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Why Is Taiwan Important to the United States?

Taiwan’s fate will have major implications for U.S. security and prosperity. It will also bear on fundamental questions of international order and the future of democracy.

China is intensifying its military, economic, and diplomatic coercion of Taiwan, which it considers a piece of lost territory that must be returned, by force if necessary. While a war between China and the United States over Taiwan is neither imminent nor inevitable, rising tensions raise important first-order questions that need to be addressed: Why does Taiwan matter and why should Americans care about its fate? How would Chinese aggression against Taiwan impact the United States? What, if anything, can and should be done to protect U.S. interests? 

While the United States is thousands of miles from Taiwan, the island’s fate will have major implications for U.S. security and prosperity. What happens in the Taiwan Strait will also bear on fundamental questions of international order and the future of democracy. Our recent Council on Foreign Relations-sponsored Independent Task Force Report, U.S.-Taiwan Relations in a New Era: Responding to a More Assertive China, explains that the United States has vital strategic interests at stake in the Taiwan Strait and examines how the United States should protect these interests. 

Taiwan sits in an important position in the world’s most economically consequential region. As Assistant Secretary of Defense Ely Ratner noted, “Taiwan is located at a critical node within the first island chain, anchoring a network of U.S. allies and partners—stretching from the Japanese archipelago down to the Philippines and into the South China Sea—that is critical to the region’s security and critical to the defense of vital U.S. interests in the Indo-Pacific.”  

Taiwan’s Location Along the First Island Chain Anchors a Network of U.S. Allies

Taiwan’s inherent military value cannot be wished away. Instead, its location dictates that its fate will in large part determine the balance of power in the region. With Taiwan outside of its control and U.S. allies and partners arrayed throughout the first island chain, China’s military will struggle to project power far beyond China’s shores. However, if China were to annex Taiwan and base military assets, such as underwater surveillance devices, submarines, and air defense units on the island, it would be able to limit the U.S. military’s operations in the region and, subsequently, its ability to defend its Asian allies. With Taiwan under China’s control, it would be far more difficult for the United States to maintain a balance of power in the Indo-Pacific or prevent a Chinese bid for regional dominance. 

What happens in the Taiwan Strait will have enormous implications for the future of U.S. alliances in the region, which constitute Washington’s most important asymmetric advantage over Beijing. If the United States chose to stand aside in the face of Chinese aggression against Taiwan and China successfully annexed the island, it would be only seventy miles from Japanese territory and 120 miles from the Philippines. U.S. allies would come to question whether the United States would or even could come to their defense. Having lost confidence in the U.S. commitment to their security, allies would contemplate either accommodating China or hedging against it by growing their militaries or even developing nuclear weapons. Either outcome would result in diminished U.S. influence and increased regional and global instability. 

A Chinese attack on Taiwan, regardless of its success or whether the United States chose to intervene, would also trigger a global economic depression and shave trillions of dollars off global economic output. Taiwanese companies manufacture nearly 70 percent of the world’s semiconductors and around 90 percent of the most advanced chips. If the world loses Taiwan’s production capacity, no other company will be able to fill the gap in the short term. During a Chinese blockade or attack, the production and shipment of semiconductors would come to a halt, leading to a shortage of nearly every product that contains technology, from smartphones to computers and cars. Companies across a range of industries would have to reduce or even halt production. 

Led by TSMC, Taiwanese Companies Dominate the Global Semiconductor Market

Market share of semiconductor foundries, 2021

Taiwan’s fate also has implications for the most fundamental tenets of international order. Following Russia’s invasion of Ukraine, for China were to successfully absorb Taiwan despite Taiwanese resistance would establish a pattern of authoritarian countries using force to attack democratic neighbors and change borders. One of the most basic pillars of international relations—that countries cannot use force to alter borders—would be severely undermined. 

Politically, Taiwan is one of Asia’s few democratic success stories and by some measures the region’s freest society. Its open political system demonstrates to China’s citizens that there is an alternative path of development for a majority ethnically Chinese society. If China were to take Taiwan by force, Taiwan’s democracy would be extinguished, and its twenty-three million people would see their rights severely curtailed. As this would come in the wake of China’s crackdown on democracy in Hong Kong, the ramifications would be even greater. 

The stakes are clear, which is why the United States needs to redouble its efforts to deter China from using force or coercion to achieve unification with Taiwan. While a military confrontation in the Taiwan Strait is neither imminent nor inevitable, the chances of one are increasing. U.S. policy toward Taiwan needs to evolve to contend with a more capable, assertive, and risk-acceptant China that is increasingly dissatisfied with the status quo. 

Source: Council on Foreign Relations