Meng Kit Tang
In 2025, Taiwan navigates a geopolitical tightrope, balancing the US policy volatility of Trump’s tariffs against China’s economic coercion, where each trade negotiation signals resilience or risks peril. The fractured trade landscape shaped by Canada’s post-election recalibration under Prime Minister Mark Carney and Trump’s October 20 remarks downplaying Taiwan in Xi talks amplifies uncertainty among allies.
The Canada-Taiwan economic cooperation framework, initiated in early 2025, embodies this tension. Its cautious progression reflects a broader truth: Taiwan’s economic ambitions cannot be divorced from geopolitical realities. This article explores the domestic, foreign, and societal factors shaping Taiwan’s negotiation stance using the stalled Canada pact as a case study. It then draws lessons for resilience in a world divided by strategic rivalry.
Domestic Factors: Internal Divisions and Ambitious Economic Strategies
To understand how Taiwan strikes its balance on the foreign policy front, we must first look inward at how domestic politics shapes Taiwan’s international credibility. Here, sharp divisions between the ruling Democratic Progressive Party (DPP) and the opposition Kuomintang (KMT) continue to complicate trade and economic diplomacy.
KMT-Led Budget Delays and Political Polarization
In October 2025, the KMT intensified its obstruction of critical budgets, including those tied to defense and trade initiatives. A proposed NT$300 billion special budget that was intended to fund the New Southbound Policy, infrastructure, and economic diversification remains stalled. KMT lawmakers argue that Taiwan’s overreliance on Washington weakens bargaining power, citing the 20% tariffs imposed by Trump in August 2025 as evidence.
For international partners like Canada, this domestic friction signals instability. Ottawa, navigating its own debates over immigration and the renegotiation of United States–Mexico–Canada Agreement (CUSMA), prefers predictable counterparts. Legislative gridlock raises concerns that Taiwan may be unable to implement trade commitments fully.
Yet resilience is possible. President Lai has proposed a cross-party task force aimed at fostering consensus on economic strategy. If implemented, such mechanisms could reassure allies, projecting unity and stability. They highlight that Taiwan’s internal divisions, while real, are not insurmountable barriers to credible economic diplomacy.
“Non-Red Supply Chain” Initiative
Taiwan’s “non-Red supply chain” initiative, launched in February 2025, represents a bold attempt to reduce dependence on China. By redirecting trade toward the U.S., Japan, and Southeast Asia, particularly in semiconductors and high-tech manufacturing, Taiwan aims to strengthen both economic resilience and strategic autonomy. The opening of TSMC’s Arizona fab and a new US trade agreement in 2025 exemplify some early successes.
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