Right now China does not have the means to undertake an operation such as conquering Taiwan. Any such endeavour would eventually involve an amphibious landing. The first thing you must have for an amphibious landing is air superiority. While China has aerial numbers, the training of their pilots is notoriously poor, and their air force while enormous is really showing its age. An attempt go gain air superiority over Taiwan would likely result in news images of migs falling en masse from the sky. China's best bet would be to send a few salvos of its massive conventional ballistic missile armament at the island intent on neutralizing the airfields. This is however not a very reliable means of attack.This problem would be further compounded if the US got involved from Japan, and with its carrier force.
Second is naval superiority, China's best prospects for doing this is with their submarine force. However Taiwan has been well trained in anti-submarine warfare. Gainging actual sea control with only their submarines and limited surface ships would be very difficult. Especially if they failed to gain air superiority.
Now lets say China does manage to land a force on the island. The US has several marine divisions in the area trained specifically in counter invasion tactics. (also keep in mind the US has extensive experiance in overseas and amphibious operations, china does not) When combined with the resistance that would be provided by the locals, well the US has Vietnam, the Soviety Union had Afghanistan, China could end up with Taiwan. China has demonstrated a marked willingness to use force, they haven't done so against Taiwan because they know for now at least it is a losing prospect. China must also keep in mind that both South Korea and Japan have threatened to create dedicated nuclear armaments if China does invade Taiwan.
Nuclear War?
Right now China is in the process of blossoming into a true superpower. This is why they have threatened nuclear action against the US. They are in essence the man who finds the biggest man in the bar and picks a fight with him (or at least threatens to) to showcase his own imperious nature. China also knows that such threats will buy them friendships among nations that don't get along with the US. As far as an actual nuclear war, China knows as the US does that it is a losing prospect for both sides.
And while they have not admitted to it, we must contemplate whether or not Taiwan has developed its own nuclear capabilities or otherwise aquired them.
Until the day you see China develop the ability to grab and maintain air and naval superiority over Taiwan, you will not see them move on the island.
As far as China embargoing the US, thats the same as a nuclear option except economically, both nations would suffer economic hardships in the extreme. China may even come out of the deal worse, as american dollars on chinese products fund China's armed forces along with everything else. The US has other people it can buy from even if such a shift would take time.