China hits Taiwan with trade restrictions after Pelosi visit

Economy / August 3, 2022 / Admin / 0

The brakes include the suspension of some fruit and fish imports from Taiwan and exports of natural sand to the island.

China is Taiwan’s biggest trading partner, with two-way trade worth $273 billion last year, accounting for 33 percent of the island’s total trade with the rest of the world, according to the Taiwanese government.

Experts are also concerned about the impact that escalating tensions between Taipei and Beijing could have on Taiwan’s semiconductor industry.

The self-governing democratic island of 24 million people is a world leader in the supply of semiconductor chips, which are a vital component for virtually all modern electronic devices, from cars to refrigerators to cell phones.

China’s Taiwan Affairs Office said on Wednesday it would suspend imports of grapefruit, lemons, oranges and other citrus fruits, as well as chilled white striped hairtail and frozen horse mackerel from Taiwan.

In a separate statement, Chinese customs officials said the suspension of citrus imports was the result of “pest control” and “excessive pesticide residues”, and cited “Covid prevention” for the suspension of citrus imports. seafood.

China’s Ministry of Commerce has suspended exports of natural sand to Taiwan, a key component for the production of semiconductor chips.

“Nancy Pelosi’s visit to Taiwan has sparked the expected wrath of Chinese authorities,” ING Group analysts said on Wednesday.

In response, Taiwanese officials said China’s suspension of sand exports would have a “limited” effect and that Chinese sand represents “less than one percent” of its total demand.

China previously banned imports of some Taiwanese products amid rising tensions. Last year, China banned imports of pineapples from the island, followed by certain types of apples later in the year, citing “pest control”. Earlier this year, it also banned Taiwan grouper, a high-value seafood product from Taiwan, citing detections of some banned drugs.

Beijing’s recent announcements coincide with Pelosi’s trip to Taiwan, the first visit by a sitting president in 25 years, and after Beijing issued stern warnings that it would take retaliatory countermeasures.

Questions mount over whether Pelosi's trip to Taiwan is worth the consequences

The country’s military said after Pelosi’s visit it was launching a series of “targeted military operations to counter the situation”.

During a press briefing on Wednesday, a spokesperson for the Chinese Foreign Ministry said that “US and Taiwanese separatist forces must take responsibility and pay the price for the mistakes they have made.” Her comments came after she was asked if the latest export suspension was intended to punish Taiwan for Pelosi’s visit, to which she declined to respond directly, saying “please ask the relevant department in charge”.

Pelosi’s visit comes at a tense time for China.

The Communist Party will undergo a leadership reshuffle at its 20th congress this fall. President Xi Jinping is expected to seek a historic third term in power at the meeting.

Domestic tensions are high as the country’s economy slid to the weakest growth in more than two years amid tough Covid lockdowns and a slumping property market. Youth unemployment has reached its highest level on record. Social protests are growing due to a nationwide mortgage crisis and a series of rural banking scandals.

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Impact on global supply chains

Traders and analysts are worried about an escalation in China-Taiwanese tensions and their impact on the global supply chain and inflation outlook.

Global markets fell on Tuesday, with major equity indices closing in the red and safe-haven currencies rising. On Wednesday morning, Asian markets rebounded slightly, but risk sentiment remains subdued.

“China’s response to Pelosi’s trip to Taiwan could impact supply chains and demand, which could keep inflationary pressures strong,” Edward Moya, senior market strategist for Oanda, said Wednesday.

Global supply chains have already been rocked by the pandemic and the war in Ukraine. The World Bank recently stated that many countries are experiencing double-digit inflation.

Any conflict in Taiwan, which is essential for supplying the world with semiconductors, could exacerbate the global chip shortage that has already strained the global auto industry. The Taiwan Strait is also an important shipping route for ships transporting goods between Asia and the West.

Taiwan Semiconductor Manufacturing Company is the world’s largest contract manufacturer of chips and plays a vital role in powering products designed by technology companies like Apple, Qualcomm and Nvidia.

In an interview with CNN this week, TSMC President Mark Liu said a war between China and Taiwan would cost everyone. “If you take on a military force or an invasion, you will render the TSMC factory unusable,” he said.

TSMC is one of Asia’s most valuable companies and accounts for 90% of the world’s super-advanced chips.

Pelosi's visit to Taiwan risks creating greater instability between the United States and China

Eurasia Group analysts, meanwhile, expected Beijing to carry out an “unprecedented” show of military force in the Taiwan Strait, along with cyberattacks, economic sanctions and diplomatic protests.

“The immediate effect on customers will be a moderate but likely temporary disruption to supply chains crossing the waters around Taiwan as planes and ships divert to avoid [People’s Liberation Army] exercises,” they said in a report on Wednesday.

“Lasting impact” will depend on the duration and intensity of the episode, although at the very least it will entail additional planning and contingencies around supply chain disruptions, including for semis. -drivers, by businesses and policy makers, they added.

“The potential for crisis may not subside anytime soon,” they said, adding that China may unveil new responses in the days, weeks and even months ahead as the party’s 20th congress approaches.

Simone McCarthy, Akanksha Sharma and Wayne Chang of CNN in Hong Kong contributed to this report.

China hits Taiwan with trade restrictions after Pelosi visit - CNN, economy