They calculate the damage that an armed conflict in Taiwan could cause to the world economy

Armed confrontation or blockade of Taiwan could hit semiconductor supplies and trigger shipping disruptions in the region, trade sanctions and disruptions in financial markets.

If a conflict broke out in Taiwan in the form of a direct armed confrontation with mainland China, the world community would suffer a loss of $10 trillion, equivalent to approximately 10% of global GDP, Bloomberg predicts.

The escalation between the authorities of both parties can erupt in two scenarios, Bloomberg experts believe. The first would be a military conflict, in which non-regional actors, such as the US, participate, and the second, a blockade that isolates Taiwan. In both cases, the conflict would hit the supply of semiconductors and trigger disruptions to maritime transport in the region, trade sanctions and disruptions in financial markets.

The significant economic losses that different countries would suffer are attributed to the importance of semiconductors in modern industry and Taiwan's high share in their production. Consequently, both in the event of an armed confrontation or a blockade, the island will no longer be able to supply semiconductors to the market, which will cause a shortage.

Losses by country

According to global risks modeled by industry experts, a conflict in Taiwan could lead to more losses for the global economy than other conflicts in the world. In the event of hostilities, Taiwan would suffer the greatest damage, as its economy would be "destroyed" with a 40% decline in GDP. China, for its part, would face sanctions, experience a shortage of semiconductors, which in turn would have a negative impact on the industry, causing a 16.7% deterioration in its GDP.

Other countries that would suffer serious decreases in their GDP could be South Korea, where the economic indicator would fall by 23.3%, and the countries of Southeast Asia, where a drop of 20% would be recorded. The US economy would also be affected by the consequences of the possible conflict, especially due to the interruption of global supply chains, mainly for semiconductors manufactured in Taiwan, which according to forecasts would see its GDP fall by 6.7%.

Losses in the event of a blockade would be smaller and are explained by lower disruptions in the financial market and smaller-scale sanctions. Thus, in one year, Taiwan's GDP would decrease by 12.2%, while the same indicator for China would fall by 8.9%, for the US by 3.3% and for the world by 5%.

The outlet reports that many companies and countries are preparing in advance for a possible escalation, in an effort to minimize possible losses and reduce their own risks. Thus, a China expert at the Center for Strategic and International Studies, Jude Blanchette, noted that interest in a crisis in Taiwan among the multinational companies he advises has "skyrocketed" and currently covers 95% of discussions.

Damage that an armed conflict in Taiwan could cause to the world economy Image source: Bloomberg.com