A military conflict across the Taiwan Strait could produce economic consequences more severe than those experienced during World War II, Washington’s top representative in Taiwan has warned, highlighting the enormous global stakes surrounding tensions between Beijing and Taipei.
Raymond Greene, Director of the American Institute in Taiwan and Washington’s de facto ambassador to the island, said preventing conflict remains essential not only for regional security but also for the global economy.
Speaking at a defence forum in Taipei on Wednesday, Greene said the United States was pursuing a strategy combining high-level diplomacy with China, stronger Indo-Pacific partnerships and continued support for Taiwan’s ability to defend itself.
The warning comes ahead of another expected US-China summit, which Washington sees as an opportunity to reduce tensions and prevent potentially dangerous miscalculations.
Taiwan Increases Defence Spending
Taiwan has been strengthening its military capabilities as concerns persist over Beijing’s intentions.
President Lai Ching-te’s government is prioritising defence modernisation, with spending expected to exceed T$1 trillion next year for the first time.
Taiwanese Vice President Hsiao Bi-khim said the island remained committed to maintaining peace while preserving the ability of its people to determine their future.
China considers Taiwan part of its territory and has not renounced the use of force to achieve unification.
Beijing has promoted a “one country, two systems” arrangement, although the proposal has little support among Taiwan’s population.
A Chinese official reiterated that eventual reunification remained what Beijing considers a historical inevitability.
Why Taiwan Matters to Global Economy
A confrontation around Taiwan would have consequences extending far beyond China, Taiwan and the United States.
The island occupies a critical position in international technology supply chains, particularly semiconductor manufacturing.
Advanced chips produced in Taiwan are used across industries ranging from smartphones and artificial intelligence infrastructure to vehicles and defence systems.
The Taiwan Strait itself is also a major commercial shipping route connecting some of Asia’s largest economies with international markets.
Any prolonged military confrontation could therefore affect global trade, manufacturing and financial markets simultaneously.
Washington Walks Diplomatic Tightrope
The United States does not maintain formal diplomatic relations with Taiwan but remains its most important international supporter and arms supplier.
Washington operates under a policy designed to deter both a unilateral Chinese attack and moves that could fundamentally alter the status quo.
That ambiguity has become increasingly difficult to manage as China expands its military capabilities and Taiwan increases defence spending.
At the same time, the United States and China remain deeply connected economically, meaning an armed confrontation would risk disrupting two of the world’s largest economies.
Greene’s warning consequently reflects a broader concern surrounding the Taiwan question: a conflict would not remain a regional security crisis.
Its effects could rapidly spread through semiconductor supply chains, shipping routes, financial markets and the wider global economy.
