How an Invasion of Taiwan Could Impact the World Economy

If you think an invasion of Taiwan by China wouldn’t affect the US, think again! Each of us will be severely impacted if such an event happened. It would have significant economic implications, not just for the region but also for the world economy. Taiwan is an important hub for global technology manufacturing, and a conflict in the region would disrupt global supply chains well beyond the technology sector. 

Firstly, an invasion of Taiwan would lead to the closure of many Taiwanese businesses and factories, leading to a significant disruption in the global supply chain of electronic components. Taiwan is a major producer of semiconductors, and the loss of production capacity would have severe consequences for global technology manufacturers. This would lead to a shortage of critical components, causing delays in production, higher prices for consumers, and even the suspension of some product lines.  It’s not just the direct effects either; the invasion of Ukraine drove the price of wheat up which drove the price of meats even if the meat was raised in the US.  We live in a global economy and can no longer afford to think with a national mindset.

Secondly, the global stock market would be impacted by a war in Taiwan. The technology sector is a significant driver of economic growth and market performance. A significant portion of technology stocks are dependent on production and components sourced from Taiwan. Any disruption to the production or supply chain would lead to a sell-off of technology stocks, causing a significant downturn in global markets.

Thirdly, an invasion of Taiwan could lead to a global recession. The manufacturing and supply chain disruption would cause a significant reduction in demand for goods and services, leading to a contraction of the global economy. This would lead to job losses, reduced economic activity, and a decrease in the standard of living.

Fourthly, an invasion of Taiwan would lead to a shift in global trade dynamics. Taiwan is a significant trading partner for many countries, including the United States, Japan, and many countries in Southeast Asia. The loss of Taiwan as a trading partner would force countries to seek new suppliers and markets, leading to a significant reshuffling of global trade. Not to mention China gaining huge production capacity in technology.

Finally, an invasion of Taiwan would lead to increased military spending by many countries, causing significant budget deficits. Many countries would need to increase their military spending to counter the Chinese threat, leading to higher taxes and a reduction in government spending on social services and infrastructure.

All told, an invasion of Taiwan would have significant economic impacts on the region and the global economy. It would lead to the disruption of the global supply chain, a downturn in global markets, a global recession, a shift in global trade dynamics, and increased military spending. It is essential that China be convinced that an invasion will not be quick or easy.  If US policy swings away from supporting Ukraine’s defense against Russia, China will learn that the US will rattle swords for a year but soon move on to another TikTok trend. 

Paul Bergman runs a business strategy and cybersecurity consulting company in San Diego. He writes on cybersecurity and board management for both corporate and nonprofit boards.

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