A China-Taiwan War Would Start an Economic Crisis. America Isn’t Ready.

China’s military exercises in the waters around Taiwan this month — the largest in almost three decades — highlight the growing risk of a total breakdown in United States-China relations. A full-scale invasion of Taiwan is one eventuality; last year, the C.I.A. director, William Burns, noted that China’s president, Xi Jinping, has instructed his armed forces to be ready for an invasion by 2027.

That isn’t Mr. Xi’s only option. He could use his far larger coast guard and military to impose a “quarantine,” allowing merchant shippers and commercial airlines to travel in and out of Taiwan only on China’s terms. This strategy would mirror Beijing’s moves in the South China Sea, where its coast guard is trying to assert control over waters and atolls that are part of the Philippines, a U.S. treaty ally.

If China forces a confrontation over Taiwan, which Beijing claims as its own territory, the United States will need to respond decisively: The implications are enormous, potentially including a global economic crisis far worse than the shock caused by the Covid-19 pandemic.

Right now, America isn’t ready.

As a report from a House panel concluded last year: “The United States lacks a contingency plan for the economic and financial impacts of conflict” with China.

Addressing this lack of preparation must be a bipartisan priority. The incoming administration must work with Congress and allied governments to develop a coherent plan that clearly outlines a vision for the global economy during and after a crisis that is anchored in American economic leadership.

The most obvious economic implications relate to semiconductors. Taiwan Semiconductor Manufacturing Company produces about 90 percent of the world’s most advanced computer chips. Some are now made in Arizona, but T.S.M.C.’s most cutting-edge chips are still produced in Taiwan. Industries from autos to medical devices depend on these chips; if Taiwanese chip production is disabled, the global economy could be plunged into a deep slump. If T.S.M.C.’s factories fall into China’s hands — it relies on T.S.M.C.’s chips, too — Beijing could seize a competitive edge, including in the development of artificial intelligence technology, and have American and European manufacturers over a barrel.