Taiwan is no longer just a test of American resolve abroad. It is a test of whether the world economy can survive a single semiconductor chip chokepoint, The New York Times reports.

The Taiwan island democracy produces the overwhelming majority of high-end semiconductors that power everything from iPhones to AI data centers.

As China’s military rehearses the unthinkable, U.S. officials are warning that a blockade or invasion wouldn’t merely rattle markets or disrupt tech launches — it could detonate a global economic catastrophe.

Treasury Secretary Scott Bessent recently underscored the stakes, calling Taiwan “the single biggest threat to the world economy” and “the single biggest point of single failure” — warning that if the island’s chip output were cut off, “it would be an economic apocalypse.”

CHIPS STAMPED IN TAIWAN

That language would have sounded hyperbolic a decade ago, when Washington framed Taiwan mostly through the lens of geopolitics and democracy. But now the fear is painfully practical: the U.S. economy — and China’s — runs on chips stamped in Taiwanese fabs.

A confidential 2022 analysis commissioned for the Semiconductor Industry Association delivered the kind of numbers that make even hardened executives look up from quarterly earnings.

Cutting off Taiwan’s chip supply, the report warned, would unleash the largest economic crisis since the Great Depression. U.S. output would plunge 11% —roughly twice the hit of the 2008 recession. China’s collapse would be worse, a 16% decline.

Bloomberg Economics has put the cost of a conflict over Taiwan at more than $10 trillion—about 10% of global gross domestic product.

The White House has tried, repeatedly, to change that math. Under President Biden, the U.S. attempted a classic government-industrial intervention: subsidies. The CHIPS Act poured roughly $50 billion into incentives meant to rebuild domestic chip capacity and lure investment stateside.

TSMC expanded its footprint in Arizona, Samsung pledged major investment in Texas, and Intel announced plans for a sprawling Ohio campus.

But building factories is only half the battle. The other half is persuading the biggest chip buyers to use them — and that’s where Washington ran into a wall of corporate pragmatism. Chips made in the United States cost more — industry executives put the premium at over 25% — driven by labor, materials, regulation, and permitting.

Even when manufacturing plants rise from the desert, they can be a generation behind Taiwan’s most cutting-edge output, because Taiwan has long insisted its newest manufacturing technology stays on the island first, and it has spent the past 50 years to position its country to get to this point.

That stalemate is why the Trump administration’s approach looks, to its supporters, increasingly prescient.

Trump has long argued that the U.S. should use trade power to reshape supply chains, and he has denounced CHIPS-style grants in favor of tariff leverage — carrots replaced by sticks.

$200B ON US CHIP PLANTS

That logic has already driven a wave of deal-making. The U.S. is on track to spend about $200 billion on semiconductor plant plans through 2030, according to SEMI, the global chip industry association — enough, on paper, to lift U.S. capacity sharply.

Yet even that eye-watering sum doesn’t guarantee security, because Taiwan and China are investing, too.

In March 2021, Adm. Philip S. Davidson, then commander of U.S. Indo-Pacific Command, warned Congress that “the threat is manifest during this decade,” adding, “in fact, in the next six years” — an assessment that helped cement 2027 as a focal point for planners.

That timeline became harder to dismiss after Russia invaded Ukraine. If anyone doubts an autocrat would risk economic self-harm to seize territory, Washington’s message is now: look at Russia President Vladimir Putin.

Even the corporate world is beginning to speak that language. Elon Musk has warned that “people maybe are underweighting some of the geopolitical risks that are going to be a major factor in a few years.”

A July 2023 classified briefing in Silicon Valley, CIA Director William J. Burns and Director of National Intelligence Avril Haines laid out intelligence about China’s military buildup to some of the most important CEOs on the planet: Tim Cook of Apple, Jensen Huang of Nvidia, and Lisa Su of AMD in the room, with Qualcomm chief Cristiano Amon joining by video.

The message was blunt: China’s trajectory suggested a move on Taiwan by 2027 was plausible. Cook reportedly told officials afterward that he slept “with one eye open.”

But purchase orders are what determine whether America can build a meaningful alternative to Taiwan.

McKinsey’s Bill Wiseman described the industry’s collective shrug with brutal clarity: too many executives assume that if disaster strikes, everyone will be wrecked together — so no one wants to be the first to eat the cost.

TSMC, NVIDIA, INTEL

That’s where Trump’s tariff threats — and the bargaining chips they create — have mattered.

In the most consequential maneuvering, TSMC itself became leverage: expand U.S. capacity faster, or face escalating trade penalties.

Nvidia, the world’s AI kingmaker, sits at the heart of this because it designs the chips that power the AI boom but relies on TSMC to manufacture them.

The logic of coercion is straightforward: if tariffs make Taiwan-made chips more expensive, the path of least resistance becomes buying from Arizona — even at a premium.

Some of that pressure has translated into multi-billion-dollar commitments, including a massive expansion of TSMC’s U.S. investment and new steps by major buyers to shift production onshore.

Intel, battered by financial strain and technology doubts, has also become a central piece of the reshoring strategy — both as a domestic manufacturing pillar and as a symbol that the U.S. cannot afford to lose its last best chance at leading-edge production.

Howard Lutnick, now driving the Commerce Department’s industrial push, has set a goal to move 40% of Taiwan’s semiconductor manufacturing to the United States.

It’s a moonshot ambition aimed at turning a single point of failure into a diversified network.

The question hanging over everything is whether America is moving fast enough to outrun the clock that Davidson started and Ukraine reinforced.

Is $200 billion through 2030 enough to turn a potential economic apocalypse into a manageable disruption? Or does that spending — spread across years, battling costs that make U.S. chips more expensive and often less cutting-edge — amount to an insurance policy that still leaves the house half built when the storm arrives?

If Taiwan goes dark, the world won’t have the luxury of debating strategy. It will have to confront a $10 trillion bill — and the shocking realization that the most important economy on Earth has been built on a supply chain that still runs through a single island.