Why This Small Island Chain Could Be The First Domino In A Taiwan War

A Chinese first strike against Taiwan could place American forces across the western Pacific at risk while threatening semiconductor supply chains underpinning large portions of the U.S. economy.

Taiwan’s Penghu Islands, a strategically positioned archipelago roughly 30 miles West of Taiwan’s main island, could be targeted during the opening wave of a Chinese invasion as the islands could serve as a defensive stronghold for Taiwanese forces, Reuters reported Friday, citing senior Taiwanese security officials and military experts. A war game involving retired American, Taiwanese and Japanese military officials saw Penghu fall just one day after China launched surprise long-range attacks against military and infrastructure targets across Taiwan, Reuters reported.

“If China were to attack Taiwan, it could happen unexpectedly and impose an immediate decision point on the United States,” Chris Miller, a professor of international history at Tufts University, told the Daily Caller News Foundation. “The economic costs of any attack would be catastrophic, imposing trillions of dollars in losses on the world economy and disruptions to manufacturing and supply chains that could be more dramatic than the COVID-19 pandemic or the Great Depression.”

The potential danger would extend far beyond Taiwan itself. China’s rapidly expanding missile force is capable of targeting regional air bases, logistics facilities, ports and communications infrastructure, while Chinese ballistic and cruise missiles can reach American bases on Guam, according to the Pentagon’s 2024 China Military Power Report.

“Xi Jinping has assured President Trump that China will not invade Taiwan, guaranteeing a free and open Indo-Pacific for the rest of the President’s term in office,” a senior administration official told the DCNF.

“Some estimates suggest that a war over Taiwan would impact $2 trillion in economic activity, without even factoring in the military costs and likely sanctions.” Zack Cooper, a foreign policy analyst and senior fellow at the American Enterprise Institute, told the DCNF. “This would be a massive conflict that would derail the global economy for years.”

That exposure could complicate any U.S. attempt to intervene in a Taiwan conflict. American and allied bases, aircraft and surface ships operating across the first and second island chains are vulnerable to Chinese missile and drone attacks, while U.S. forces maintain significant forward deployments in Japan and Guam, according to a May Center for Strategic and International Studies (CSIS) analysis.

China would also risk severe economic damage from an attack on Taiwan, while any attempt to seize TSMC could be undermined by the chipmaker’s reliance on specialized equipment and inputs from the U.S., Japan and other countries, according to the U.S.-China Economic and Security Review Commission.

A war could also expose one of China’s biggest economic vulnerabilities: its reliance on imported energy moving by sea. China imported a record 11.6 million barrels of crude oil per day in 2025, and nearly half of the crude passing through the strategically important Strait of Malacca during the first half of 2025 was destined for China, according to the U.S. Energy Information Administration.

That vulnerability is somewhat cushioned by China’s massive oil stockpiles. China entered the Iran War with the world’s largest estimated strategic oil inventories, which reached about 1.54 billion barrels in the first quarter before falling to roughly 1.49 billion barrels in the second quarter as disrupted Strait of Hormuz flows contributed to lower Chinese imports and inventory draws, according to the U.S. Energy Information Administration.

The United States could exploit that vulnerability by threatening to interdict China-bound energy shipments passing through the Strait of Malacca and nearby maritime chokepoints. Beijing has long worried an adversary could blockade its seaborne oil routes during a crisis, a vulnerability Chinese officials have described as the country’s “Malacca dilemma,” according to a U.S. Department of War assessment.

The Iran War has already shown how quickly an overseas conflict can reach Americans’ wallets. The national average for regular gasoline stood at roughly $2.94 per gallon shortly before the war began and climbed to about $4.52 by May 11, an increase of more than 50%, according to AAA.

The strain could quickly extend to American weapons inventories. U.S. forces exhausted some categories of long-range missiles during the first week of multiple simulated Taiwan conflicts, while Taiwan depleted its anti-ship cruise missile inventory in roughly the same amount of time, according to CSIS.

The Iran War is also weakening the U.S. military’s global strength by depleting munition stockpiles, shifting the balance of power in Asia.

The U.S. may have burned through nearly 67% of its prewar PAC-3 Patriot missile interceptor stockpiles, retaining as few as 759 out of the initial 2,330, according to a July 27 report from CSIS. It could take years to replenish these munitions, one analyst previously told the DCNF.

“It will vary by munition, but timeframes will be in the years, at least 5 if not up to 10,” Jennifer Kavanagh, senior fellow & director of Military Analysis at Defense Priorities, said.

Previous war games have shown the potentially enormous cost even in scenarios where China fails to conquer Taiwan. The U.S., Taiwan and Japan defeated a conventional Chinese amphibious invasion in most of 24 scenarios conducted by CSIS, but American forces lost dozens of ships, hundreds of aircraft and tens of thousands of service members in the simulations, according to a 2023 CSIS report.

“China would have to decide at the outset whether to strike US forces in the opening day of a conflict,” Cooper told the DCNF. “If they did, it would likely force the United States into a multi-year war. If China did not strike, it would leave the PLA open to massed strikes by US forces that could derail any Chinese operation. Neither option would be appealing to Beijing.”

President Donald Trump cast uncertainty over U.S. support for Taiwan following his May summit with Chinese President Xi Jinping in Beijing, telling Fox News that a delayed U.S. weapons package for Taiwan would depend on China and calling the arms sale a “very good negotiating chip.”

“I will say this: I’m not looking to have somebody go independent and, you know, we’re supposed to travel 9,500 miles to fight a war,” Trump said during a May 15 interview with Bret Baier on Fox News. “I’m not looking for that.”

Beyond the battlefield, a conflict could create immediate problems for the American economy because of U.S. dependence on foreign semiconductor production. The United States consumes roughly one-quarter of the world’s semiconductors but fully manufactures only about 10% of the chips it needs, leaving the country heavily dependent on foreign supply chains, according to a January White House proclamation citing Commerce Department findings.

Washington has already sought to reduce some of that exposure. Taiwanese semiconductor and technology companies committed to at least $250 billion in new U.S. investments under a January agreement, alongside at least $250 billion in Taiwanese credit guarantees intended to facilitate additional investment in American production, according to the Commerce Department.

Taiwanese semiconductor and technology companies, the centerpiece of the push, expects its second Arizona factory to begin high-volume production in 2027 and their third by the end of the decade, while several additional factories announced this year have no firm completion date, according to the Commerce Department.

The Pentagon has increasingly tied the military balance in the region directly to American economic interests. The Indo-Pacific is expected to account for more than half of the global economy, making Americans’ security and prosperity dependent on continued access to the region, according to the Pentagon’s 2026 National Defense Strategy.

“Sustaining and enhancing U.S. military deterrence of such an outcome is absolutely critical for U.S. security and prosperity, which is why it is so important that the United States properly invest in defense capabilities in the Indo-Pacific region,” Miller told the DCNF.