President Lai Ching-te’s government stands at a crossroads, facing unprecedented internal and external pressures. Amid a shifting global economy and rising domestic political turmoil, Lai’s administration must navigate a storm of economic, political, and environmental crises. This article will analyze how Lai Ching-te’s government is responding to these challenges, particularly in the areas of trade, politics, and climate change.

1. External Pressures and Economic Challenges

The first major external pressure facing Lai Ching-te’s government is related to changes in the global trade environment and Taiwan’s competitiveness within the global supply chain. As the U.S. trade war with China intensifies, Taiwan, as part of this global supply chain, is deeply impacted. In August 2025, trade tariffs between Taiwan and the U.S. were reduced from 32% to 20%. While this reduction has alleviated some pressure, it is still insufficient to remove Taiwan’s economic burdens. Key issues remain unresolved, especially whether Taiwan is willing to open its agricultural product market, eliminate tariffs, and permit investment into the U.S. These unresolved questions continue to create uncertainty for Taiwan’s economy, which could impact Taiwan’s internal and external political and economic stability.

It is noteworthy that the tariff issue between Taiwan and the U.S. is not limited to agricultural products but also involves Taiwan’s technology industry. According to current data, Taiwan’s technology products account for 68% of its exports to the U.S. These products include semiconductors, electronic components, computer equipment, communication devices, and more. Under the current trade negotiation framework, if the U.S. imposes temporary tariffs (excluding Section 232 technology industry tariffs), it could severely affect Taiwan’s technology product exports to the U.S., further intensifying Taiwan’s economic pressure. This additional tariff burden will significantly increase Taiwan’s difficulty in competing in the U.S. market, especially against competitors like Japan and South Korea, as Taiwan’s exports face a 20% tariff while those from Japan and South Korea are subject to only 15%.

In this context, the Taiwan dollar has appreciated by 12%. This change has significantly impacted Taiwan’s external exports, particularly in the manufacturing and agricultural product sectors. The appreciation of the Taiwan dollar has reduced Taiwan’s price competitiveness in international markets, weakening Taiwan’s position in the global market, which undoubtedly poses a threat to Taiwan’s long-term economic development.

The Lai Ching-te government must not only closely monitor the results of Taiwan-U.S. trade negotiations but also ensure that subsequent trade agreements with the U.S. address these key issues, particularly in the technology industry tariff and agricultural product opening fields. Taiwan must ensure that its economic interests are secured while avoiding being dragged into more complex international trade disputes. The government must also take urgent measures to maintain Taiwan’s stability and growth in the face of external economic pressures, minimizing the impact of tariffs and exchange rate fluctuations on its industries.

2. Domestic Political Challenges and Party Competition

In addition to external economic pressures, Lai Ching-te’s government also faces a complex domestic political landscape, particularly the pressures of maintaining party unity and navigating party competition. Taiwan’s political ecosystem is filled with uncertainty, especially as the ruling Democratic Progressive Party (DPP) failed to secure overwhelming victories in two major recall campaigns, revealing that voters are hesitant to alter the current composition of the Legislative Yuan.

On July 26, 2025, the major recall campaign resulted in a total failure, with 24 seats lost, and the upcoming 7-seat recall on August 23 faces even greater challenges. Although the Lai Ching-te government still maintains around 40% support, the failure of the recall reflects voter tolerance for the status quo, especially in the Legislative Yuan seats. Voters seem to have no strong desire to change the legislative landscape. However, this failure does not mean complete success for the Kuomintang (KMT) and the Taiwan People’s Party (TPP); rather, it exposes voters’ reliance on opposition parties to supervise the ruling party. Voters tend to favor maintaining the status quo and rely on opposition parties to balance and monitor the ruling party rather than push for more radical change in the political structure.

The complexity of domestic politics is also reflected in the power struggles within political parties. The younger generation of the KMT, though hopeful, has yet to shake up the party’s traditional factions and still depends on the old guard and local factional support in elections. Meanwhile, although the DPP lost in the recall elections, it attracted more young leaders to join the party, revitalizing it internally. The Taiwan People’s Party may face the problem of losing political relevance in the future, especially if it fails to integrate resources effectively, which could lead to the party losing its foothold in the political landscape.

How Lai Ching-te’s government navigates this complex party competition, maintaining internal unity, and coordinating various interests to ensure policy implementation will be a major challenge. Especially with the upcoming local elections, attracting young voters while balancing the interests of different factions within the party will directly determine the DPP’s performance in these elections.

3. Climate Change and Green Governance Pressures

Climate change presents significant challenges for Lai Ching-te’s green governance, especially in the face of frequent natural disasters, which have tested the government’s capacity for effective response and governance. The recent heavy rains in central and southern Taiwan further highlight the profound impact of climate change on Taiwan’s society, particularly in the green-leaning areas of southern Taiwan, where these disasters have placed enormous political pressure on local governments. In the past, Lai Ching-te’s government won broad support in southern Taiwan through green policies, but as natural disasters linked to climate change increase in frequency and severity, local governments are facing severe challenges in governance, especially in disaster recovery and emergency response.

However, the complexity of the problem goes far beyond this. As climate change exacerbates, southern Taiwan and other disaster-stricken areas may face significant political repercussions in the upcoming 2026 local elections. If the DPP fails to effectively manage the aftermath of climate disasters, it could lead to growing dissatisfaction among voters, which could affect the party’s election prospects in the southern counties. The DPP needs to closely monitor these disaster-stricken regions and ensure that recovery work proceeds in a timely manner; otherwise, it could face significant challenges in the southern elections.

Additionally, the Lai Ching-te government must address international pressures, particularly from the United States, regarding agricultural policy. The U.S. may demand that Taiwan further open its agricultural product market. For Lai Ching-te’s government, this presents both an economic opportunity and a political risk. If the DPP compromises on agricultural policy, it could lose support from farmers, especially in southern Taiwan’s agricultural counties. These regions have long supported the DPP, but if the government fails to protect farmers’ interests, the KMT could seize the opportunity to strengthen its influence in the agricultural product distribution system, regaining support from these voters. By expanding resources and building broader support networks, the KMT could regain control of southern Taiwan’s seats in future elections.

Therefore, Lai Ching-te’s government must take urgent measures to address this series of challenges. First, it must strengthen its response to climate disasters and disaster recovery efforts, not only to alleviate voter dissatisfaction but also to maintain the DPP’s electoral advantages in southern Taiwan. Second, the government needs to make cautious decisions regarding the opening of agricultural markets, ensuring that farmers’ interests are not harmed and effectively communicating these policies to avoid losing key voters’ support during the election period. Only by making timely adjustments in these areas can the DPP avoid the dilemma of fighting a two-front battle—losing both national and local elections.

Conclusion and Outlook

Lai Ching-te’s government faces severe political, economic, and social challenges. External economic pressures require the government to enhance economic ties with global partners to ensure Taiwan’s competitiveness in the international economy; internal political challenges, especially in maintaining party unity and voter support, require the government to be more flexible in managing internal divisions, relieving recall pressures, and promoting cooperation among different factions. At the same time, climate change and the resulting natural disasters present huge governance challenges for the government, particularly in securing support from southern Taiwan’s voters, with the government’s response and leadership directly impacting election prospects.

In the coming months, Lai Ching-te’s government will face a daunting path, navigating a complex political and economic landscape. How well the government handles these challenges—particularly in disaster recovery, party unity, and international trade negotiations—will determine the future political landscape of Taiwan. If these issues are not effectively addressed, the DPP will face failure in local elections and may lose control of both the national and local legislatures, ultimately leading to a crisis in the DPP’s long-term governance. Lai Ching-te’s government must adopt a more nuanced and forward-looking strategy to ensure Taiwan’s stability and maintain public trust in the government, finding a way through this complex web of challenges.