U.S. Shifts to “Strategic Conditionality” as Taiwan Seals Major Chip Deal Amid Rising Tensions

WASHINGTON, January 24, 2026 – The United States has recalibrated its Taiwan policy, replacing decades of “strategic ambiguity” with a new doctrine of “strategic conditionality” that explicitly ties support to cost and allied burden-sharing. This shift, outlined in the 2025 National Security Strategy (NSS), unfolds alongside a historic U.S.-Taiwan trade pact worth up to $500 billion, record arms sales, and intensified Chinese military drills, creating a complex new equilibrium in the Taiwan Strait.

A New Strategic Lexicon: From Ambiguity to Conditionality

The Trump administration’s 2025 National Security Strategy, released in November, marks a subtle but significant rhetorical shift. Where previous administrations stated the U.S. would “oppose” unilateral changes to the status quo in the Taiwan Strait, the new NSS states the U.S. “does not support” such changes. Analysts interpret this not as abandonment, but as a move toward “strategic conditionality”—making U.S. support contingent on Taiwan’s own defense investments and political unity. The document frames Taiwan primarily as a strategic asset critical to sea lanes and supply chains, moving away from value-based framing.

The $500 Billion Semiconductor Bargain

On January 15, 2026, the U.S. and Taiwan announced a landmark agreement centered on the semiconductor industry, which Taiwan dominates. The deal commits Taiwanese companies, led by Taiwan Semiconductor Manufacturing Company (TSMC), to invest at least $250 billion to build and expand advanced chip, energy, and AI production capacity in the United States. Taiwan will also provide credit guarantees for an additional $250 billion in related investment.

In return, the U.S. will cap its reciprocal tariff rate on Taiwanese goods at 15%—down from rates as high as 20-32%—and grant preferential, duty-free treatment for semiconductor imports tied to new U.S. fabrication plants. The deal aims to reshore a significant portion of advanced chipmaking to American soil, with U.S. Commerce Secretary Howard Lutnick stating a goal to bring 40% of Taiwan’s semiconductor supply chain to the U.S. by 2028.

Military Pressure and Political Gridlock

The diplomatic and economic maneuvering occurs against a backdrop of sustained military pressure from Beijing. In late December 2025, China conducted “Justice Mission 2025,” its largest-ever military exercises around Taiwan, simulating port blockades and precision strikes. More recently, on January 17, 2026, a People’s Liberation Army drone breached Taiwanese airspace over Pratas Island in the South China Sea, a potential first in decades.

In Taipei, President Lai Ching-te faces significant domestic hurdles. His administration’s proposed NT$1.25 trillion (approx. $39.6 billion) special budget for asymmetric defense has been blocked multiple times—most recently on January 23—by an opposition-controlled legislature. This political gridlock undermines the very burden-sharing the new U.S. strategy demands.

Key Facts at a Glance

Frequently Asked Questions

What does “strategic conditionality” mean?

It is a term used by analysts to describe the new U.S. approach implied by the 2025 National Security Strategy. It means U.S. military and political support for Taiwan is no longer presumed or ambiguous, but is explicitly conditioned on Taiwan demonstrating sufficient self-reliance, burden-sharing, and political cohesion to make U.S. intervention a viable strategic calculation.

Is the U.S.-Taiwan chip deal good for Taiwan’s economy?

Views are mixed. The Lai administration hails it as securing preferential U.S. market access and extending Taiwan’s “sacred mountain” of semiconductor leadership abroad. Opposition parties and some critics warn it risks hollowing out Taiwan’s most critical industry—the “silicon shield”—by incentivizing the relocation of advanced manufacturing and capital to the United States.

Will the U.S. defend Taiwan if China attacks?

The U.S. maintains a policy of strategic ambiguity, never explicitly guaranteeing military intervention. The 2025 NSS and recent arms sales affirm a commitment to deterrence and maintaining Taiwan’s self-defense capability. However, the new conditional language and emphasis on allied burden-sharing suggest that the scale and nature of U.S. involvement would be weighed against immediate American interests and the credibility of Taiwan’s own defense efforts at the time of a crisis.

Why is Taiwan’s defense budget stalled?

President Lai’s Democratic Progressive Party (DPP) does not control the legislature. The Kuomintang (KMT) and Taiwan People’s Party (TPP), which form a majority coalition, have repeatedly blocked the special budget, citing procedural concerns and demanding greater transparency. The gridlock highlights the domestic political challenges Taipei faces in meeting the self-reliance expectations of its chief security partner.