The newly elected president of Taiwan will confront a parliament divided along party lines. This is significant because it may hinder the president's ability to pass legislation and implement policies.

• On Saturday, Lai Ching-te of the Democratic Progressive Party won Taiwan's 2024 presidential election with 40% of the vote, while the ruling party lost its parliamentary majority.
• The Kuomintang party has one more seat than the DPP party, but no party has an outright majority, according to Kuomintang.
• Lai has vowed to seek agreement, which could temper some of his political plans.
• Despite losing the presidential election, Ko Wen-je's Taiwan People's Party still holds eight seats, giving it the potential to be a decisive partner in any coalition.

Taiwan's president-elect Lai Ching-te will have a split parliament that will likely moderate his policy agenda, with the Taiwan People's Party holding eight seats and being the king maker since neither of the two major parties won an outright majority in the 113-seat Legislative Yuan.

On Saturday, the presidential race was a three-way contest between candidates from the ruling Democratic Progressive Party, the main opposition party Kuomintang, and the smaller Taiwan People's Party.

The KMT won 52 seats in the legislature, one more than the DPP, and Han Kuo-yu could be the party's choice for Speaker upon his return to Taiwan's parliament.

If the KMT forms a coalition with TPP, Han's anger may be softened by the possibility of working with its potential partner.

On Saturday, Lai won the presidential election with 40% of the popular vote, but his DPP lost 10 seats in Taiwan's parliament, resulting in a loss of its majority.

In a post-election press conference, Lai vowed to remain open-minded in his leadership and to work towards building consensus in a divided legislature.

If the KMT fails to secure a legislative majority, they will need the support of the TPP to form a coalition, and if they become too inflexible and obstruct the Lai administration's plans, they may struggle to maintain that alliance, according to Sara Newland, an assistant professor at Smith College who specializes in local politics in China and Taiwan.

The TPP's policy positions are unstable, so they could cooperate with either the DPP or the KMT on many issues. However, given their critiques of the major parties, it is not in the TPP's interest to be part of a coalition that makes the legislative process grind to a halt, as this would look hypocritical.

More restraint toward China

Lai may adopt a more moderate China policy, as recommended by the KMT and TPP, despite Beijing's expected increase in pressure on Taiwan's government after his inauguration in May. The new parliament will begin its term next month.

Gabriel Wildau, Teneo's managing director for political risk in China, wrote in a client's note that Lai did not use provocative pro-independence rhetoric during the campaign and our base case is that his administration will maintain continuity with Tsai, who utilized anti-mainland sentiment while avoiding overt provocations.

Beijing will closely monitor Lai's inauguration speech and may respond with military exercises, new tariffs, or sanctions against Taiwanese companies that support the DPP.

Beijing has consistently portrayed Lai as a "determined advocate for Taiwan independence" and a "threatening separatist," presenting the election as a binary decision between "peace and war, prosperity and decline."

Since Tsai Ing-wen assumed office in 2016, the Chinese Communist Party has refused to engage with her. This is because Tsai has served the maximum two presidential terms and did not stand for re-election.

Since the Kuomintang fled to Taiwan following its defeat in the Chinese civil war in 1949, China has never renounced its claim over the island, which has been self-governing ever since.

The DPP does not acknowledge the "1992 Consensus" and challenges the unspoken "one China" agreement between the KMT government and CCP officials, which Beijing uses as the foundation for cross-Straits engagement.

Lai stated on Saturday that he is dedicated to maintaining peace in the Taiwan Straits and is open to resuming negotiations based on "parity and dignity" while also emphasizing his determination to protect Taiwan from threats and intimidation from China.

Consensus or gridlock?

During a post-election press conference on Saturday, Lai pledged to establish a new political climate characterized by communication, consultation, participation, and cooperation in the upcoming legislature.

Timothy S. Rich, a professor in political science at Western Kentucky University, stated that Lai's statements about consensus-building are likely not only due to winning only 40% of the vote and wanting to ease concerns about relations with China, but also because of practical considerations.

The election of Ko Wen-je as the Taiwan People's Party's presidential candidate has disrupted the traditional DPP and KMT dominance. This is partly due to the growing frustration among Taiwan's youth, who believe that the ruling DPP does not prioritize their immediate economic concerns.

The split legislature will make it difficult for the Lai administration to pass much of his agenda unless he either cooperates with the TPP or focuses on areas of broader consensus. The TPP has the power to either support or hinder Lai's legislative aspirations.

Lai emphasized the need to address the financial sustainability of Taiwan's labor and health insurance, as well as the island's energy transition, in order to build consensus.

The president-elect stated that he would appoint the most skilled individuals, regardless of political affiliations, in the spirit of a democratic alliance.

CNBC reported that Wei-Ting Yen, an assistant professor in government at Franklin and Marshall College, stated that the potential negative impact of the situation may not harm Taiwan's democracy.

Lai will be constrained to be more moderate as he will have to reach consensus first to secure his policy bills in a democratic system.