TAIPEI (Taiwan News) — A Chinese invasion of Taiwan would cost the global economy US$10 trillion (NT$311 trillion), equivalent to 10% of global GDP, higher than the Ukraine war, COVID-19 pandemic, and the 2009 global financial crisis, according to a Bloomberg Economics estimate.
The media company simulated two scenarios: China invades Taiwan and draws the U.S. into a regional war, and China imposes a blockade and severs Taiwan's trade with the globe. It used models to predict the influence on GDP, taking into consideration hits to semiconductor supplies, regional shipping disruptions, trade sanctions and tariffs, and the effect on financial markets.
In the event war breaks out in the Taiwan Strait:
Taiwan's economy is expected to suffer a severe blow. Based on recent similar wars, Bloomberg Economics research estimates that Taiwan's GDP will plunge by 40% in the first year. Due to the concentration of Taiwan's population and industrial base along the coast, both the human and economic costs are anticipated to be high.
China's relations with major trading partners will be disrupted and it will be unable to obtain advanced semiconductors. As a result, its GDP is expected to suffer a 16.7% slide in the first year.
The U.S. GDP is expected to slump by 6.7% in the first year. Despite being far from the center of the conflict, the U.S. faces significant risks due to its reliance on the Asian electronic supply chain, particularly with companies like Apple Inc.
The world's GDP is projected to drop by 10.2% in the first year, with South Korea, Japan, and other East Asian economies suffering the greatest harm.
In the event China blockades Taiwan for one year:
As a small, open economy that thrives through trade, Taiwan is projected to experience a 12.2% plummet in GDP in the first year.
The GDP for China, the U.S., and the entire world is expected to fall by 8.9%, 3.3%, and 5%, respectively, in the first year.
According to Bloomberg Economics research, if a war breaks out in the Taiwan Strait, the potential global GDP losses could surpass those incurred by the 2020 COVID-19 pandemic, the 2009 global financial crisis, the 1991 Gulf War, the 2001 U.S. 9/11 terrorist attacks, and the 2023 Israel-Hamas war.
However, if Taiwan were to face a blockade, the resulting global GDP losses would fall somewhere between the levels observed during the global financial crisis and the Gulf War.