Encountered this error when a exisitng project was copied from server to local system. I tried installing different Typescript versions from Marketplace and tried changing the Microsoft.Typescript.MSbuild versions as well. None of these helped to resolve the issue.

I encountered a github issue ( github ), which explicitly doiesnt provide a solution, but on reading the issue i noticed the build was successful when the path didnt have any space. I copied my solution to a folder in directly in D drive and tried rebuilding the solution and it was successful.