As occurred in the Middle East, where the United States has ended up distrusted by almost all the parties, the same situation has arisen in the China-Taiwan-US triangle.
It is no secret that the People's Republic of China has been lavishly modernizing its armed forces and particularly those areas that project China into the status of a regional power with amphibious capabilities.
To counter this buildup, the Republic of China (Taiwan) has asked for 66 F-16 C/D fighters. That represents an improvement in terms of weaponry and radar capability over the F-16 A/B fighters currently in the service of its air force.
As the People's Republic of China still regards Taiwan as a breakaway province, it opposes any arms sales to Taipei. In an attempted compromise, trying to please all sides, Obama has rejected Taiwan's request but is offering upgrade kits for the older model plane.
It didn't work.
Beijing has condemned the more modest sale as a gross intervention in Chinese internal affairs and a blow to China's core interests. It argues that if the United States was truly interested in preserving stability in the Straits of Formosa, it would not be selling arms at all. China even threatens retaliation against US economic interests.
The current government of Taiwan is headed by the Guomindang (Nationalist) Party, descended from the party that ruled China till the Chinese Civil War resulted in the victory of the Chinese Communist Party in 1949 and the breakaway occurred. What the Nationalist party and the Communist Party have in common is their belief in one China as opposed to a two China policy. Both believe that Taiwan is part of China.
This has promoted stable relations between Taiwan and China and improved trade relations. However the Nationalist Party government of President Ma Ying-jeou needed the arms deal as a sign that it was preserving the island's ability to withstand a Chinese assault and takeover.
Washington, by rejecting Taiwan's request, was embarrassing president Ma precisely during the run-up to the 2012 election. Realizing the problem, an anonymous administration official relayed to the Financial Times the administration's negative appraisal of his rivals, the Democratic Progressive Party (DPP) Tsai Ing-wen. “She left us with distinct doubts about whether she is both willing and able to continue the stability in cross-Strait relations the region has enjoyed in recent years,”
The Democratic Progressive Party is in favor of a two China policy that would rule out unification with China irrespective of the regime in Beijing. When the DPP was in power tensions increased as Beijing threatened retaliation if Taiwan declared independence.
Therefore, everybody winds up displeased at Obama's no-policy policy:
Beijing is angry about any arms sales to Taiwan; the Nationalist Party is angry that the arms sale proposal was rejected; the Democratic Progressive Party is upset about crude American interference in the elections of a friendly country.
Taiwan's supporters in the United States are angry over what they regard as appeasement of China.