Crossroads of Commerce: How the Taiwan Strait Propels the Global Economy

Matthew P. Funaiole, Brian Hart, David Peng, Bonny Lin, and Jasper Verschuur

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Chinese leader Xi Jinping has made it unequivocally clear that the use of force remains an option for resolving Taiwan’s ambiguous political status, stoking fears about a possible invasion of the island.

But Beijing has a range of options short of invasion at its disposal. CSIS research suggests that less kinetic actions, such as a coast guard–led quarantine of Taiwan, are more likely in the short term than an amphibious assault on the island.

While lower in intensity, such contingencies could still threaten the trillions of dollars’ worth of trade that moves through the Taiwan Strait each year.

Taiwan produces over 90 percent of the most cutting-edge chips used in smartphones, data centers, and advanced military equipment. Disruptions to the supply of these technologies could wipe trillions of dollars from global GDP.

It is a critical hub for other goods as well. CSIS estimates that Taiwan’s ports handled approximately $586 billion worth of trade in 2022, including transshipments between other economies. Yet nearly all of this activity flowed through a handful of ports located as little as 100 miles from the Chinese mainland—leaving them uniquely vulnerable to Chinese provocations.