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The closure of the Strait of Hormuz by Iran showed how quickly a strategic maritime corridor can turn into a weapon with global consequences. But there is a place where a crisis could be even more destructive — the Taiwan Strait, through which about 90% of the world’s advanced semiconductor supply depends — components essential for artificial intelligence, smartphones, and modern military technology, Bloomberg reports.
China is watching
China is closely studying how Iran and the United States used the Strait of Hormuz as a tool of pressure. This is not just geopolitical observation — it is preparation for a possible Taiwan scenario. In his first public comment on the conflict, Xi Jinping described the global order as “descending into chaos.”
China officially considers Taiwan, home to 23 million people, as its territory. Xi has made “reunification” part of his political legacy. A direct military invasion is seen as less likely than a naval blockade or “quarantine” — a scenario in which China would control all shipping to and from the island without formally declaring war.
More important than Hormuz
The Taiwan Strait is a roughly 180 km-wide waterway between mainland China and Taiwan, connecting the South China Sea with the East China Sea. Unlike Hormuz, ships could theoretically reroute, but only at significant cost in time and fuel. A large share of global container traffic, energy supplies, and industrial goods passes through it daily.
But the key vulnerability is not oil — it’s chips. Taiwan is home to TSMC, the world’s leading producer of advanced semiconductors used in everything from iPhones to missile guidance systems. No other country has comparable capacity in producing the most advanced chips.
The cost of a blockade
Estimates of potential losses are staggering:
- $2+ trillion — minimum losses from a blockade without full-scale war (Rhodium Group, 2022)
- $10.6 trillion — projected global economic losses in the first year of a full-scale US–China conflict over Taiwan (Bloomberg Economics, 2025), equal to about 9.6% of global GDP
Both figures exceed the combined economic impact of the COVID-19 pandemic and the 2007–2009 financial crisis.
A critical point: much of this damage could occur without a single shot fired. A “quarantine” and disruption of trade routes alone could destabilize global supply chains.
Beijing may be willing to take the risk
Xi’s logic goes beyond economics. Taiwan, as a prosperous Chinese-speaking democracy, challenges the Chinese Communist Party’s narrative that only authoritarian rule can deliver stability and prosperity.
Regular Chinese military drills around the island are not just rehearsals for invasion — they are psychological pressure aimed at weakening Taiwan’s resistance and promoting the inevitability of “reunification.”
Diplomatic pressure
Recently, Xi met with a leader of Taiwan’s opposition party, Kuomintang, which traditionally supports closer ties with Beijing. The party has played a role in blocking a $40 billion defense budget in Taiwan’s parliament.
At an upcoming summit with Donald Trump, Xi is expected to push for reducing US arms supplies to Taiwan, raising concerns about whether Washington would defend the island in a crisis.
A regional — and global — problem
Taiwan’s government has launched new drills to secure critical supplies in case of a blockade. Officials stress this is not just Taiwan’s issue — it affects the entire region.
Experts highlight key priorities:
- coordinated efforts by the US and allies to maintain critical trade flows
- strengthening Taiwan’s military and civilian resilience
- clear signals to financial markets to prevent panic
