THREAT ASSESSMENT: U.S. Moves to Isolate China Economically if Taiwan Is Attacked
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If China undertakes coercive action against Taiwan, the U.S. could initiate exclusion from key financial institutions; if that occurs, global semiconductor supply chains and multilateral economic coordination would face simultaneous strain.
Bottom Line Up Front: The U.S. Congress has advanced legislation that would trigger economic isolation of China from major global financial institutions if it threatens or attacks Taiwan, signaling a hardened deterrence posture amid rising cross-strait tensions.
Threat Identification: The primary threat is a potential Chinese military or coercive action against Taiwan, which Beijing claims as part of its territory despite the island's de facto sovereignty and democratic governance. In response, the U.S. is preparing a comprehensive economic countermeasure framework through the PROTECT Taiwan Act.
Probability Assessment: U.S. defense and intelligence officials assess that China aims to develop the capability for a Taiwan invasion by 2027, though no decision to invade has been confirmed [Newsweek, 2026]. The probability of military action remains moderate but increasing, particularly if diplomatic channels deteriorate or Taiwan moves toward formal independence.
Impact Analysis: A Chinese attack on Taiwan would severely disrupt global technology markets, given Taiwan’s dominance in advanced semiconductor manufacturing (accounting for ~90% of production) [Newsweek, 2026]. Conversely, excluding China from institutions like the G20 and Financial Stability Board would undermine global economic coordination and could trigger retaliatory measures, including supply chain disruptions and financial instability.
Recommended Actions: 1) Expedite Senate consideration of the PROTECT Taiwan Act with provisions for allied coordination; 2) Strengthen diplomatic engagement with G7 and Indo-Pacific partners to build consensus on deterrence measures; 3) Enhance U.S. and allied defense readiness in the Western Pacific; 4) Develop contingency plans for semiconductor supply chain resilience.
Confidence Matrix: Threat Identification – High confidence; Probability Assessment – Moderate confidence (based on intelligence assessments); Impact Analysis – High confidence; Recommended Actions – High confidence in feasibility, moderate in geopolitical acceptance.
Citations: [Newsweek, 2026]
—Marcus Ashworth
Published February 12, 2026