How war in Taiwan could mean the wheels come off the UK economy
As the world struggles with the economic fallout from the Ukraine war, fears are mounting about a conflict that would be even more consequential: a Chinese invasion of Taiwan.
Last week, Taiwan’s foreign minister said he was preparing for the possibility of a conflict with China in 2027, and a leaked memo from a four-star US general said his “gut” told him the US – which is committed to defending Taiwan – would be at war with China in 2025.
The UK foreign secretary warned last week that such a war would destroy world trade and deal a catastrophic blow to the global economy. James Cleverly said in a speech on Britain’s relations with Beijing that “no country could shield itself from the repercussions of a war in Taiwan”, and cited an estimated cost to global trade of $2.6tn.
Taiwan is the world’s largest manufacturer of microchips, so any damage there would severely disrupt global supply chains for goods ranging from defibrillators to cars.
Western governments would probably respond to an invasion with sanctions against China, severing at least some trade and financial links, as they have with Russia. While sanctions have led to inflation, stopping imports from the world’s workshop could lead not only to more price rises, but to shortages.
Mark Williams, chief Asia economist at consultancy Capital Economics, says: “War between China and Taiwan would deliver a shock to the global economy that would be bigger than anything we’ve seen in modern times.”
For the UK, he says, it would mean a huge supply blow, reflecting China’s status as the nation’s biggest single source of goods imports, and hitting everything from medicines to smartphones.
“Governments would have to respond with massive support,” says Williams. “Prices for many
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