The US and Japan have released a joint statement to the effect that multiple countries may get involved in the case of an armed conflict in the Taiwan Strait. Cross-Strait tensions have become a geopolitical issue of global concern. Whether or not Taiwan and China can peacefully resolve their differences and create a prosperous joint future in East Asia will no longer be just an "internal" issue for discussion between the two sides, but a matter of common international concern. For Taiwan, this presents both risks and opportunities.

Looking back, when the trade war between the US and China started three years ago, it was originally focused on economics. The administration of former US President Trump hoped that tariffs would bring jobs back onshore. Just as when the West hoped to use market access and participation in international organizations to prod China to join the international system, and subsequently a peaceful transformation away from socialism, the aim here was likewise to use financial interests as a bargaining chip to resolve differences in political systems.

After witnessing the fall of the former Soviet Union and the Jasmine Revolution in Egypt, however, and bolstered by rapid growth, Beijing invested more resources than other authoritarian countries in maintaining the party-state’s grip on power, giving it the confidence to declare a “Chinese model.” Thus, the US-China trade war has widened in scope to become an ideological struggle over different systems and values. The problems that can be solved with money are not the most difficult ones to solve. Today’s competition for hegemony has turned into a vicious cycle between the two countries, even heading towards a ‘Thucydides Trap situation.

As tensions heat up, will Taiwan, caught between two great powers, be able to focus on its own development? The answer should be clear. Taiwan’s growth is deeply affected by the special cross-Strait relationship. For example, from the 1990s, Taiwan’s geographical and cultural proximity to China benefited many Taiwanese manufacturers, helping make their businesses quite profitable. Later, as the Chinese market further integrated with international markets, Chinese market and production strength provided some industries with opportunities to become international leaders. For manufacturers who have reshored from China, or who remained partially in Taiwan, though, China is the most important reason for the hollowing-out of Taiwan’s industry. For better or worse, Taiwan is destined to depend on the cross-Strait situation for its growth prospects.

Now, as the trade war escalates into a conflict over values, Taiwan might wish it could just come out on top by simply by standing idly by. Its orientation in this debate includes human rights, freedom, and property rights, and it started allowing social choice early in its 40-year democratization process. Financial industry data from since the trade war started highlight that China’s political system, characterized by rising authoritarianism, might not be so good for Taiwan’s business interests after all, especially as it becomes clear Beijing intends to reign in the private sector.  

In fact, Taiwan is at an inflection point. We hope that through this ‘Cold War,’ the universal values of human rights and democracy can be further refined. If the US and China set aside their differences, Taiwan will be Beijing’s best opportunity to show its goodwill to the world. If China moves from an emphasis on coercion to constructive dialogue with Taiwan on equal footing, it could lead to a break in the clouds of war and be a harbinger of a more stable, peaceful and prosperous Asia Pacific.