends not just on what Washington promises, but on what it delivers.
Xi has indicated that preventing US arms sales to Taiwan is a top priority in trade and diplomatic negotiations with the Trump administration, framing the issue as a precondition for closer economic ties. Beijing's approach amounts to "blatant extortion," Jones wrote, offering greater trade access in exchange for US appeasement on Taiwan.
The next decision point comes as the Trump administration weighs whether to approve the $14 billion package. If approved, the focus shifts to whether the US can accelerate production and delivery timelines — a challenge given that the Pentagon's own industrial base is stretched by Ukraine replenishment and Indo-Pacific posture demands. If not, the signal to Beijing and the region would be unambiguous: deterrence has a price, and the US is not yet willing to pay it.
This article is for informational purposes only and does not constitute investment advice.
