Bessent Warns Taiwan Chip Reliance Risks "Economic Apocalypse"
Authored by Tom Ozimek via The Epoch Times,
U.S. Treasury Secretary Scott Bessent warned on Jan. 20 that the world economy faces a single, outsized systemic vulnerability because advanced semiconductor production remains overwhelmingly concentrated in Taiwan, saying a blockade or destruction of the island’s manufacturing capacity could trigger an “economic apocalypse.”
“I would say that the single biggest threat to the world economy, the single biggest point of [...] failure is that 97 percent of the high-end chips are made in Taiwan,” Bessent said during remarks at the World Economic Forum in Davos on Jan. 20. “If that island were blockaded, that capacity were destroyed, it would be an economic apocalypse.”
The Trump administration is pushing to accelerate the reshoring of critical supply chains—especially semiconductors and critical minerals like rare earths—amid ongoing tensions with China and concerns over potential disruption to global trade routes in the event of a major military conflict in Asia.
In Davos, Bessent said Washington was working to relocate more semiconductor manufacturing to the United States, describing the effort as a national security and economic stability priority.
“So, we are reshoring the semiconductor industry to the U.S. with the defense contractors,” he said.
Bessent characterized major U.S. defense contractors as critical industry players akin to systemically important banks, which enjoy special protections like Federal Reserve backstops that prevent their potential failure from throwing the entire financial system into chaos. He urged defense contractors to prioritize building domestic production capacity over returning capital to shareholders.
“The defense contractors are no different than the systemically important banks,” Bessent said, adding that they benefit from government support and oversight much like large financial institutions. He said contractors have fallen behind in meeting obligations and should scale up U.S.-based industrial investment.
“They have let down the American people. They are five, six, seven years behind on fulfillment of their contracts.” Bessent said. “So I do not think it is unreasonable to tell them that until further notice, you need to build more factories and buy back less stock.”
‘Test Run’ During COVID-19
Bessent also described the disruption caused by the COVID-19 pandemic as a warning sign of what could happen if supply chains were severed by a major geopolitical conflict.
“I think the only good thing that came from COVID was it was a test run for what would happen if our supply chains were ever broken due to a kinetic war,” Bessent said.
He said the disruption revealed that there are about a half dozen industries that are essential to U.S. economic resilience and national security.
“So we saw that there are five, six, seven key industries that we have to reshore,” he said. “Rare earth magnets. We’ve got to get out from under China’s grasp. The semiconductors.”
Critical Minerals Alliance
Bessent said the United States was moving to coordinate with allies and partners to reduce reliance on China for critical minerals and mineral processing, warning that Beijing has used pricing power to undercut American and allied industrial projects.
“We have seen what happens when the free markets get kind of perverted,” Bessent said, describing cases in which companies attempted to launch critical mineral facilities in the United States only to be undercut by cheaper Chinese supply.
“The Chinese come, lower prices, undercut them, and then they’re bankrupt.”
He said that the Trump administration plans to intervene with pricing mechanisms to bolster domestic production.
“We are going to put in a system, price floor, price ceilings,” he said.
An AI server assembly station is displayed at the Century Trading Corporation booth during the Semicon Taiwan exhibition in Taipei on Sept. 10, 2025. I-Hwa Cheng/AFP via Getty Images
Bessent also said the Treasury Department was helping assemble a new coalition he described as a “critical minerals block” involving the G7 nations plus additional partners, including Australia, India, Mexico, and South Korea.
“We are working at warp speed to create a critical minerals block where we can mine, process, and refine critical minerals, and China won’t have this sword over our heads,” he said.
When asked when the United States could become independent in terms of refining critical minerals, Bessent estimated the timeline at “18 to 24 months,” pointing to early progress in domestic rare earth magnet manufacturing.
“I went down about two months ago to my home state of South Carolina, and in South Carolina for the first time in 25 years, there’s a producer there who made rare earth magnets,” he said.
Rare earth magnets are displayed in the showroom at Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. in Baotou, Inner Mongolia, China, on May 5, 2010. Nelson Ching/Bloomberg via Getty Images
Bessent said producers believed that they could fulfill most of the rare earth magnet needs for the United States within two years.
“And then we also want to help our allies, because the supply chain is important,” Bessent added.
Bessent’s Davos comments echoed warnings he has raised previously about Taiwan’s dominance in high-end chip manufacturing.
In an appearance on the All-In Podcast in December, Bessent said he viewed the concentration as the top economic risk to the United States and the global economy.
His latest warning comes days after the U.S. Commerce Department announced a major U.S.–Taiwan chips deal intended to expand manufacturing and supply chain investment in the United States.
The Trump administration’s push to reshore manufacturing and coordinate supply chains has unfolded alongside broader U.S.–China tensions over semiconductors, technology exports, and industrial subsidies.
