The United States is trying to build up an alliance to continuously strengthen the technological blockade against China. Chips, as the core carrier of high technology, constitute the main battlefield in the Sino-US competition. Under the context of an embargo alliance forged by the United States against China and the risk of chip supply chain disruption confronting the world’s second largest economy, it is of great significance to quantitatively evaluate the vulnerability of China’s macro-economy and its impact on the border of chip import disruption.

This paper develops a dynamic computable general equilibrium model consisting of 13 regions and 12 sectors around the world to make a simulation study of this issue. Simulation results show that the implementation of chip embargo imposed by the United States alone tends to have a limited impact on the Chinese economy, but when Taiwan Province of China and South Korea join the chip embargo alliance, the Chinese economy will suffer huge losses. Under the extreme scenario of complete interruption of chip imports, China’s real GDP will decrease by about 0.49%, with exports and employment declining by 8.02% and 0.18%, respectively. Worse still, the number of unemployed people will soar by about 1.36 million. Due to the trade transfer effect, there is significant heterogeneity in the economic impact of chip embargo alliance for countries and regions inside and outside the alliance. Specifically, members of the alliance will lose, while its non-members will benefit from the US-led chip embargo alliance. Moreover, the economic impact of the chip embargo alliance on its members is also asymmetric. Specifically, if Taiwan Province of China and South Korea join the US-led chip embargo alliance, their economies will sustain heavier losses than the United States. In addition, this paper also finds that China’s subsidy policy for the chip industry may help to alleviate the negative impact of the US chip embargo on the Chinese economy.

This paper makes the following contributions: First, it is the first-ever one that evaluates the macroeconomic impact of the US-led chip embargo on China from the perspective of the alliance of major powers. This paper analyzes the evolution trend and law of the embargo in time dimension, revealing the impact boundary of chip supply and the pressure of China’s economic system. Second, it is the first study that analyzes the regional spillover effect of the chip embargo from the perspective of space trade transfer. Furthermore, this paper also estimates the trade transfer effect between relevant countries/regions and China under different scenarios and corresponding benefits and losses. Third, it introduces the concept of “virtual tariff cost” into the international trade model, and quantitatively depicts the interruption of chip imports caused by the intervention of national administrative forces, which better captures the non-market behavior in the chip embargo.