A Bloomberg worst-case model estimates massive immediate losses for EU economies if conflict severs Taiwan supply chains. The scale would test Europe’s crisis response.

According to Bloomberg, in the worst-case scenario of a conflict between the United States and China over Taiwan, the EU economy could suffer losses of about $2 trillion in the first year. Such an assessment underscores the scale of potential global consequences for European markets and manufacturing.

Although Taiwan traditionally relies on the United States for security, European officials are concerned that resuming dialogue between Donald Trump and the Chinese leader could give Beijing a “green light” for a possible invasion. Taiwan remains a critically important hub in global supply chains, as it produces more than 60% of the world’s most advanced semiconductors.

There are currently no obvious signs that Xi Jinping is preparing a move in the near term. However, the costs of a potential conflict could be devastating, and the EU risks coming under greater pressure than China. According to Marcin Jerzewski, head of the Taipei office of the Center for European Values on Security Policy, Taiwan is an “unsafe ‘blind spot’ for the EU.”

“The blockade of Taiwan will be a serious European security and economic crisis even without an invasion”

– Marcin Jerzewski

Economic consequences for the major EU economies

According to Bloomberg, Germany would be the hardest hit, its economy closely linked to Taiwanese semiconductors and rare earth elements from China. Germany’s GDP could shrink by about 14%, nearly twice as much as expected for the United States or China. By comparison, France’s GDP would decline by about 6.5%, Italy by about 8.8%, Spain by about 7%.

Global GDP could fall by more than 8%, significantly exceeding the impact of the 2009 financial crisis and the Covid-19 pandemic. A sharp shortage of goods whose production is concentrated in Taiwan is also expected, including medical devices such as pacemakers and insulin pumps.

The EU’s role and internal differences

In the EU, decisions are often made after reaching a consensus among the 27 member states, so forming a united stance on Taiwan is one of the most challenging tasks. A spokesperson for the European Commission stressed that the bloc aims for a peaceful resolution of tensions between both sides of the Taiwan Strait through dialogue. If China attempts to change the status quo by force, the EU says it is ready to defend its interests.

According to informed sources, discussions of a European strategy on Taiwan are often held in secret and involve only select member states. Cyprus, the bloc’s rotating chair, regularly vetoes discussion of the topic, fearing to set a precedent for its own contentious issues with Turkey.

At meetings, officials conducted tabletop exercises modeling scenarios of escalation of Taiwan’s airspace. The latest sessions showed how unprepared Europe is for a rapid crisis response, according to sources familiar with the discussions.

Indeed, during one meeting they considered a scenario in which exports of Taiwanese semiconductors would fall by half. Europeans initially thought their economies could withstand the blow, but it later emerged that Taiwan is fully dependent on U.S. military support, and it would be Washington that receives the key chip supplies, leaving Europe without the critically needed component.

In the event of a serious escalation, the EU could have only a few hours to respond, and currently most participants in the discussions doubt their readiness to act within such a short timeframe.

For many years the EU has called for de-escalation and closer cooperation with the United States, but Donald Trump’s return to office and increased dialogue with China have changed the dynamics of coordination on the global stage.

In 2023, the EU reaffirmed the “One China” principle, not recognizing Taiwan as an independent state, but sought to develop bilateral ties without official recognition. This allows European countries to maintain economic ties with Taiwan without violating the official status.

Bloomberg’s conclusions underscore the importance of stronger coordination between the EU, the United States, and allies: without clear and swift action, the EU risks not only economically but also strategically losing influence in the world economy.

In the future, the EU should focus on common positions on Taiwan, strengthen engagement with international partners, and promote peaceful means of resolving tensions to reduce risks to the continent’s security and economy.