Lawmakers Introduce Bill to Safeguard US Economy From Potential ‘Fallout’ of Chinese Invasion of Taiwan

Air force soldiers prepare to load U.S. made Harpoon AGM-84 anti ship missiles in front of an F-16V fighter jet during a drill at Hualien Air Force base in Taiwan on Aug. 17, 2022. (Sam Yeh/AFP via Getty Images)

House lawmakers have introduced bipartisan legislation to develop an economic strategy aimed at mitigating “the catastrophic economic fallout” resulting from a potential Chinese invasion of Taiwan.

The legislation, titled the “Fortifying U.S. Markets from Chinese Military Aggression Act,” was introduced by Reps. Blaine Luetkemeyer (R-Mo.) and Ritchie Torres (D-N.Y.) on April 11.

Under the legislation, an advisory committee would be established to develop an economic plan to alleviate potentially devastating economic repercussions in the event the Chinese Communist Party’s (CCP’s) military invades Taiwan.

“America is unprepared for the catastrophic economic impact of a Chinese invasion of Taiwan,” Mr. Luetkemeyer said. “Our capital markets are resilient and have weathered prior military conflicts, recessions, and a global pandemic. Yet a Chinese invasion of Taiwan and the immediate economic sanctions and likely military actions that follow would present a drastically more intense challenge given how deeply our countries’ economies are integrated.”

The advisory committee, under the Financial Stability Oversight Council, will help identify and assess risks in the financial services and banking systems and develop solutions to mitigate their impact.

The committee will include members from “key federal financial regulatory agencies, capital market participants, and policy makers.”

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Several U.S. generals, experts, and intelligence officials have warned of the Chinese regime’s imminent takeover of the self-ruled democratic island.

Last month, during testimony before the Senate Armed Services Committee, Adm. John Aquilino, commander of the U.S. Indo-Pacific Command, said the Chinese regime has aggressively built up its military power to prepare for a potential invasion of Taiwan by 2027.

In early 2023, CIA Director William Burns said his agency had intelligence indicating that Chinese leader Xi Jinping directed the CCP military to be ready to invade Taiwan by 2027.

Xi has vowed to achieve the “reunification” of Taiwan, which the CCP has never ruled. He has explicitly stated his willingness to use force to achieve this goal.

The Chinese regime has ramped up pressure against Taiwan in recent years, consistently deploying military aircraft and vessels close to the island on an almost daily basis, aiming to erode Taipei’s defenses.

According to Bloomberg, a Chinese military invasion of Taiwan would cost $10 trillion, about 10 percent of the world economy, surpassing the costs of the Ukraine–Russia war, the COVID-19 pandemic, and the Global Financial Crisis.

Taiwan plays a vital role in the global tech industry with the most advanced chip firms. The country’s chip giant, Taiwan Semiconductor Manufacturing Co. (TSMC), provides semiconductors for the world’s top tech companies, including Apple, Nvidia, Intel, and Qualcomm. TSMC’s top 20 customers’ market capitalization is about $7.4 trillion.

Bloomberg projects that in the event of a war, the U.S. economy would decrease by 6.7 percent, China’s gross domestic product would decline by 16.7 percent, and Taiwan’s economy could suffer the most, with 40 percent down for the first year of the conflict.

“It is imperative for the U.S. government to be prepared for any and all global emergencies,” Mr. Torres said. “If the CCP takes the drastic action of advancing on Taiwan, we must proactively prepare our national economy.”

War Game

According to a 2023 wargame report from the Center for Strategic and International Studies (CSIS), China would be defeated in a conventional amphibious invasion of Taiwan.

CSIS noted that China lost the hypothetical war heavily, which “might destabilize Chinese Communist Party rule,” but the report also noted the costs to the U.S. Navy and Taiwan’s economy.

“The United States and its allies lost dozens of ships, hundreds of aircraft, and tens of thousands of service members,” it stated. “Taiwan saw its economy devastated. Further, the high losses damaged the U.S. global position for many years.”

A November 2023 Reagan National Defense Survey found that 73 percent of respondents said they were “concerned” about a possible Chinese invasion of Taiwan.

The survey also found that a growing number of Americans support Taiwan, with 46 percent in favor of sending U.S. forces to defend the island if invaded, up from 39 percent in 2019. Sixty percent of Americans supported increasing the presence of U.S. troops near the island to deter a Chinese invasion.

The United States has had no formal diplomatic ties with Taiwan since Washington changed its diplomatic recognition in favor of Beijing in 1979. However, the two sides have a robust relationship based on the Taiwan Relations Act, which authorizes the United States to provide the island with military equipment for self-defense.