Trump Is Treating Taiwan Like Collateral

The highlights this week: The United States pauses an arms deal with Taiwan, Russian President Vladimir Putin visits Beijing, and a journalist is charged with acting as an unregistered Chinese agent.

U.S. Halts Taiwan Arms Package

The United States is pausing a $14 billion arms deal with Taiwan, acting U.S. Navy Secretary Hung Cao said in a Senate hearing last week. The package is the latest casualty of U.S. President Donald Trump’s attempts to find a new equilibrium with China.

During his summit with Chinese President Xi Jinping earlier this month, Trump called the package a “negotiating chip,” brushing aside the long-standing practice of not discussing such sales with Beijing. China, meanwhile, is reportedly holding up a proposed visit by U.S. Undersecretary of Defense Elbridge Colby over the deal.

Delays in U.S. arms sales to Taiwan are common: The current backlog is nearly $30 billion, and China protests every package. But the weapons are only part of what matters. Steady bipartisan support reassures Taiwan and signals resolve to China. Trump’s casual treatment of the deal suggests that Taiwan’s future could be easily traded away to serve interests he deems more important.

At the same time, Trump has floated the idea of direct talks with Taiwan’s president, a gesture that previous administrations avoided. It is possible that the president was bloviating and did not understand the implications of such an offer, as when he echoed Xi’s language on Taiwan.

Other Trump administration officials have been similarly inconsistent, swinging between softening the U.S. National Security Strategy’s language on China and removing a fact sheet’s reference to U.S. opposition to Taiwanese independence. In the course of a year, Trump himself has gone from attempting a trade war to sucking up to Xi.

As I’ve written before, structural pressures make it difficult for Trump to fully abandon the possibility of defending Taiwan. But every episode like this weakens Taiwan’s confidence in the United States and increases its temptation to accommodate China.

It also strengthens the belief among hard-liners in Beijing that the United States is a paper tiger that will back away from a real conflict. That is a dangerous assumption, because the United States is not a paper tiger; it is a volatile superpower whose reaction to Chinese aggression could spiral into a major war.

Under a normal U.S. administration, there would be serious debate around arms sales to Taiwan. For instance, is the balance of weaponry right, or should Taiwan focus more on asymmetric capabilities such as mass drone warfare? Moreover, do the sales discourage Taiwan from much-needed military reforms?

But as long as U.S. policy is driven by Trump’s impulses, those questions are beside the point. Trump’s apparent willingness to sell out Taiwan has spurred a new round of rationalization from China hawks in the administration. Cao, who has positioned himself as a staunch anti-communist, blamed the delay on needing to restock munitions depleted in Iran.

In private, some hawks insist that the capture of former Venezuelan President Nicolás Maduro, the Iran war, and even a hypothetical invasion of Cuba are part of a grand strategy aimed at eroding Chinese power. But there is no grand plan here, and as U.S. failure in Iran becomes harder to deny, that argument will likely give way to a search for a scapegoat.

For its part, China could interpret such an outcome as a sign that the United States would back down in a Taiwan crisis—or as a reminder that overwhelming military advantages do not necessarily guarantee victory against smaller states.

What We’re Following

Putin’s visit. Russian President Vladimir Putin’s travels to Beijing last week generated more noise than substance. The China-Russia alliance of convenience is well established, but Beijing has shown little interest in doing Moscow meaningful favors, particularly on the economic front. Instead, China has taken advantage of Russia’s dependence during the war in Ukraine to secure deals on its terms.

Notably, Putin’s visit did not produce an agreement on the long-delayed Power of Siberia 2 pipeline, a project first proposed in 2006 that would send natural gas from Russia’s Altai region to northeastern China. Though Beijing would benefit from the additional supply to heat the frigid region, its green energy successes mean it can wait until Moscow accepts its preferred terms.

Chinese espionage case. An American journalist and son of a prominent Texan Republican, Thomas Pauken II, has been charged with acting as an unregistered foreign agent for China. Two aspects of the case are particularly revealing.

First, as in many instances of Chinese espionage, the information allegedly passed to Beijing appears to be trivial—nothing that couldn’t have been learned by reading the newspaper. Because China’s espionage system is so sprawling and messy, it expends a lot of time and money collecting low-value information.

Second, Pauken told the FBI that the Chinese were “obsessed” with attaining information on his father. That points to an undercovered aspect of Chinese spying: It often targets the family members of U.S. politicians, hoping for leverage.

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Tech and Business

Government spending down. China’s public spending fell sharply in April, declining by 7.3 percent compared to the previous year. That is not a great sign for the economy, especially since consumers aren’t spending either. China has felt the effects of the Iran war, though less than its more vulnerable neighbors.

However, another factor may be at work: Xi’s intensified anti-corruption campaign and political purges. Bribery is the oil that greases the wheels of Chinese local government—what political scientist Andrew Wedeman has dubbed “developmental corruption.”

Combined with officials’ fear of backing the wrong project and attracting political scrutiny, it makes sense that messaging from the top might freeze or reduce spending throughout the system.

AI price war? Chinese artificial intelligence firm DeepSeek has cut prices for its flagship model by 75 percent—bringing them to roughly one-tenth of the cost of U.S.-based OpenAI and well below its nearest Chinese competitors. Rival firm Xiaomi responded with a price cut of up to 99 percent. China now appears headed for the kind of brutal AI price war it has seen in other boom industries, such as electric vehicles.

Many firms will likely go under, and the ones that survive will become de facto national champions. DeepSeek, incubated in a private firm, is already receiving significant state backing. But DeepSeek’s price drop, however unsustainable, may also be an opportunity for China. As the costs and limits of AI become clearer, U.S. companies are having to raise prices even higher.