Rising Defense Budgets and Trade Pressures Reshape Taiwan’s Job Market

Image from Ken Suzuki, Nikkei Asia

As Taiwan steps up its defense spending and industries brace for shifting global trade policies, a quieter struggle is emerging among the island’s younger generation. Many are entering a job market reshaped by security concerns, automation, and the lingering effects of global economic uncertainty.

Image taken on Oct. 10 where Lai Ching-te, the Taiwanese President, delivers his National Day speech

President Lai Ching-te’s government has pledged to expand national defense budgets to more than 3 percent of GDP next year, rising to 5 percent by 2030. The plan includes developing advanced systems such as the “T-Dome” air defense network and strengthening local defense industries. While the investment aims to safeguard Taiwan’s sovereignty and technological edge, it also diverts public funds away from social and labor programs that young people depend on.

According to Taiwan’s Directorate-General of Budget, Accounting and Statistics, youth unemployment in August stood at 10.8 percent, roughly triple the national rate. Economists say the combination of rising defense expenditures, U.S. tariff pressures, and slowing export demand is making it harder for small and medium-sized enterprises — long the backbone of Taiwan’s economy — to hire new graduates.

“The technology sector remains strong, but outside of semiconductors, job growth has been uneven,” said Lin Ming-hua, an economist at National Taiwan University. “Firms are hesitant to expand payrolls because they expect higher operating costs and uncertain global demand.”

Taiwan’s manufacturing and export-driven economy has historically offered steady employment in electronics, machine tools, and maritime logistics. But a surge in automation and digitization has displaced many mid-skill roles. Meanwhile, the rise of artificial intelligence has encouraged employers to prioritize technical expertise, leaving non-STEM graduates struggling to compete.

To address these pressures, the government has announced a 93 billion New Taiwan dollar (about US$3 billion) support package for industries and workers affected by U.S. tariffs. Lai has also pledged tens of billions of dollars annually to help small firms adopt AI technologies, hoping to modernize traditional sectors and generate new employment opportunities.

Despite these efforts, many young Taiwanese remain uneasy. “It feels like the world is changing faster than we can adapt,” said 25-year-old marketing graduate Chen Yi-lin, who has been freelancing since her contract position ended in June. “I see my friends working in delivery, design, or online tutoring because they cannot find stable jobs. Everyone is just trying to survive.”

Analysts say Taiwan’s youth are caught between two transitions — one economic and one geopolitical. On the one hand, the island’s dependence on exports to both China and the United States leaves its industries vulnerable to trade shifts and diplomatic tensions. On the other, China’s military posturing across the Taiwan Strait has made national defense an unavoidable budget priority.

“The pressure to prepare for potential conflict has long-term social costs,” said Chou Wei-ling, a sociologist at Academia Sinica. “Younger people face not only higher living costs and job insecurity but also anxiety about the future. The sense of normalcy that once defined Taiwan’s growth years is fading.”

Still, some see opportunity in the challenge. A new generation of startups is emerging in cybersecurity, AI defense systems, and local manufacturing, driven by government incentives and a growing demand for technological independence. Taiwan’s stock market, despite occasional volatility, has remained resilient, reflecting investor confidence in the island’s innovation capacity.

Yet as both Beijing and Washington exert pressure on Taiwan — one through military threats, the other through economic realignments — the island’s young professionals are left to navigate an increasingly uncertain future. For many, the question is no longer only about employment, but about identity and resilience. “I think our generation has learned to adapt,” Chen said. “We grew up with earthquakes, pandemics, and constant news about China. Maybe this is just another storm we will have to weather.”