Raymond Greene, the United States' de facto ambassador to Taiwan, warned that a conflict along the Taiwan Strait could cause an economic shock even more damaging to the global economy than World War II.
Greene, who heads the American Institute in Taiwan (AIT), made the remarks at a defence forum in Taipei while stressing the importance of preventing a military confrontation between China and Taiwan, Reuters reported. The AIT performs many of the functions of a US diplomatic mission because Washington does not maintain formal diplomatic relations with Taiwan. Greene urged Beijing to abandon military pressure on Taiwan and pursue dialogue with Taipei.
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Taiwan is a major part of the global technology and semiconductor supply chain. Consequently, a military conflict or prolonged blockade around the island could disrupt international manufacturing and trade.
Greene's warning comes against the backdrop of growing concern about China's military pressure on Taiwan and the possibility that a conflict could affect economies far beyond East Asia. Reuters reported that Greene used his remarks to underline the importance of maintaining peace across the Taiwan Strait.
Greene also pointed to an upcoming US-China summit as an opportunity to reduce the risk of confrontation. Chinese President Xi Jinping is expected to travel to the United States later this month for a meeting with US President Donald Trump.
Greene stated that the summit could help Washington and Beijing build what he described as a relationship of "strategic stability", based on fairness and reciprocity, Reuters reported. He said that communication at the highest levels could help the two countries avoid misunderstandings and miscalculations.
Greene reaffirmed the Trump administration's commitment to maintaining peace in the Indo-Pacific region. Greene said that Washington was working to maintain what he described as a favourable regional balance of power.
Greene also expressed support for Taiwan's efforts to strengthen its own defence capabilities. Taiwan's defence budget is expected to exceed T$1 trillion for the first time, according to the Reuters report.
Taiwanese President Lai Ching-te has made military modernisation a priority amid concerns over China's growing military capabilities and pressure on the island.
China claims Taiwan as part of its territory and has repeatedly opposed what it considers moves towards Taiwanese independence, while Taiwan is governed separately by a democratically elected government that rejects Beijing's sovereignty claims.
A conflict around Taiwan could potentially disrupt international trade, shipping and technology supply chains because of the island's importance to global manufacturing. Taiwan's semiconductor industry is particularly significant to the world economy, with advanced chips used across industries ranging from electronics and automobiles to artificial intelligence and telecommunications.
Any prolonged military confrontation could also create uncertainty for international investors and companies operating across Asia. Greene's warning was therefore centred on preventing such a conflict.
The warning comes as tensions between China and Taiwan remain a major geopolitical concern and as Washington continues to balance support for Taiwan with efforts to prevent direct conflict with Beijing.
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