Taiwan War Would Cost $2 Trillion, Former President Warns

Tsai Ying-wen, who led Taiwan as president until 2024, sat down with the French magazine L'Express to make a stark calculation: a war between China and Taiwan would cost the world two trillion dollars. The figure comes from the Rhodium Group, an American research organization, and it reflects something far larger than the military cost of conflict itself. It is the price of disruption—the fracturing of supply chains, the halting of innovation, the seizing up of global commerce that depends on a single island's factories.

Taiwan's economic weight in the world is almost impossible to overstate. The island manufactures roughly 70 percent of the semiconductors the world relies on and 95 percent of the most advanced chips. These are not luxury goods. They are the foundation of artificial intelligence, the technology that has begun to reshape every sector of the global economy. When Tsai speaks of a conflict in the Taiwan Strait, she is not describing a regional problem. She is describing a wound to the nervous system of modern civilization.

The comparison to Ukraine is instructive, and it is why Tsai made it. Russia's economy is large, but it operates at the margins of global production. China does not. Over the past three decades, China has woven itself into the fabric of world manufacturing and trade so thoroughly that a major disruption would ripple outward in ways that would take years to repair. A long crisis in the Strait would damage commerce, fracture production chains, slow global economic growth, and set back the development of artificial intelligence by years. The cost would not be measured only in dollars but in technological progress foregone, in innovations never built, in capabilities never developed.

This warning comes as the military pressure on Taiwan has intensified. Over the last three years, China's People's Liberation Army has conducted large-scale encircling drills around the island, flown fighter jets in repeated sorties, staged live-fire exercises, and engaged in what diplomats call gray-zone maneuvers—actions designed to intimidate without crossing into open war. Beijing has said repeatedly that reunification with Taiwan is inevitable, a matter of time. The question is not whether it will happen, from China's perspective, but how.

Tsai's concern extends beyond the economic calculus. She noted that countries across East and Northeast Asia are watching closely, fearful of what a conflict would mean for regional security. Taiwan is not an isolated problem. It sits at the center of a security architecture that has underpinned peace and stability in the Indo-Pacific for decades. A crisis there would reverberate through Japan, South Korea, the Philippines, and beyond. China threatens not only Taiwan but the entire regional order.

Yet there is a counterintuitive element to this threat. Diplomats suggest that Xi Jinping's preference would be to take Taiwan by consent, through political pressure and economic integration. Since that will not happen, force becomes the option. But an outright invasion carries a terrible cost for China itself: the destruction of the semiconductor facilities it seeks to control. Those factories are irreplaceable. They cannot be rebuilt quickly. They cannot be moved. For this reason, some analysts believe China's most likely path is a gradual escalation of gray-zone warfare followed by a blockade—a slow strangulation designed to force surrender without the devastation of direct assault.

Meanwhile, Taiwan's economy is booming. In the first five months of 2026, Taiwan's exports to the United States surpassed those from China for the first time, driven by surging demand for advanced semiconductors and AI infrastructure. The U.S. has become Taiwan's largest trading partner. American technology giants—Apple, Microsoft, Amazon Web Services, Google, Oracle, Meta—are spending between 750 billion and one trillion dollars combined this year on AI infrastructure, much of it dependent on chips made in Taiwan. In the first quarter of 2026, Taiwan's economy grew 14.6 percent year-over-year, propelled almost entirely by AI-related exports and their ripple effects through investment and consumer spending.

This is the paradox at the heart of the Taiwan question. The island has become more economically vital to the world at precisely the moment when the military threat to it has grown more acute. The Trump administration, seeking to reduce American reliance on China in high-technology products, has shifted trade and investment toward Taiwan. A bilateral trade agreement signed early in the year has encouraged direct shipping routes and discouraged assembly through mainland factories. Taiwan is no longer a peripheral concern in great-power competition. It is the pivot point. And the cost of losing it—or of the conflict that might precede that loss—is a price the world may not be able to afford.