The US is pushing China to a 'red line' and companies that do business in the country need to come up with a 'plan B,' Yale economist says

• US-China tensions are nearing a "red-line," according to Yale economist Stephen Roach.
• Roach said the US's support for Taiwan could spell trouble for firms that do big business in China.

US-China tensions are reaching a critical point, and US companies that do business in the country might want to come up with a "plan B" in the event relations between the superpowers deteriorate, according to Yale economist Stephen Roach.

In an interview with CNBC on Thursday, Roach pointed recent comments from House Speaker Kevin McCarthy, who spoke on the "friendship" between the US and Taiwan, and the importance of "economic freedom, peace and regional stability" when visiting Taiwan's president on Wednesday.

"All multinationals who have made such a massive commitment to China want at least to begin to work hard on a plan B here," he added.

Though US politicians have not said it explicitly, McCarthy's visit is another sign of support for Taiwan amid its own tense dealings with China, Roach said, which means US-China relations could be approaching a tipping point.

"For China, that is their red line, and they pushed back last August, and they will most surely push back after this meeting," Roach said, referring to rising tensions after Former House Speaker Nancy Policy visited Taiwan last August. "It clearly raises a real warning flag for them that we are going to keep putting our foot on their throat."

Roach has raised concerns over the US's relationship with China for months, and previously said the US's current economic struggles could open the door for China to assert its global ascendancy. Other economists, like "Dr. Doom" Nouriel Roubini, have also warned of China's rising economic power as it deepens its partnership with countries like Russia.

Chinese officials have already responded to McCarthy's visit with outrage, calling the meeting a "serious violation" of the nation's one-China principle, adding that the US has "been crossing the line and acting provocatively," per a statement from the Chinese Foreign Ministry.

Some corporations have already started to shift away from China as the potential for a conflict grows, Roach said, pointing to Apple's recent plans to diversify its production to countries like Vietnam and India.