It begins not with missiles but with cutter ships. One morning, dozens of Chinese coast guard vessels start conducting “routine customs inspections” of merchant ships approaching Taiwan’s major ports. Chinese civil aviation authorities begin to demand manifests from flights entering and leaving Taiwan. Beijing insists it is merely asserting existing Chinese customs law, which claims the right to regulate the flow of people and goods in and out of “Taiwan Province.”

Immediately, nearly all airlines and shipping companies decide to comply. These private operators have no interest in seeing their ships or aircraft seized, detained, or worse. Nor do they have much of a choice. Insurance companies would not cover them if they resisted. Suddenly, nearly all planes and ships entering or leaving Taiwan must first stop at a mainland port in Fujian Province before traveling to their final destination. Beijing has seized control of most of Taiwan’s links to the outside world.

China’s diplomats insist that this is not a blockade. Beijing has no intention of starving Taiwan out, they say. People and goods can continue to flow freely as long as they abide by China’s laws. There are just a few important exceptions: no more weapons into Taiwan, no more dual-use components that Taiwan can use to make weapons, no more U.S. military “advisers.” Members of Taiwan’s China-skeptical Democratic Progressive Party, whom Beijing labels “separatists,” may also find it difficult to gain exit visas. So might the process engineers at Taiwan Semiconductor Manufacturing Company (TSMC) and their families.

The White House quickly recognizes the core issue: the burden of escalation is now on the United States. China’s actions, although deeply alarming, do not automatically rupture any supply chains. They are not traditional acts of military aggression. Taiwan’s most important exports—the GPU chips that power the artificial intelligence revolution—can continue to flow to the United States, at least for now. But if Washington accepts this new normal, it will have been checkmated. Starved of the tools to defend itself, Taiwan will soon lose its leverage to resist China’s coercion. Washington cannot trust that Beijing will let Taiwan export GPUs freely forever. At any point, the United States could theoretically destroy or disable TSMC’s fabrication plants to prevent China from accessing them. But such an action would trigger a financial panic. China will therefore seize the advantage in cutting-edge AI capabilities unless Washington chooses to inflict a devastating economic blow against itself, antagonizing the entire world in the process.

Worse, once Beijing establishes the norm that it can control who and what comes and goes from Taiwan, then Japan, the Philippines, and South Korea immediately become vulnerable to similar coercion. China does not have to attack these countries with physical force to weaponize their economies against the United States. It simply needs to impose pressure on the private shippers and carriers that connect them to the outside world. This is China’s path toward reconfiguring the regional and ultimately global economic order without a war.

The U.S. policy community has invested enormous energy in preparing for a full-scale amphibious invasion of Taiwan. Countless war games have been held to study it. Congressional hearings fixate on ship counts and missile inventories. The military balance does matter. But the most likely pathways to a crisis over Taiwan run through the gray zone: “quarantines,” coercive mobilizations of amphibious forces on the mainland side of the Taiwan Strait, and other forms of brinkmanship. The common feature of these scenarios is that they change facts on the ground while pushing the burden of escalation onto Washington. The United States has no integrated strategy for managing such a crisis. It has no precoordinated economic response with allies, no doctrine for communicating with financial markets, and no publicly communicated joint plan for resupplying Taiwan under quarantine conditions or evacuating U.S. and allied citizens from the island.

In essence, the United States must deter a crisis over Taiwan, not just a war. It must demonstrate to China it is prepared to handle the political and economic shock that would accompany a severe crisis, that it could cushion the immediate blow to its economy and those of its allies, and that, if necessary, it could trigger a phased but inexorable partial decoupling from China. The United States must start building these plans with allies today. Otherwise, if a crisis comes, it may rush to the brink, panic, and back down—sacrificing Taiwan while shredding the credibility of its alliances across the globe.

Chinese leader Xi Jinping claims to seek “peaceful reunification” with Taiwan, in which Taiwan submits under pressure to a Hong Kong–style “one country, two systems” arrangement, accepting that it is part of China, in exchange for the right to manage its own affairs autonomously. Beijing could then erode Taiwan’s autonomy over time through incremental coercion (as it did to Hong Kong), eventually seizing control of Taiwan’s semiconductor manufacturing base.

The hard deadline Xi has articulated for achieving this symbolic “reunification” is 2049, the same deadline for achieving “national rejuvenation,” his broader legacy project. For Xi, the two goals are linked. National rejuvenation means establishing total Chinese preeminence: economic modernization, technological self-sufficiency, untrammeled military dominance, and much more. Taiwan is the keystone in the arch of national rejuvenation. But a botched move against Taiwan could put the whole project at risk. As a result, Xi has moved methodically, aiming to test U.S. resolve and undermine Taiwan’s morale while gradually redefining the status quo.

Xi’s campaign to bring Taiwan to heel is already a whole-of-government effort that integrates every tool of China’s national power. People’s Liberation Army (PLA) fighters enter Taiwan’s Air Defense Identification Zone relentlessly. Long-endurance drones circle the island.........

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