Bloomberg Economics' Taiwan War Scenario
Global Output Down 9.6% in First Year of War
Taiwan 40%, China 11%, United States 6.6% Hit
A study has found that if China invades Taiwan and the United States intervenes, the global economy would lose 10.6 trillion dollars (about 15,440 trillion won). In the case of Korea, it is projected to suffer severe damage, with gross domestic product (GDP) shrinking by 23%.
Bloomberg Economics on the 10th (local time) released a report estimating the impact on the global economy based on five scenarios: war, blockade, heightened tensions, status quo, and reconciliation.
Under the scenario assuming a war triggered by a Chinese invasion of Taiwan, losses in the first year alone are expected to reach 10.6 trillion dollars. This amounts to 9.6% of global output, which Bloomberg projects would be a heavier blow than either the COVID-19 pandemic or the 2007-2009 global financial crisis.
By country, GDP is expected to fall by 40% in Taiwan, 11% in China, and 6.6% in the United States. Among neighboring countries, Korea is projected to be hit hard, with GDP shrinking by about 23%. By industry, GDP is estimated to decline by 15.5% in semiconductors, 6% in trade, and 1.5% in finance. Japan is also forecast to see a 14.7% hit to GDP, the European Union (EU) 10.9%, India 8%, and the United Kingdom 6.1%.
The damage stemming from disruptions to Taiwan’s semiconductor supply is also expected to be substantial. Taiwan’s TSMC accounts for 70% of global foundry revenue. The combined market capitalization of TSMC’s top 10 customers, including Nvidia and Apple, totaled 14 trillion dollars as of February 2. In particular, Apple could see iPhone sales plunge by 90%, while Chinese manufacturers such as Xiaomi, Vivo, Oppo, and Honor would also face difficulties, potentially causing global smartphone sales to fall by as much as 80%. In contrast, Samsung Electronics, which produces about one-third of its mobile processors in-house, would be in a relatively advantageous position, according to Bloomberg.
Trade disruptions are also expected. Bloomberg projected that, in the event of war, revenue at China’s state-owned shipping company COSCO could fall by 63-68%, while revenue at major Korean shipping companies such as HMM could decline by 38-43%. The Taiwan Strait is an artery of global trade: as of 2022, more than one-fifth of the world’s seaborne trade volume passed through the Taiwan Strait.
Bloomberg also predicted that the actual damage could be even greater if factors not included in this set of assumptions are taken into account, such as disruptions in the supply of key minerals with high dependence on China and the impact of reduced capital expenditure on artificial intelligence (AI).
However, regarding the likelihood of each scenario, Bloomberg assessed the probabilities as follows: “medium” for heightened tensions and status quo, “low” for war and reconciliation, and “very low” for a blockade. It analyzed that the Chinese government is taking a cautious stance on invading Taiwan and has a variety of tools to pressure Taiwan without resorting to war.
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