Financial Sanctions Loom Over Taiwan: Experts Warn of Global Economic Costs

A recent study warns that Western nations are likely to impose severe financial sanctions on China in the event of a major crisis in the Taiwan Strait. The report, jointly produced by Rhodium Group and the Atlantic Council’s GeoEconomics Center, examines the potential economic countermeasures that could be taken against Beijing.

Sanctions Targeting China’s Financial Sector

According to the study, G7 leaders would likely target China’s financial sector, individuals associated with its political and military leadership, and industries linked to the military. This could have a significant impact on global trade and finance, as China is the world’s second-largest economy and largest trader.

Impact of Sanctions

The report estimates that large-scale sanctions on China could put at least $3 trillion in trade and financial flows at risk of disruption, equivalent to the gross domestic product of the United Kingdom in 2022. This would likely have far-reaching consequences for global economic stability.

Reducing Collateral Damage

To reduce collateral damage, G7 responses might focus on targeting Chinese industries that rely heavily on Western inputs, markets, or technologies. However, even targeted sanctions could still have substantial impacts on China and other countries.

Challenges of Coordination

The study also highlights the challenges of achieving coordination among sanctioning countries in a Taiwan crisis. Policymakers are still in the early stages of discussing potential economic countermeasures, and finding alignment with Taiwan on the use of such measures will be crucial.

Economic Statecraft: A Key Component

While economic statecraft can play a role in maintaining peace and stability in the Taiwan Strait, experts warn against overreliance on sanctions alone. Military and diplomatic tools must also be employed to deter Beijing from taking aggressive action.

Full Report Available

The full report is available online and provides further insights into the potential economic impacts of financial sanctions on China in a Taiwan crisis scenario.