A war over Taiwan could deliver a $10 trillion shock to the world economy, per Bloomberg.
The potential conflict over Taiwan would carry an immense human and economic cost, estimated at approximately $10 trillion by Bloomberg Economics, equivalent to about 10% of global GDP.
This staggering figure surpasses the impacts of the war in Ukraine, the Covid pandemic, and the Global Financial Crisis. Factors such as China's increasing economic and military strength, Taiwan's growing national identity, and tense relations between Beijing and Washington create conditions that could lead to a crisis. While an imminent Chinese invasion is deemed unlikely, the upcoming Taiwan election on Jan. 13 adds a potential flashpoint.
Despite the absence of massing troops on the coast and reported military corruption in China, recent global conflicts like those in Ukraine and Gaza serve as reminders of how longstanding tensions can escalate into war. Various entities, from Wall Street investors to military planners and businesses reliant on Taiwan's semiconductor production, are already taking measures to hedge against potential risks. Taiwan is a key player in the global semiconductor industry, contributing significantly to the production of advanced logic semiconductors and various other chips. Sectors using chips as direct inputs contribute nearly $6 trillion, or 5.6% of global total value added. The market cap for the top 20 customers of Taiwan Semiconductor Manufacturing Co. stands at around $7.4 trillion, highlighting the strategic importance of the Taiwan Strait, one of the world's busiest shipping lanes.
