Published On 1/7/2026
India does not place Taiwan among its direct geopolitical priorities, but any military conflict on the island could turn into one of the biggest shocks facing the fifth-largest economy in the world, due to the dependence of Indian industries on semiconductors and the exposure of trade and supply chains to widespread disruptions, according to an analysis published by Bloomberg.
Bloomberg noted that Taiwan produces most of the advanced semiconductors used in artificial intelligence applications and modern electronics, which makes any disruption in its production or exports have repercussions beyond East Asia to the entire global economy.
According to Bloomberg Economics estimates, the outbreak of a military confrontation between the United States and China over Taiwan could cost the global economy about $10 trillion, equivalent to approximately 8% of the global gross domestic product.
Potential blow to growth and supply chains
Bloomberg believes that the Indian economy may contract by about 6.8% during the first year of any conflict over Taiwan, as a result of disruptions in global trade and supply chains and a shortage of basic industrial components.
Although India is less exposed than industrial economies such as South Korea and Germany, the size of the loss remains large, especially when compared to the contraction of the Indian economy by 5.8% during the fiscal year 2021 under the impact of the Corona pandemic.
The scenario assumes that the conflict will disrupt navigation through the Taiwan Strait, with the possibility of the disturbances spreading to the South China Sea if the United States intervenes, which will affect one of the most important global trade lanes.
Bloomberg estimates that exports equivalent to about 2.6% of India’s GDP will be at risk, especially exports of textiles and consumer goods, as a result of the disruption of maritime trade.
Chips and rare metals are at the heart of the risks
The analysis believes that any Chinese attack would likely lead to the disruption or blockade of Taiwanese semiconductor factories, preventing the access of raw materials to them or the export of their production, with Beijing potentially imposing restrictions on exports of chips and rare earth metals to maintain domestic supplies and strengthen its geopolitical position.
According to Bloomberg estimates, the shortage of semiconductors and restrictions on rare metals may threaten economic activities equivalent to about 3.3% of India’s gross domestic product, by affecting industries such as transportation equipment and manufacturing industries, in addition to related sectors in services and raw materials.
The repercussions are not limited to trade and production, as Bloomberg expects that global risk aversion in financial markets will lead to deducting about an additional 0.8% from India’s gross domestic product.
Although the outbreak of war between China and the United States over Taiwan is still an unlikely scenario in the near term, Bloomberg believes that escalating tensions make preparing for these risks necessary, in light of the global economy’s increasing dependence on semiconductors and Asian supply chains.
