Taipei has ramped up investment in military equipment and weapons over the past decade in response to intensifying pressure from China, which claims the democratic island as part of its territory and has threatened to seize it by force.

Premier Cho Jung-tai said the latest hike was "another concrete demonstration to the world and the people of Taiwan of our resolve and ability to safeguard national sovereignty and security".

The proposed spending needs to be approved by the opposition-controlled parliament before it can take effect.

Taiwan's cabinet has allocated NT$949.5 billion (US$31.1 billion), or 3.32 percent of GDP, for defence spending next year, budget documents show.

That is an increase of 22.9 percent on this year.

The 2026 budget includes NT$135.9 billion in spending on the Coast Guard Administration and military retirement benefits, which were not included last year.

"Our total defence budget is calculated using NATO's model and standards," Cho told reporters.

Cho gave the figure 3.23 percent during the news conference but the cabinet later confirmed to AFP that 3.32 percent is the correct number.

Cho said overall expenditure for 2026 was budgeted at just over NT$3 trillion -- up NT$110 billion or around 3.8 percent from 2025.

President Lai Ching-te has previously vowed to increase defence spending to more than three percent of GDP as Washington pressured the island and other governments around the world to spend more on their own security.

Military expert Chieh Chung said if spending on the coast guard and pensions was stripped out, the defence budget would be 2.84 percent of GDP.

"As for Washington's reaction, I think it will welcome Taiwan's move to increase its defence budget, but it is still far from what they would be satisfied with," said Chieh, an analyst at the Association of Strategic Foresight.

- Tariff talks -

The announcement comes as Taipei seeks to strike an agreement with US President Donald Trump's administration for a lower tariff on Taiwanese shipments to the United States.

Trump this month imposed a temporary 20 percent tariff on Taiwan's imports as part of his global trade war. Negotiations are ongoing.

The China-friendly Kuomintang party (KMT) which controls the island's legislature with the help of the Taiwan People's Party, slashed the Lai government's 2025 budget and froze some defence spending.

Chieh said a KMT-proposed increase to military personnel benefits was not included in the government's 2026 budget plan, which could be a stumbling block.

"Aside from this issue, the KMT is not expected to cause much difficulty," he said.

The KMT supported increasing the defence budget, but "priorities should be addressing manpower shortages, asymmetric warfare capabilities, and modernised training," said Chance Hsu, KMT assistant director of international affairs.

While Taiwan has a homegrown defence industry and has been upgrading its equipment, it would be outgunned in a conflict with China and relies heavily on US arms sales to bolster its security capabilities.