A Bloomberg report estimates that the global economy would lose $10 trillion if the Chinese regime wages war on Taiwan.
The $10 trillion calculation is based on two modeled scenarios. One, the United States gets caught up in the war. Two, Beijing blockades Taiwan to cut it off from global trade.
In either case, trade would plunge, the semiconductor supply chain would take a hit, shipping lanes would get disrupted, and the United States could slap sanctions and tariffs on China.
The world’s two largest economies—the United States and China—would both take blows to GDP. For America, Bloomberg estimates an over 6 percent drop. For Taiwan, a whopping 40 percent.
“A direct conflict or even indirect conflict between China and the United States would be detrimental for the entire globe economically.”
This estimate comes at a special time.
Taiwan is set to elect a new president and parliament and the vote will decide how the island handles its relationship with the Chinese Communist Party.
Any conflict between China and Taiwan could cost the United States dearly.
Mike Gallagher—chairman of the House Select Committee on China—highlighted a wargame simulation last year.
“Equity markets would drop precipitously as global shipping lanes closed, shipping insurance premiums skyrocketed, supply chains broke down, and the specter of global conflict would grow, causing further chaos to the global financial system. Americans would likely see their pensions shrink and their bank accounts hemorrhage cash,” Mr. Gallagher said.
The Committee also asked the Federal Reserve to stress test U.S. banks, to see whether they could endure the cost of suddenly losing the Chinese market.
Americans had invested over a trillion dollars in Chinese stocks and bonds as of 2020.
Taiwan is also important for America in terms of microchips.
What’s more, the island sits next to a major shipping lane and almost half of the global shipping containers pass through the route.