Here's what would happen to markets and the economy if China attacked Taiwan

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A war involving China and the US could cause China's GDP to plunge by as much as 25% 💸

, and now functions as an independent democracy. China, however, considers Taiwan a renegade republic, and President Xi Jinping insists that “reunification” with Taiwan is inevitable. Since Taiwan isn’t interested, China would have to coerce reunification.The United States has a deliberately vague policy toward Taiwan, meant to imply that the U.S. military would help defend Taiwan if China attacked, without saying so overtly.

China’s $17 trillion economy would suffer a lot more, with its GDP plunging by as much as 25%, according to Rand. As with Russia's economy after the invasion of Ukraine, the damage would likely come from several directions: economic sanctions imposed by the United States and other allied nations, attacks on Chinese infrastructure by Taiwan, the cost of sustaining a costly and perhaps lengthy war, and the decoupling of China from many international systems.

If there is a shooting war, Americans should not assume they’ll end up on the winning side. First, it’s not 100% clear the U.S. president, whoever he or she is, would be willing to risk thousands of American lives in Asia by committing ships and planes to a war against China on Taiwan’s behalf. There are ways to “defend Taiwan” without sending American service members to war, such as providing the kind of hardware and intelligence the United States is now supplying to Ukraine.

 

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