Opinion: We need to start thinking about a Taiwan crisis |
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Opinion: We need to start thinking about a Taiwan crisis
For Canada, the impact of a Chinese invasion would be mainly economic. Preventive diversification means finding alternatives to both countries' goods
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The formerly geopolitically unthinkable United States-Israel war with Iran now in a ceasefire, Canada needs to start thinking seriously about another long-unthinkable event: a Chinese invasion of Taiwan.
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Much current discussion of that possibility focuses on escalation, deterrence and the risk of great-power war. For Canada, however, the biggest impact would be economic, not military. A conflict involving Taiwan would expose vulnerabilities in Canada’s supply chains, trade dependencies and strategic planning.
Opinion: We need to start thinking about a Taiwan crisis Back to video
As current events in the Middle East show, modern wars, especially those involving major powers, disrupt markets, sever supply chains and create serious instability. Canada’s main challenge in a Taiwan crisis would be absorbing a possibly prolonged economic shock.
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Canada’s direct economic exposure is relatively limited. China accounts for roughly one-tenth of our imports and a smaller share of our exports, while trade with Taiwan is minimal. But Taiwan sits at the centre of the global semiconductor industry. The Taiwan Semiconductor Manufacturing Company (TSMC) produces the majority of the world’s cutting-edge semiconductors. A disruption to that supply would ripple through financial systems, communications infrastructure, AI development and everyday economic activity.
Apart from semiconductors, Canada’s economy is deeply integrated into supply chains that depend on stability in the Indo-Pacific. A China-Taiwan conflict could also disrupt the critical shipping corridor of the South China Sea. Regional war could easily push the global economy into recession.
It would also pose difficult geopolitical questions. The U.S. response would be shaped by shifting domestic priorities, global commitments and, increasingly, presidential discretion. Canada would almost certainly align itself with the U.S., but the nature of that alignment could vary significantly. A limited or ambiguous American response — whether focused on economic measures, partial deterrence or delayed action — could still provoke Chinese retaliation against U.S. partners, including Canada. The challenge, therefore, is not whether to align with the U.S., but how to prepare for the risks associated with different forms of American engagement.
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The geopolitical challenge becomes more complex if allied responses are divided. European countries, already under strain due to energy pressures and the war in Ukraine, may be reluctant to engage in another major conflict, especially given their own economic ties with China. If NATO is divided, Canada could find itself navigating competing strategic pressures.
In any case, the important point is that Ottawa has yet to fully grapple with the economic and strategic consequences of a Taiwan crisis. It needs to move beyond diagnosing risks and begin making difficult choices.
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First, it should recognize that Canada’s security commitments and deep economic integration with the U.S. mean a Taiwan crisis would reinforce, rather than complicate, our alignment with the Americans. Despite current trade tensions, we should explore targeted trade arrangements to mitigate potential disruptions in the event of a crisis. At the same time, we should deepen engagement with key Indo-Pacific partners, such as India, Japan and South Korea, to support broader regional stability and diversify strategic co-operation. The real challenge is not who we’re aligned with but whether we are prepared for the economic consequences of our choice, including potential retaliation and trade disruptions.
Second, Canada needs to reduce critical supply-chain vulnerabilities, particularly in semiconductors. Replacing Taiwan’s advanced chip production is not realistic in the short term, but we should build on emerging North American co-operation, including efforts driven by the U.S. CHIPS Act, to strengthen regional capacity. Canada’s can focus on R&D and niche areas such as compound semiconductors, while the U.S. and Mexico expand manufacturing, assembly and testing. Canada should also deepen collaboration with partners such as Japan and South Korea. Strengthening supply chain resilience may actually increase Canada’s economic integration with the United States, but doing so would provide greater security and reliability in the face of global disruptions.
Third, diversification will need to become a strategic priority rather than a long-term aspiration. In this context, it means reducing overreliance on China — not full decoupling but building stronger economic ties across the Indo-Pacific and elsewhere to ensure flexibility during a crisis.
Finally, Canada must be realistic about its necessarily limited role in any potential conflict. But, planning alongside its allies, it can contribute through intelligence-sharing, logistics, sanctions co-ordination and economic resilience.
Thinking ahead won’t eliminate the risks of a Taiwan crisis but it could reduce the need for reactive decisions under pressure. A Taiwan crisis can’t be treated as a distant or hypothetical scenario. The economic consequences would be immediate, and the strategic implications significant. The real question is whether Canada starts preparing now or waits until the crisis forces its hand.
Mantajvir Singh Deol, a student at Toronto Metropolitan University, studies Asian foreign policy and Canada’s engagement in the Indo-Pacific.
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