Global Macro Research
Asia-Pacific Taiwan Strait: storms on the horizon
The US-China trade détente and shifts in Taiwanese politics are keeping the threat of a geopolitical flare-up over Taiwan low in the near-term, despite big changes in US foreign policy. However, China’s goal of reunification and the view that its window of opportunity might be closing will reignite risks over time.
Author
Michael Langham
Emerging Markets Economist
Duration: 8 Mins
Date: Feb 13, 2026
Key Takeaways
- The shift to a more assertive US foreign policy has raised broader questions about risks to the geopolitical status quo in the Taiwan Strait.
- However, we judge the probability of the status quo persisting over the next 12 months as higher than we did in 2024 (40% to 65%).
- This is because of the détente in US-China trade relations, the US’ re-affirmed commitment to “strategic ambiguity” vis-à-vis Taiwan, and the importance of Taiwan to US security.
- Shifts in Taiwan’s domestic politics away from independence, and uncertainties surrounding the leadership of the People’s Liberation Army (PLA), also raise the likelihood of the status quo persisting.
- Nevertheless, President Xi’s long-standing goal of reunification, and concerns China’s window of opportunity might be closing raise the risks of a geopolitical flare-up over time.
- The possibility of supply diversification leading to Taiwan’s reduced significance as a supplier of high-end chips could, over time, lower the US’ strategic interest. And continued ‘grey zone’ military activity by the PLA creates scope for renewed friction.
- Over the next five years, we see a 45% probability of the status quo persisting, and, in extremis, we allocate a 10% chance to military annexation.
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