A war in the Taiwan Strait would wipe out $10.6 trillion from the global economy, with South Korea losing 23% of its gross domestic product, according to a new study.
Bloomberg Economics released a report on Sunday examining economic impacts across five scenarios: war, blockade, heightened tensions, status quo, and reconciliation. The worst-case scenario—a Chinese invasion of Taiwan with U.S. intervention—would cause $10.6 trillion in losses in the first year alone.
That represents 9.6% of global output, exceeding the economic damage from the COVID-19 pandemic or the 2007-2009 global financial crisis.
East Asia would bear the brunt. Taiwan's GDP would plunge 40%, followed by South Korea at 23%—the second-most severe impact. China would see an 11% decline, Japan 14.7%, the EU 10.9%, and the United States 6.6%. South Korea and Japan face direct hits due to their heavy dependence on semiconductor supply chains and Taiwan Strait shipping.
Semiconductors are the critical factor. If TSMC, which controls 70% of global foundry revenue, halts operations, the semiconductor sector alone would account for 15.5% of GDP losses. Apple would lose 90% of iPhone sales, and Chinese smartphone makers would suffer cascading effects, potentially causing global smartphone sales to plummet by up to 80%. Samsung Electronics, which produces one-third of its mobile chips in-house, is in a relatively better position, the report noted.
Shipping would also take a major hit. If the Taiwan Strait—through which more than one-fifth of global maritime trade passes—is blocked, COSCO's revenue would drop 63-68%, while Korean carriers including HMM would see declines of 38-43%.
Bloomberg noted actual damage could be greater when factoring in disruptions to Chinese critical mineral supplies and reduced AI investment. However, the report assessed the probability of war as low, citing China's array of economic and diplomatic pressure tools that make military action less likely.