China would face huge economic costs due to the disruption of trade if it blockades or invades Taiwan, according to a report by a Washington think tank.

The report, published by the Center for Strategic and International Studies titled Troubled Straits: Analyzing Trade Chokepoints in the South China Sea, states, "Military action by China that disrupts the Taiwan Strait could harm China’s economy even more severely than a disruption of the Malacca Strait."

It highlights that the Taiwan Strait is not only Taiwan’s lifeline, but also a critical artery for China’s own economic survival as nearly $1.3 trillion of Chinese trade transited through the waterway which is nearly 33 per cent more than through the Malacca Strait.

The Taiwan Strait supplies China with key industrial imports including oil, coal, natural gas, ores and metals arriving from resource-rich countries.

In 2024, 33 per cent of China’s total imports and 58 per cent of its maritime imports transited the Taiwan Strait, the report said.

In addition, the Taiwan Strait is a vital conduit for China’s own domestic shipping.

China relies on the Taiwan Strait to transport goods produced in southern technological hubs such as Shenzhen and Guangzhou to eastern cities, including Shanghai and Ningbo, and northern cities like Tianjin, the report observes.

If a conflict disrupted traffic through the Strait, China could transport these goods by land, but moving goods from Guangzhou to Tianjin that way “can cost about three times the price of moving the same goods by sea", the report points out.

If China had to switch all its north-south shipping from sea routes to land routes, it could “create bottlenecks within China’s inland logistics networks, sending ripple effects throughout the economy", it said.

The report also underscores that while only 3 to 4 per cent of US trade passes through the Luzon, Malacca and Taiwan straits annually, these strategic passages are crucial to key US allies in Asia.

“For US allies Japan, South Korea and the Philippines, the risks are much greater, especially in the Taiwan Strait,” it said, adding that these countries shipped US$755 billion worth of goods through the Taiwan Strait in 2024.

The Strait carried 28 per cent of Japan’s total trade in 2024, with key technologies such as semiconductors accounting for one-quarter of all Japanese imports.

Besides, the report underlines that Japanese Prime Minister Sanae Takaichi and Philippine President Ferdinand Marcos Jr have warned that a Chinese military move in the Taiwan Strait could draw their countries into the conflict.