A China-Taiwan War Could Bring The Global Economy To Its Knees, Top Diplomat Warns

A war over Taiwan could unleash an economic shock greater than World War II by choking off one of the world’s busiest trade routes and crippling the semiconductor industry, a top U.S. diplomat in Taipei warned Wednesday.

Taiwan sits at the center of the global technology economy, producing roughly 60% of the world’s semiconductors and more than 90% of its most advanced chips, according to Taiwan’s Ministry of Foreign Affairs. The Taiwan Strait is also a commercial artery carrying more than $2.4 trillion in goods annually, meaning even a blockade short of a full-scale invasion could send economic shock waves around the world, according to the Center for Strategic and International Studies (CSIS).

“Beyond the human toll, any conflict across the Taiwan Strait would have a bigger impact on the global economy than the Second World War,” Raymond Greene, director of the American Institute in Taiwan and Washington’s de facto top envoy to the island, said at a defense forum in Taipei Wednesday, Reuters reported.

“With China substantially increasing its capabilities and seeking to rival that of the USA, and China under a cautious [leader] like in Xi Jinping, it will not resort to this unless Xi calculates that he will either force Taiwan to accept surrender terms without combat or win even if Taiwan receives US support and intervention,” Steve Tsang, professor of China studies and director of the SOAS China Institute at SOAS University of London, told the Daily Caller News Foundation. “The implication is that the U.S. will have to call on its allies if it wants to win.  Not only Japan and South Korea, and Australia, but the Western democracies more generally.”

The South Korean Embassy in Washington, the Japanese Embassy in Washington, Taiwan’s Ministry of Foreign Affairs, the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office did not respond to requests for comment.

The potential damage would extend far beyond Taiwan itself.

More than $2 trillion in economic activity could be directly exposed to disruption under a hypothetical Chinese blockade of Taiwan, even before accounting for sanctions, military escalation or broader knock-on effects, according to an analysis by the Rhodium Group, an independent research firm specializing in economics, energy and China.

Roughly $565 billion in Taiwanese value-added trade could be placed at high risk under such a blockade, while semiconductor shortages could force chip-dependent industries to forgo as much as $1.6 trillion in annual revenue, according to Rhodium Group.

“Kinetic action across the Taiwan Strait would immediately suspend and even destroy 60-70% of semiconductor production globally,” Victor Shih, professor and Ho Miu Lam Chair in China and Pacific Relations at the University of California, told the DCNF. “U.S. chip companies which heavily rely on Taiwan fabs would immediately see a suspension of cash flows. U.S. software and AI companies which use GPU and memory chips would see a curtailed ability to provide services to customers.”