Tariffs are getting much attention, but we should discuss why sourcing from China is an existential risk.
Chinese President Xi Jinping has stated that he intends to unite Taiwan with China peacefully or by force. Analysts have projected this will take place between 2027 and ’29.
Taiwan will not volunteer to join China, so it will only happen through force.
Taiwan is highly armed (for its size) and has the benefit of advanced technology from the U.S. It will bring a hell of a fight.
Conversely, China is a regional military superpower and could bring many men, ample equipment and vast resources to a battle with Taiwan.
Both sides will likely target civilian and industrial infrastructure. Taiwan, outnumbered and potentially overwhelmed, will resort to asymmetric warfare, i.e., cyber and other economically destructive means, to fend off an attack. This will have a substantial impact on supply chains built for export.
According to Warfronts, Taiwan plans to take out significant Chinese industrial infrastructure, including power plants like the Three Gorges Dam.
China, on the other hand, plans to convert its civilian maritime assets for military uses.
The devastation to both countries would be massive.
Whether Trump would intervene in a conflict between Taiwan and China is unclear. Let’s assume the U.S. stays out of it. (Never mind the geopolitical impacts.)
The battles would be colossal, bloody and incredibly disruptive. Civilian and industrial infrastructure would be destroyed.
The U.S. and Western allies would likely implement huge sanctions, with catastrophic impacts on supply chains.
The bottom line is that we have to assume Xi is serious about his intention to take Taiwan forcibly.
Encouraging companies to migrate supply chains out of China is not just good economics; it’s a national security issue.
We have a couple of years before China is ready. (Xi has commanded the military to be ready by 2026.)
Migrating supply chains is not free, but given enough window, it can be done efficiently.
It is better to deal with a slight increase in cost now than catastrophic pain down the road.