A senior U.S. diplomat said Thursday that financial markets are assigning too much probability to a near-term war across the Taiwan Strait, arguing that American deterrence and the costs Beijing would face make a forced takeover unlikely even as Chinese military activity around the island intensifies.
What DeSombre said in Singapore
Michael DeSombre, the U.S. assistant secretary of state for East Asian and Pacific affairs, told CNBC on the sidelines of the Milken Institute Asia Summit that “the most mispricing is with regard to Taiwan,” adding that investors appear to be “overpricing the risk of something happening across the Taiwan Strait.”
DeSombre said both Washington and Beijing want to avoid open conflict and that U.S. policy is built around preventing it. “Concerns of that perhaps are priced at too high a level,” he said in the interview broadcast Thursday evening U.S. time.
His comments come days before Taiwan’s Oct. 10 National Day ceremonies in Taipei, when the government will highlight domestic resilience amid sustained People’s Liberation Army patrols. Taiwan’s defense ministry reported a larger sortie on Friday morning, including aircraft crossing the median line of the Taiwan Strait, underscoring that military pressure continues even as diplomats speak about risk premiums.
How Washington frames deterrence
Asked about widely discussed assessments that Chinese leader Xi Jinping wants the People’s Liberation Army ready for action by 2027, DeSombre described Xi as “a very rational actor.” He said Beijing would not attempt reunification by force if leaders concluded the move could not succeed—or could not succeed without “substantial consequences.”
DeSombre emphasized allied coordination. “That’s why it’s important … ensuring that we have the deterrence in place with our allies and partners to make sure it does not happen,” he said.
Taiwan’s democratic government rejects Beijing’s sovereignty claims. China has not renounced the use of force and has expanded gray-zone operations, including more frequent air and naval activity documented by Taiwan’s military since 2020.
Arms sales and the economic lens
DeSombre’s market commentary intersects with stalled U.S. arms packages for Taiwan. CNBC noted that President Donald Trump has held back approval of a new roughly $14 billion sales bundle after an earlier $11 billion package drew a sharp response from Beijing last December. Days after Trump met Xi in September, Taiwanese Foreign Minister Lin Chia-lung opened a de facto consulate in Phoenix, a symbolic expansion of U.S. ties that Beijing criticizes.
For Taiwan’s semiconductor-heavy economy, investor anxiety often tracks shipping insurance, defense headlines and U.S.–China rhetoric as closely as quarterly chip demand. DeSombre did not cite specific market instruments, but his message was directed at fund managers weighing tail-risk scenarios for companies such as TSMC, which is building advanced fabrication plants in Arizona with U.S. subsidies.
What Taipei is watching
Officials in Taipei typically welcome assurances of U.S. commitment while pressing for timely weapons deliveries and clearer regional coordination. DeSombre’s interview does not change Taiwan law or U.S. policy language on “strategic ambiguity,” but it offers a rare explicit attempt to talk down conflict odds in financial terms during a week of heightened PLA activity.
Analysts in Taipei said markets may treat the remarks as a calming signal only if accompanied by visible progress on arms transfers and continued Japanese and U.S. naval presence in nearby waters. Until then, National Day security deployments and live-fire drills scheduled around the island will keep military risk on the front page even when diplomats focus on mispriced insurance contracts.