As the United States scrambles to decouple its defense supply chains from China, one area has proven especially difficult to sever: unmanned aerial vehicle (UAV) production. With China dominating the global drone market through aggressive subsidization and near-total price control, the Pentagon has struggled to secure reliable alternatives. But a promising path is emerging from an unlikely yet strategically critical partner—Taiwan.
Industrial collaboration between U.S. and Taiwanese drone manufacturers offers a rare opportunity to challenge China’s dominance while strengthening American defense resilience. However, if this cooperation is to reach its full potential, Washington must remove trade barriers—particularly tariffs—and actively incentivize bilateral investment and federal procurement.
The past decade has seen drones rise from military novelties to centerpieces of modern warfare. The war in Ukraine has demonstrated how pivotal drones have become in surveillance, precision strikes, and battlefield logistics. Unsurprisingly, this surge in demand has not gone unnoticed by China.
Chinese state-owned enterprise DJI now commands nearly 90 percent of the global commercial drone market. Backed by deep state subsidies, DJI and other firms produce drones at costs 50 to 75 percent lower than their Western competitors. These low prices, while attractive to many nations, come with a price: dependency on Chinese technology.
Even frontline nations like Ukraine, despite concerns over cyber and geospatial data vulnerabilities, have found themselves reliant on Chinese drones due to a lack of cost-effective alternatives. This growing dependency poses a significant threat to U.S. national security, particularly as evidence mounts of Chinese drones being used to collect sensitive operational data.
Taiwan’s burgeoning drone sector offers a promising counterweight. Unlike most countries, Taiwan not only seeks to decouple from China—it actively builds its industrial capacity with that aim in mind. Moreover, it has a proven track record of scaling high-tech manufacturing quickly and reliably.
Taiwan’s National Chung-Shan Institute of Science and Technology (NCSIST) provides a compelling example. In 2022, NCSIST achieved its target of producing over 1,000 missiles annually—two years ahead of schedule. That kind of rapid expansion is exactly what the U.S. defense sector, often mired in red tape and budget overruns, sorely lacks.
Now, Taiwan is pivoting toward drone production. In March, Taiwan’s China Shipbuilding Corporation (CSBC) unveiled the Endeavor Manta—a sea drone built with zero Chinese components, designed for military use in the contested waters of the Taiwan Strait. Developed and manufactured in under a year, the Manta showcases Taiwan’s engineering prowess and capacity to produce strategic technologies on tight timelines.
Four Taiwanese drone companies have already passed the Ministry of National Defense’s (MND) rigorous standards for defense contracts, demonstrating the sector’s growing maturity.
Taiwan’s new president, Lai Ching-te, has made drone production a national priority. Declaring his vision to turn Taiwan into the “Asian hub of UAV supply chains for global democracies,” Lai has committed hundreds of millions of dollars to procurement and R&D.
Taiwan aims to produce 15,000 drones per month by 2028—triple the output from 2024. But these ambitions face a critical roadblock: limited domestic demand. Even with strong military and government orders, Taiwanese firms can’t achieve economies of scale without external markets.
Enter the United States. American agencies—from the Department of Homeland Security to state-level fire and rescue departments—have a growing appetite for secure, China-free drones. Taiwan can meet this demand with products only 25 percent more expensive than Chinese alternatives—a manageable premium for secure, high-quality systems.
More importantly, U.S. investment would help lower costs further by enabling mass production, boosting Taiwan’s competitiveness on the global stage. Such investments wouldn’t be one-sided. While Taiwan excels in manufacturing, the U.S. remains dominant in certain enabling technologies—like advanced optics and system integration—needed to build high-end UAVs.
According to Su Tzu-yun, a senior analyst at Taiwan’s Institute for National Defense and Security Research (INDSR), Taiwanese firms often develop drone platforms before clearly defining their mission requirements. American partners could help shape mission-driven, integrated designs from the outset, enhancing both operational utility and market fit.
There’s already movement toward bilateral integration. Last year, Taiwanese drone maker Thunder Tiger signed a production-sharing agreement with Virginia-based RapidFlight, signaling the start of reciprocal manufacturing in both countries. Thunder Tiger also announced plans to manufacture key components in California.
These steps are part of a broader strategy to align with the Trump administration’s “America First” economic vision by investing in domestic U.S. industry. Such moves not only make Taiwanese firms politically palatable in Washington—they also help build indigenous U.S. drone capacity, a long-sought goal of the Department of Defense.
In September 2024, delegations from the U.S. Department of Commerce and Department of Defense met with over two dozen Taiwanese firms in Taipei to discuss formalizing production ties. The aim: build a “non-red” (non-China) UAV supply chain that can supply both nations in peacetime and scale rapidly in wartime.
That initiative continues under the second Trump administration. In March 2025, AIT Director Raymond Greene promoted drone industry cooperation in an interview with Liberty Times. Days later, Taiwan’s defense minister confirmed that joint drone production remains a key area of strategic interest.
While federal coordination is vital, local governments are already leading the way. In December 2024, Oklahoma Governor Kevin Stitt visited President Lai in Taipei and signed a memorandum of understanding for UAV investment.
Meanwhile, local U.S. emergency services are turning to Taiwan. Several counties have inked contracts with Taiwanese firm Coretronic for search and rescue drones, citing quality, affordability, and trust.
Coretronic is now aiming higher—pursuing contracts with U.S. Customs and Border Protection (CBP) to supply drones for border patrol. Federal agencies such as CBP, the Federal Emergency Management Agency (FEMA), and even the Coast Guard represent a vast untapped customer base. Orders from these entities would both enhance homeland security and fuel Taiwan’s drone output.
Despite all the progress, a major policy hurdle threatens to stifle momentum: tariffs.
Under a 2018 trade policy carried over into the current administration, the U.S. is considering a 32 percent tariff on various Taiwanese exports, including drones and components. While microchips are currently exempt, drones are not.
The threat of these tariffs—whether realized or not—chills American investment and slows joint manufacturing plans. If the U.S. is serious about decoupling from China and securing its drone supply chain, exempting drones and their components from these tariffs should be a priority.
Doing so would send a clear signal to investors, manufacturers, and strategic planners alike that U.S.-Taiwan drone integration is not only encouraged—it is indispensable.
Industrial integration between U.S. and Taiwanese drone producers isn’t just about defense procurement or supply chains—it’s about deterrence. By embedding American economic interests deeper into Taiwan, the U.S. raises the stakes for China should it contemplate aggression.
The more the U.S. is invested in Taiwan’s economic and industrial security, the more intertwined the fates of the two democracies become. This concept is not new: the Trump administration’s mineral extraction deal with Ukraine in 2023 served a similar dual-purpose—economic support with strategic implications.
A robust, China-free drone alliance led by the U.S. and Taiwan would also strengthen the global democratic bloc. Other nations wary of China’s rise would have a viable, trusted source for secure drone systems—a key tool in both civilian and military operations.
If the U.S. wants to make this vision a reality, three immediate policy steps are needed:
- Exempt Taiwanese drones and components from tariffs
Remove trade obstacles that disincentivize cooperation and weaken domestic procurement options.
- Promote joint production through federal grants and procurement
Use the Defense Production Act or similar frameworks to fund collaborative projects, particularly those involving component manufacturing on U.S. soil.
- Place federal orders with Taiwanese producers
Encourage agencies like DHS, FEMA, and CBP to prioritize Taiwanese drones for non-military applications, from disaster relief to border surveillance.
The clock is ticking. China’s drone dominance is growing, and its foothold in global infrastructure is tightening. U.S.-Taiwan drone cooperation presents a chance to build a new model: one where democracies secure critical technologies together and safeguard one another through shared industry, not just shared values.
By removing tariffs, expanding federal contracts, and investing in joint production, the U.S. can fortify its defense base, boost a key partner, and deliver a strategic setback to Chinese economic coercion.
