Taiwan President Lai’s three big challenges in 2025

Taiwan President Lai Ching-te enters 2025 confronting three distinct challenges: a fractious domestic political environment and determined opposition to his agenda; mounting Chinese pressure on Taiwan; and a particularly uncertain international environment in which many of Taiwan’s closest partners are undergoing political turbulence or transitions. How well Lai manages these three simultaneous challenges over the next 18-20 months will determine his political party’s performance in Taiwan’s 2026 local elections, and thus his strategic position heading into Taiwan’s presidential election in 2028.

Taiwan’s domestic challenges

Even on the best of days, Taiwan’s politics are intense, but today they are in hyperdrive. The three main political parties maintain their own narratives for the causes of the breakdown in Taiwan’s comity and its deepening divisions. The ruling Democratic Progressive Party (DPP) blames the two opposition parties, the Kuomintang (KMT), which holds the most seats in Taiwan’s legislature but does not enjoy a majority, and the Taiwan People’s Party (TPP), for choosing obstruction and political point-scoring over the well-being of Taiwan’s 23 million people. The DPP worries that some members of the political opposition are doing Beijing’s bidding by undermining Taiwan from within through ceaseless political gridlock.  

The opposition KMT accuses Lai of pursuing an imperial presidency. From the KMT’s vantage, Lai is unwilling to engage in the normal give-and-take of democratic politics in a divided government. Instead, according to Kuomintang leaders, Lai is trying to consolidate political control in his own hands and doing so in ways that betray stubbornness, arrogance, and inflexibility.

Taiwan’s third major party, the TPP, holds eight seats in Taiwan’s Legislative Yuan, making it the swing vote in Taiwan’s 113-seat legislature between the KMT (52 seats) and the DPP (51 seats). The TPP is smarting from the arrest of its founder and leader, former Taipei mayor Ko Wen-jeh, on corruption charges. The party argues that Lai has weaponized Taiwan’s justice system to weaken his political opponents. It also believes Taiwan must pursue nuclear energy to fill a shortfall between electricity supply and demand in the coming years, and that Taipei should adopt a more flexible posture to cross-Strait relations. Both these positions put them at odds with President Lai. 

Meanwhile, Taiwan’s population is divided on key issues like energy, defense spending, and the budget. The island is experiencing a shrinking and aging population, stagnant wages, rising housing costs, widening inequality, and a dearth of opportunities for youth entering the workforce. The island’s economy is heavily concentrated around electronics and information and communication technology exports. Taiwan’s semiconductor industry, for instance, produces over 90% of the world’s most advanced semiconductors, contributing over 15% of Taiwan’s GDP but creating jobs for only 2.8% of the workforce. This concentration of high-paying jobs in one sector is creating widening wealth disparities within Taiwan’s society; wages in the service sector are largely stagnant.

Taiwan’s future economic prospects are constrained by shortages of land, labor, and energy. Of these three constraints, energy might provide the most proximate headwind on economic growth. Taiwan faces a steep and increasingly urgent challenge in meeting its rising energy demand. While the Taiwan public broadly favors moving toward a green transition and generating more power through renewables, it is divided on what role—if any—nuclear power should play in the transition. Nuclear power accounted for 4% of Taiwan’s electricity mix last year, but Taiwan’s government has adopted plans to phase out nuclear power by 2025. As researchers at the Center for Asia-Pacific Resilience and Innovation noted, “A 2024 survey [of Taiwan public opinion] found that 63% of respondents and 70% of those aged under 30 supported nuclear energy. While the issue remains partisan, with 88% of KMT voters supporting nuclear energy, even supporters of the traditionally anti-nuclear DPP are now split, with 44% supporting and 45% opposing the use of nuclear energy.”

This internal divide around nuclear power draws into question how Taiwan will meet rising energy demand while positioning itself as the global epicenter of hardware development for the artificial intelligence industry. Taipei must find new sources of energy to power its manufacturing plants while contending with the population’s demands for cheaper energy that is increasingly sourced from renewables.

Lai must also navigate a divided government, the first in 16 years and only the second in Taiwan’s democratic history. This divided government has contributed to the paralysis of Taiwan’s judicial branch. The Constitutional Court Procedure Act (CCPA), which took effect in January 2022, was further amended in 2024 by the KMT and TPP. This new amendment raised the minimum number of justices required to pass a ruling or declare an act of government unconstitutional to 10 out of 15 justices. Previously, any ruling by the top court required the support of the majority. Terms for seven of the top court’s 15 judges expired late last year, leaving only eight justices on the bench. The KMT-TPP coalition has blocked confirmation for the new justices that Lai nominated. As such, Taiwan’s Constitutional Court presently is unable to meet quorum to rule on the constitutionality of any bills the legislature passes, rendering Taiwan’s top court unable to function.

Taiwan also faces a potential fiscal crisis, with the legislature pushing to increase the percentage of total government revenues that go to local governments from 25% to 40%. Importantly, the KMT controls 14 of Taiwan’s 22 local prefectures and is focused on strengthening its sub-national leadership ahead of elections in 2026 for county and municipal leaders. If tax revenue is rebalanced to favor local governments, it could limit resources available for Taiwan’s national defense as well as societal resilience initiatives.

More broadly, the process for Taiwan’s legislature to review and deliberate on an annual budget has broken down. The process typically involves review by jurisdictional committees and then negotiation among political parties before approval. With a divided government and hung parliament, though, Taiwan’s leading political parties have yet to demonstrate they are up to the task. Such partisan divisions are reflective of broader societal sentiment on the allocation of government resources. In a recent poll on whether Taiwan should increase defense spending, 49.1% of voters supported increasing the defense budget, while 43.8% opposed it. Lai thus far has been unable to break the logjam and persuade a weary electorate of the imperative of dialing up defense spending, even with China’s growing military menace toward Taiwan and U.S. President Donald Trump’s public demands for Taiwan to invest more in its own security.

Lai has proven himself to be a skilled retail politician. He connects well with audiences, shows empathy and understanding in interactions with voters, and is an effective orator. His toughest test as a leader may be whether he is capable of building consensus within his own political party and forging compromises with key stakeholders across Taiwan’s political spectrum. Lai appears to be grasping this challenge and working to address it. Time will tell whether his efforts deliver results.

Cross-Strait relations

Meanwhile, Chinese pressure on Taiwan is growing. The People’s Republic of China (PRC) has declared its intention to assert legal and political control over Taiwan. Beijing has determined that Lai is a “dangerous separatist” who cannot be trusted and must instead be confronted. In furtherance of this goal, Beijing has pursued a comprehensive campaign of what my Brookings colleague Richard Bush has coined as a strategy of “coercion without violence.” These efforts include cyber intrusions, economic coercion, influence operations, bribery, organized crime, united front activities, and ceaseless and intensifying military pressure surrounding Taiwan. In other words, Beijing is taking a full spectrum of actions up to—but stopping short of—the use of force. The goal of this strategy is to undermine the psychological confidence of Taiwan’s leaders and its people and to foster disunity in the political system to the point that the people of Taiwan decide resistance is futile and Taiwan’s best option is to integrate with the PRC. All the while, Beijing is investing in the largest peacetime military build-up in modern history in case its strategy of coercion without violence fails and it must instead resort to force to achieve its aims.

The Lai administration has pursued a multipronged grand strategy to respond to Beijing’s mounting pressure on Taiwan. First, it has launched a whole-of-society resilience initiative to disabuse any notions that Beijing could assert control over Taiwan quickly or painlessly. Second, Lai has sought to work with Taiwan’s leading companies to reduce Taiwan’s economic dependence on the PRC. Whereas 84% of Taiwan’s outbound investment flowed to the PRC in 2010, that figure now stands at 7.5%. Instead, much of these investments are being made inside Taiwan, as well as in the United States, Japan, the European Union, and other partner countries. Third, Taiwan has pursued active diplomacy with other key powers and sought to raise international awareness of Taiwan’s indispensability to the global economy. And fourth, Taiwan has sought to build asymmetric defensive capabilities to deter a PRC invasion, and if deterrence fails, to repel PRC efforts to establish a military presence on Taiwan.

This latter line of effort has not fared well in Taiwan’s political buzzsaw. The legislature has frozen critical parts of Taiwan’s defense budget, including the military’s operational expenditures, its indigenous submarine program, its efforts to launch a drone industrial park, and the military’s public affairs budget. If Lai is unable to negotiate a deal that raises or at the very least preserves defense spending at current levels, then it could complicate Lai’s efforts to convince the Trump administration that Taiwan takes its own self-defense seriously and is not a free-rider on America’s security posture in the region.

Taiwan’s international relations  

As part of his grand strategy, Lai has pledged to attract greater international support for Taiwan’s political autonomy and democratic governance. In recent years, a growing number of countries and groupings have publicly raised their voices in support of Taiwan’s security, including Australia, Canada, the European Union, the G7, Japan, New Zealand, South Korea, the United Kingdom, and the United States. Now, however, many of Taiwan’s closest partners are undergoing political turbulence and transitions. The uncertainty caused by these events is challenging Lai’s vision of fostering greater cohesion among democratic countries in co-producing military technologies and strengthening secure supply chains that do not include China.

Nowhere is Lai’s challenge more acute than in Washington. Trump has vowed to be strong in facing down China, but at the same time, he has lamented that Taiwan’s defense spending is insufficient to the risk it faces. Trump also has complained that Taiwan “stole” America’s semiconductor industry and criticized Taiwan for running a record-level trade surplus with the United States. This latter point is a sore spot for Trump, who views trade deficits as an indicator that America is being taken advantage of by its trading partner, whereas in reality, it is the result of macroeconomic imbalances between two economies. Taiwan’s large trade surplus with the United States may be a contributing factor to why Trump has threatened to levy tariffs against Taiwan exports such as semiconductors and has insisted that more semiconductor production capacity be reshored to the United States.

Trump is unconventional in his views on Taiwan. On the one hand, he argues that his unpredictability and his foreign policy muscularity are assets that will deter China from launching an attack on Taiwan. On the other hand, he said in 2021, if China invades Taiwan, “there isn’t a f—ing thing we can do about it.” Trump’s advisors also hold a range of views, from those who prioritize Taiwan’s defense to others who argue for greater restraint in America’s application of hard power abroad, and others who believe America needs to focus more on Latin America to reassert its sphere of influence in its own hemisphere. Elon Musk also maintains unique access to Trump. Musk has previously likened Taiwan’s role with China to Hawaii’s relationship with the United States and argued that the United States must avoid being drawn into conflict to defend Taiwan.

Compared to the executive branch, members of Congress generally are less divided and more supportive of Taiwan. Even so, there are both constitutional and practical limits to the role Congress can be expected to play in influencing America’s policy on Taiwan. As a co-equal branch of government, Congress provides advice and consent to Trump’s nominees for national security positions. Congress controls the “power of the purse” in deciding where American taxpayer dollars are spent. Congress is also technically responsible for declaring when the United States is at war, though in practice it has not exercised this responsibility since World War II. Congress also can hold hearings and exercise influence over the direction of American foreign policy. In practice, however, the U.S. Constitution grants wide latitude to the president to conduct America’s foreign policy. Additionally, the 119th Congress has thus far been timid in exercising its authority as a co-equal branch of government, instead largely operating along party lines to support Trump’s initiatives and nominations.

For these reasons and more, Trump’s return has prompted debate in Taipei about how the Lai administration should manage a more mercurial America. One side of the argument is to focus on working closely with the pro-Taiwan advisors that Trump has appointed to senior positions, such as Secretary of State Marco Rubio and National Security Advisor Michael Waltz, as well as with members of Congress who are broadly pro-Taiwan in their orientation. In other words, work around Trump while seeking to maintain cross-Strait stability.

The other side of the argument is that Taiwan has become such a major global issue that Taiwan must proactively engage Trump and his senior advisors. In this telling, Taiwan’s leaders must find ways to persuade Trump that (1) Taiwan is indispensable to his vision of reindustrializing the United States and spurring a renaissance of American advanced manufacturing; (2) Taiwan takes its own security seriously; and (3) Taiwan is a stable, steady, responsible actor in the cross-Strait relationship and is not an instigator of rising tensions in the region. One point of consensus across party lines in Taiwan is that now would be an inopportune time for Lai to push boundaries or poke Beijing on cross-Strait issues. If there are spikes in cross-Strait tensions, it will be crucial for Lai’s relationship with Trump that the tensions be perceived as being instigated by Beijing, and not by Taipei, as China will certainly assert.

Conclusion

2025 will be a decisive year for Lai’s presidency and his prospects for winning reelection in 2028. He faces a determined political opposition at home, an aggressive counterparty across the Taiwan Strait, and a dynamic situation abroad. To succeed, Lai will need to disentangle a domestic political knot, or at a minimum, convince Taiwan’s voters that the opposition parties are responsible for the political gridlock, not him. He also will need to navigate a complicated set of external relationships with key partners, none more important than the United States. At the same time, he will need to manage rising stresses in cross-Strait relations.

While the challenges Lai confronts are formidable, it would be a mistake to count him out. He is an able politician who stood out as one of the few leaders of advanced democratic societies to secure victory in 2024, a year of global elections in which incumbent leaders struggled to retain power amid calls for change. He has overcome many obstacles to reach the pinnacle of power in Taiwan. Whether he proves capable of managing the three converging challenges he faces in 2025 will inform the longevity of his hold on power in Taiwan going forward.