The shipping industry could face a global crisis, including surging operational costs, loss of ships, and delays if China invades Taiwan, a new report has warned.
The report, prepared by the Mercatus Center at George Mason University, suggests that China would also cut undersea internet cables that are essential for the semiconductor industry and which provide an important data link between Asia and North America.
Maritime Executive highlighted the concerns raised by the authors which noted that China’s People’s Liberation Army had prepared hundreds of scenarios as part of the country’s ambitions of reunification.
The report warns that if an invasion goes ahead it would have a significant impact on trade and the global economy, even surpassing the effect of Russia’s invasion of Ukraine. The US economy would be the hardest hit because of its huge exposure to the economies of China and Taiwan, both in trade volumes and value.
An invasion of Taiwan by China, a Taiwanese declaration of independence, or an accidental clash at sea between China and Taiwan or the US could lead to a crisis in the Taiwan Strait, the researchers reported. This would pose risks to the US economy in the form of delays or disruption of container shipments in the Taiwan Strait, the South China Sea and the East China Sea, as well as potential disruptions to digital communication from submarine cables with landing stations in Taiwan.
Senior research fellows at the Mercatus Center, Christine McDaniel and Weifeng Zhong, noted in the report: “The potential effects of a Chinese invasion of Taiwan on the US economy are far greater than those of the Russian invasion of Ukraine. Container shipments to and from major ports in the region, as well as digital flows, would be at direct risk.”
A Chinese invasion would significantly disrupt container shipping operations through the Taiwan Strait, which 21% of global trade uses as an essential route. The disruption could affect vessels travelling to or from major ports in China, Japan, the Philippines, South Korea, Taiwan and Vietnam. This would also lead to longer shipping times and a surge in insurance premiums, with the cost of rerouting all traffic around the Straits of Malacca estimated between $279 million per month if rerouting through Indonesia, and $2.8 billion per month if rerouting through Australia.
The impact on supply chains will also be huge as most US technology firms rely on Taiwanese manufacturers to produce up to 90% of semiconductor chips, which means disruptions would have a ripple effect on every industry that uses advanced computer chips.
