This is Post 15 of 16 in the Taiwan Risk Series. Full series at polarismng.com

Consequence #7 — The Taiwan Strait Carries $5 Trillion a Year. What Happens When It Closes?

The semiconductor supply chain is the most discussed economic consequence of a Taiwan conflict. It is not the only one.

The Taiwan Strait and the Luzon Strait — the two primary maritime corridors in the region — together carry approximately $5 trillion in annual trade. Container ships, bulk carriers, tankers, and LNG vessels transiting between East Asia and the rest of the world pass through these waters. They carry manufactured goods, raw materials, energy, and food. Closing or militarising these corridors does not merely disrupt Taiwan’s trade. It disrupts the trade of every country whose supply chains route through the western Pacific.

We have a recent, small-scale precedent for what this looks like. The Red Sea crisis of 2024 — triggered by Houthi attacks on commercial shipping in one secondary maritime corridor — caused container spot rates to spike dramatically, extended delivery times across Europe and Asia, and contributed to inflationary pressure on manufactured goods globally. The Red Sea handles roughly $1 trillion in annual trade. The Taiwan Strait handles five times that.

Marine insurance premiums in a Taiwan conflict scenario are estimated to spike 300–500%. Ships would reroute around the southern tip of Australia or via Cape of Good Hope — adding weeks to transit times and thousands of miles to journeys — or would simply not sail until a military outcome was clear. The “just-in-time” inventory model, already stressed by COVID-era disruptions, would collapse for any supply chain routed through the western Pacific.

📍 Next in the series

Consequence #8+9+10 — The Long Game: Innovation Divorce, Nuclear Risk, and Why Taiwan Is Not Crimea. The final post in the series — the three consequences that go beyond GDP models and into the structural shape of the next fifty years.

⚡ The consequence to watch

If your logistics depend on trans-Pacific routing — even indirectly through supplier networks — the Red Sea crisis is your stress-test reference. Model what happened to your lead times and input costs in 2024, then multiply the magnitude by five and extend the duration by years rather than months.

🔧 The drill

Identify every supplier whose production or raw material sourcing routes through the western Pacific. For each one, ask: what is the alternative routing, what is the additional lead time, and what does that do to your inventory requirements? If you do not have that map, your supply chain resilience plan has a geography-sized gap.

Sources: Responsible Statecraft (2025); DIIS (2024); Bloomberg Economics (Feb 2026). Full series: polarismng.com