By Trevor Hunnicutt, Ben Blanchard and Yimou Lee WASHINGTON/TAIPEI (Reuters) -U.S. President Donald Trump's administration is negotiating a deal that could commit Taiwan to fresh investment and training of U.

For proof that an economy can thrive even under constant military threats from a powerful neighbor and amid US President Donald Trump’s sweeping global tariffs, look no further than Taiwan.

The budget will be allocated over eight years, from 2026 to 2033, and comes after President Lai Ching-te pledged to raise defense spending to 5% of the island's GDP, as part of his strategy amid China's threats of invasion.

Taiwan has sharply raised its economic growth forecast for 2025 to 7.37 per cent, the fastest rate in 15 years, as roaring demand for artificial intelligence continues to boost its electronics exports.

The budget will be allocated over eight years as part of the island's strategy to deter a China's threats of invasion

The remarks come amid the two countries’ worst diplomatic crisis in years, after the Japanese prime minister said a Chinese attack on Taiwan could trigger a military response from Tokyo.

Gross domestic product is expected to expand 3.54% in 2026, according to a statement from the statistics bureau in Taipei on Friday. That compares with the previous forecast of 2.81% back in August. Exports were projected to grow 6.32% for the year, versus an earlier call of 2.19%.

Japan, a U.S. ally that had angered China on Taiwan, found the message worrying.

Largest special defence budget in 30 years aims to persuade Donald Trump of willingness to pay more for security

China’s campaign to deprive Taiwan of diplomatic recognition risks a rare reversal this month when voters in Honduras choose their next president.

The last publicised strait transit by New Zealand's navy, accompanied by an Australian navy ship, took place in September last year. That was the first time a New Zealand naval ship had passed through the strait since 2017.