What China is learning from the Iran war – POLITICO

Global power is in flux. Your daily guide to what comes next.

By DYLON JONES

While the globe focuses on the war in Iran, the timebomb at the center of growing tensions between the U.S. and China — Taiwan — keeps ticking. And according to Eyck Freymann, a Hoover Fellow at Stanford University, the White House’s inability to reopen the Strait of Hormuz or engage allies in its cause isn’t inspiring confidence about how the U.S. could handle the economic fallout of a Chinese blockade of Taiwan, or a move to seize the island.

“If I’m Beijing, that signals to me the Americans have no economic contingency plan if things get challenging in the western Pacific,” he says, “and the Americans are incapable of marshaling an effective allied coalition.”

In his new book, Defending Taiwan: A Strategy to Prevent War with China, Freymann advocates for a multi-pronged approach — military, economic, diplomatic, technological — to prevent the situation in Taiwan from devolving into an economic and humanitarian disaster that would ripple well beyond the waves of the Indo-Pacific. “We can continue to deter this, day by day, with courage and preparation and a steady pair of hands,” he says. “But we’ve got work to do, and we have to stop pressing the snooze button when we get wake-up calls.”

This conversation has been edited for length and clarity.

Your book is about Taiwan, but I’d like to tie it to the latest news from Iran, with Trump backing down after vowing that “a whole civilization will die.” What lesson do you think Beijing will take from how he’s handled that war?

On the plus side, aspects of the U.S. military campaign in Iran have been impressively, professionally run. Special Forces have served with distinction. U.S. and Israel very quickly neutralized most of Iran’s air defenses, enabling them to control airspace over Taiwan; that probably speaks to our cyber and electronic warfare capabilities. The successful strikes against the IRGC leadership reveal impressive U.S. and Israeli intelligence, and the U.S. has certainly set back Iran’s defense-industrial base by an enormous margin.

On the other hand, the Trump administration made some big strategic mistakes, which Beijing has clearly observed. The first is that it initiated this campaign, seemingly, with no contingency plan for the economic consequences of Hormuz being closed. To me, that’s absolutely mind-boggling.

And there was no allied contingency planning, either. So then, days into the war, we were in the position of having to beg our allies to release oil from their strategic reserves and to send their own forces to reopen the strait. If I’m Beijing, that signals to me the Americans have no economic contingency plan if things get challenging in the western Pacific, and the Americans are incapable of marshaling an effective allied coalition.

Now, Iran is an unusual case. This is a war of choice for the United States. If China initiates by moving against Taiwan, the circumstances will be slightly different.

Let me ask a question that, forgive me, is blunt and basic: Why should the U.S. care about Taiwan?

When the president asks, “Why do we care about Taiwan?” the simplest answer is, “It’s the chips, sir.” Never in history has a technological revolution been as dependent on a single resource from a single place as the AI revolution is on Taiwan. Ninety percent of the world’s advanced semiconductors, but 99 percent of the Nvidia GPUs that really count. If you take those off the board, that’s a global financial crisis and a bitter recession, if not depression, starting immediately. Nvidia, Apple, OpenAI — how are these companies going to do if they can’t source chips for a decade or more?

The second reason is geographic: Taiwan is a vital node in the first island chain, the archipelago that effectively hems in China’s navy, preventing it from projecting air and naval power far into the Pacific. We learned this lesson the hard way in the Pacific war with Japan. The Pacific Ocean is big, but it doesn’t have natural obstacles, and if your enemy has a formidable navy, they can cross that ocean pretty quick and make trouble for you at home….

But I think that there’s an even more important issue at stake, and that is the way that Taiwan’s future is decided. Whether Taiwan’s future is decided peacefully, democratically, without coercion, between Beijing and Taipei — or whether it’s decided violently, through coercion — is going to determine the future of economic order, the effective rules of the game in the region and in the world.

Why does that matter? It’s not about abstract principles; it’s about American prosperity. If China can seize control of Taiwan’s economy, even without fighting, they can use the same tools against Japan and South Korea and others. And without those countries, we will never be able to reindustrialize. In fact, once China takes over the commanding heights of AI, once they take over financial services and technology, we are going to turn into the farm. They are going to turn into the factory, and we will become like Argentina.

You write that an outright Chinese invasion of Taiwan isn’t the most likely scenario. 

The scenario that most concerns me is what some have called a quarantine or an “indirect control” scenario. The idea here is, it’s not a blockade, it’s not saying that no one and nothing can come in or out. It’s Beijing saying, “You’re welcome to come in and out — you just have to do it under our supervision and control, subject to our law.”

Which is to say, that United Airlines flight that I’m taking from SFO to Taipei? United should send in the manifest to the civil aviation authorities in Beijing to be confirmed before the flight can take off or before it can land. “Oh, terribly sorry, we don’t like that Eyck is on that flight, so could you please make a pit stop in Shanghai? Terribly sorry, Eyck needs to be kept for further questioning.” Or, similarly, for people in Taiwan, like [Taiwan Semiconductor Manufacturing Company] engineers, the people who know how to run the [fabrication plants] and make the chips: “Terribly sorry, we don’t want you leaving,” or, “We don’t want your kids leaving.”

“Oh, the United States, you’re sending parts so that Taiwan can make drones and missiles and other defenses? Terribly sorry, we have information there’s contraband on your ship. We need to inspect you. Oh, maybe we need to impound you. Oh, maybe we need to interrogate the crew.”

Beijing can do this all at once. They’ve laid the legal groundwork to do it any given day — post something on their website, or they can do it bit by bit. But the point is, most of the commerce, the sinews of exchange that connect Taiwan and the outside world are, for the most part, private companies, private airlines and shipping companies, and they are not going to pick a fight with the People’s Republic of China, which has nuclear weapons and the world’s largest coast guard.

The Trump administration has been pretty explicit that it believes in regional and hemispheric power, at least for itself. If the U.S. gets to exercise regional might, what argument can it make that China should not? Is that undermining our position with Beijing?

I don’t think the Trump administration cares very much about double standards. I think it thinks the United States is exceptional, and that the United States has exceptional prerogatives, which include the prerogative to have a sphere of influence.

The Trump administration’s National Security Strategy, may it rest in peace — I don’t know how valuable it is anymore, since sort of the whole point was [that] we were not going to get into Middle Eastern wars. One way to read the NSS is that we get a sphere of influence; the Russians may get a sphere of influence, depending on whether they negotiate with us over Ukraine, yet to be determined; but China doesn’t. That’s one way to read the NSS, I’m not saying I agree with it.

I think there’s a view in Republican circles that the Monroe Doctrine is just a historical fact. And at the same time, if there are those in the administration who believe that we can or should trade the Indo-Pacific for the hemisphere, they’re smoking something.

Welcome to POLITICO Forecast. Reach out with news, tips and ideas at [email protected]. Or contact tonight’s author at [email protected] or on X (formerly known as Twitter) @tdylon_jones.

After clashing with Trump and Israel, Sánchez casts Spain as moral model for EU: Spanish Prime Minister Pedro Sánchez on Friday urged Europe to “dream big” and not only defend its interests, but become the moral leader in an increasingly turbulent world. The prime minister said that at a moment when the U.S. has given up on international cooperation, Europe has an obligation to step up to fill that gap. And in that context, Spain is pitching itself as the leader the rest of the EU should follow.

The EU’s Big Tech rulebook is shifting the digital economy, says Ribera: The EU’s landmark tech regulations are a “success story” that are beginning to level the playing field between Silicon Valley’s giants and their digital competitors in Europe, said European Competition Commissioner Teresa Ribera on Friday. Speaking at POLITICO’s European Pulse Forum in Barcelona, Ribera said the EU’s Digital Markets Act has triggered shifts in how the European digital economy functions in the two years since the Commission began its enforcement of the bloc’s digital competition rules.

Surging gas prices drive U.S. inflation to highest level in two years: Inflation shot up to its highest level in two years in March, and consumer sentiment is at a record low. As the effects of President Donald Trump’s war with Iran ripple across the economy, the combination of surging prices and grim attitudes is a warning sign to Republicans seeking to maintain control of Congress in the midterm elections.

By 2035, Bitcoin’s market capitalization could reach $11 trillion, according to a new projection. Today, Bitcoin’s market cap is around $1.4 trillion.

Canadian voters will hit the polls Monday in three by-election parliamentary races — contests to fill mid-term vacancies in the House of Commons — and winning just one would turn Prime Minister Mark Carney’s minority government into a slim majority, writes Zi-Ann Lum in POLITICO Magazine. That would give him some real breathing room to enact his agenda and would secure his grip on power until at least 2029, when the next national election could be held.

“It’s the latest turn in a remarkable trajectory for Carney. Until a year ago, he was a political neophyte. He had a sterling economic resume and international contacts to match, but he had never run for office. Then Donald Trump started mouthing off about annexing Canada and imposing tariffs — pissing off Canadians, accelerating the end of the Justin Trudeau era and vaulting Carney into a stunning election victory over a collapsing Conservative Party.

Carney has since proved fairly adept in domestic politics, helping to poach a handful of lawmakers from both Conservative and farther-left New Democrat benches. More are reportedly toying with the idea of joining Carney’s Liberals as Canadians continue to sour on Trump’s America.

The three elections are the first since Carney made his blockbuster speech at Davos earlier this year, when he called for the world’s middle powers to band together to forge a New World Order. It’s a vision now being tested on the ground in Toronto, Canada’s biggest city, where the public may care more about their own personal finances than Carney’s geopolitical ambitions.”

Read more about the critical elections, and the prime minister on the verge of a big election win in Canada. 

Did someone forward this email to you? Sign up here.

SUBSCRIBE to the POLITICO newsletter family: Brussels Playbook | London Playbook | London Playbook PM | Playbook Paris | Berlin Playbook | POLITICO Confidential | Sunday Crunch | EU Influence | London Influence | Berlin Bulletin | D.C. Playbook | D.C. Influence | Canada Playbook | POLITICO Forecast | All our POLITICO Pro policy morning newsletters