is not treaty-bound to defend Taiwan from attack by China. Instead, successive commanders-in-chief, including Mr Trump, have left open the possibility that they might send in the Seventh Fleet if China tries to take the island by force. For decades that ambiguity has deterred Communist Party chiefs from making their move. Mr Trump frightens Taiwan. True, he has sold the island weaponry in record-breaking quantities. But he has also mocked it as a tiny place outgunned by mighty China. During a state visit to Beijing in May, he emerged from hours of talks with China’s leader, Xi Jinping, parroting Chinese talking points. Mr Trump more or less accused Taiwan’s president, Lai Ching-te, of provoking China by seeking independence for the island. That is a red line for Chinese leaders, though Mr Lai’s actual position is waffly and cautious. Taiwan wants America to “travel 9,500 miles to fight a war”, Mr Trump grumbled. “I’m not looking for that.” He calls future arms sales to Taiwan a bargaining chip in negotiations with China over trade and Chinese-refined minerals used by American firms. Taiwan knows that it needs leverage. After it embraced democracy 30-odd years ago, Taiwan won friends in Washington by talking up its status as a bastion of liberty, menaced by autocratic China. When despot-praising Mr Trump took office, Taiwanese officials quickly learned to downplay talk of shared values. They watched in horror when Mr Trump scorned Ukraine as a small country that had foolishly sought to defend itself against larger Russia. That could be us, Taiwanese shuddered. Instead, Taiwan leans on two arguments about its strategic value to America. One involves Taiwan’s location in the “first island chain”, Pentagon jargon for the archipelago that hems in mainland China, running from Japan through Taiwan to the Philippines. The other involves Taiwan’s indispensable role as a global centre for making chips, including around 90% of the most advanced semiconductors. For some years Taiwanese politicians have called their chip industry a “Silicon Shield” or—in their more flowery moods—a sacred mountain that makes Taiwan too valuable for China to attack, or for America to abandon. Other countries take a dimmer view of Taiwan’s chipmaking dominance. Even friendly governments resent their dependence on an earthquake-prone,
typhoon-lashed island that imports almost all its raw materials and energy. Even before Mr Trump, Taiwan was being pressed to build chipmaking foundries overseas, notably in America, Japan and Germany. Mr Trump goes further, falsely charging Taiwan with stealing America’s chip industry decades ago. He has browbeaten TSMC and other leading firms to expand operations in Arizona, Texas and other states. In Taipei, the capital, some policy types fret about the silicon shield being weakened over time, and about talented engineers being deployed to build and run foreign fabs. Others, though, suggest ways to turn Taiwan’s defensive shield into a weapon, right now. Taiwan has its own strait. The channel between the island and the mainland, spanning about 160km, carries some of the world’s most precious cargoes each day, including silicon chips. To date, Taiwan’s focus has been on defence, and protecting itself from Chinese invasion fleets or naval blockades. But in Taipei well-placed people suggest that their indispensable role in global commerce can be used to coerce both America and China. They predict that Taiwan would stop exporting chips in the first hours of a crisis, throwing global markets and supply chains into chaos. The trigger would be an energy crisis. Electricity would soon run short if China blocks imports of coal, gas and oil. Chipmaking uses lots of power, and the government would prioritise hospitals and other civilian services. That gives Taiwan a moral argument for holding the world economy hostage. At that point, the gloomiest sorts imagine Mr Trump ordering Taiwan to surrender, after talks with China from which Taiwan is excluded. Optimists counter that such a sell-out would leave China controlling the world’s most important chipmakers. How would that be compatible with America’s quest for AI dominance, they ask? In short, Taiwan has a choke point. Indeed, Mr Trump’s bluster about Taiwan stealing America’s chip industry is a form of backhanded compliment. Taiwan has cards and Mr Trump knows it. If this is blackmail, it is in a noble cause. A war over Taiwan between America and China would be terrifyingly dangerous. A Chinese takeover would snuff out a thriving, if chaotic, democracy, ushering in a nightmare of repression, show trials and mass re-education for millions of Taiwanese. The best way to avoid such disasters is for America to continue deterring China.
In Washington, Trump apologists credit him with reviving Ronald Reagan’s doctrine of “peace through strength”. That is an insult to the Gipper. Actually, other countries scent weakness in Mr Trump. They are learning from another Reagan saying: if you can’t make someone see the light, let ’em feel the heat. ■ Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence. This article was downloaded by zlibrary from https://www.economist.com//international/2026/06/30/allies-learn-how-to-bully- america
Big oil’s secretive trading arms are having an extraordinary year The rise of vibe lawyering Donald Trump’s AI regime is opaque, unpredictable—and unsustainable Can Bending Spoons thrive as a listed company? Indonesia gives its best-known entrepreneur a decade in jail The Toddyssey Show a liberal a Lime bike and he will show you his soul
Big oil’s secretive trading arms are having an extraordinary year Meet the corporate gamblers who never waste a good energy crisis July 2nd 2026 Oil majors have two ways to make big money during an energy shock. One is to sell the hydrocarbons they pump and refine themselves. The other is to buy barrels that rival companies produce and flog them to whoever wants them the most. The third Gulf war has now demonstrated just how important the latter has become as a source of profit for the industry—particularly in Europe. Trading used to be the majors’ dirty little secret for topping up their returns. It is not little anymore. The volume of hydrocarbons traded by BP, Shell and TotalEnergies—the equivalent to 40-50m barrels of oil per day—is five to ten times what they produce. Nor is the contribution to their profitability a
mere rounding error. Our calculations suggest that the trading arms of these three companies could be on course to increase their average return on capital by roughly a third or more this year. Yet secretive these activities remain. The majors disclose plenty about their production and distribution businesses. But information about their trading arms is, in effect, classified. Opacity helps protect their competitive edge. Trading profits alone explain why European majors, whose valuations have long trailed those of their American cousins, have outperformed Exxon and Chevron since the end of February (see chart 1). To understand how they mint so much money—and whether it can last—The Economist spoke to a range of insiders from across the industry. Our findings indicate that the golden geese still have eggs to lay. But foxy competitors are circling. Europe’s trading nous is a product of history and geology. American oilmen always had ample resources and a vast domestic market. European ones, which lacked both, lost their equity stakes in Middle Eastern crude during the nationalisations of the 1970s. That shock forced them to buy third-party barrels rather than just sell their own. BP pioneered trading in the 1980s, when OPEC’s grip on prices collapsed. Amid a glut of cheap oil, the firm began buying barrels it didn’t need, betting it could sell them at a profit. Shell and Total began to grow their own arms through the 1990s, when low
oil prices squeezed upstream margins and also pushed the majors to look elsewhere for returns. Trading—which profits from volatility and spreads, not just price levels—became the answer. The majors’ traders can harness volatility in part because they possess unmatched intelligence on supply, demand and the direction of prices thanks to the vast operations of their employers, encompassing oil and gas fields, refineries, terminals, storage facilities and more. Over the past 15 years the opportunity has expanded. Banks, hamstrung by regulation, have retreated from commodity trading. America’s shale bonanza, Japan’s pivot away from nuclear power and the Russian-gas crisis have also turned liquefied natural gas (LNG) into a booming global market. Traders are still expected to help place their own companies’ “equity” barrels, but their growing contribution to overall profits has bought them greater independence. Around nine-tenths of what they shift now comes from outside the firms. The Iran war—and the energy crunch it has caused—look set to make this a banner year for trading, even as prices normalise (see chart 2). The majors hide trading profits by bundling them with other units’. But projections we assembled suggest BP, Shell and Total may earn $15bn-20bn in pre-tax profit from trading in 2026. Taking the lower end of that range, and assuming this year resembles 2023—when Brent crude averaged $83 a