China hits Taiwan with trade restrictions after Pelosi’s visit

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

China is Taiwan’s largest trading partner, with bilateral trade valued at $273 billion last year, accounting for 33% of the island’s total trade with the rest of the world, according to the Taiwanese. government.

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

The autonomous 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 mobile 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 citrus import suspension is a result of “pest control” and “excessive pesticide residues,” citing “Covid prevention” for the suspension of imports. imports of sea products.

Meanwhile, 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 drawn the expected wrath of the Chinese authorities,” analysts at ING Group said on Wednesday.

What you should know about Pelosi's visit to Taiwan

In response, Taiwan 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 has previously banned imports of some Taiwanese goods amid escalating tensions. China last year banned imports of pineapples from the island, followed by some types of apples later that year, citing “pest control.” Earlier this year, it also banned Taiwanese grouper, a high-value seafood product from Taiwan, citing the detection of some banned drugs.

The recent announcements from Beijing coincide with Pelosi’s trip to Taiwanthe first visit by a seated speaker in 25 years, and after Beijing issued severe warnings that it would take countermeasures in retaliation.
Questions grow about whether Pelosi's trip to Taiwan is worth the consequences
country’s military he said after Pelosi’s visit that he was launching a series of “specific military operations to counter the situation.”

At a press conference on Wednesday, a Chinese Foreign Ministry spokesman said “the US and Taiwanese separatist forces must bear responsibility and pay the price for the mistakes they made.” His comments came after being asked if the latest export suspension is intended to punish Taiwan for Pelosi’s visit, to which he declined to answer directly, saying, “ask the relevant department in charge.” “.

Pelosi’s visit comes in a tense moment for chinese

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

Internal tensions are high as the country’s economy has fallen to lowest growth in more than two years amidst rigid Covid lockdowns and a real estate market crash. Youth unemployment has skyrocketed to the highest level on record. Social protests are increasing due to a national mortgage crisis and a series of rural banking scandals.
China strives to sound alarm bells over mortgage boycotts and bank runs

Impact on global supply chains

Traders and analysts are concerned about an escalation in tensions between China and Taiwan and its impact on the global supply chain and inflation outlook.

Global markets slumped on Tuesday, with major stock indices closing in the red and safe-haven currencies rising. On Wednesday morning, Asian markets rallied a bit, but risk sentiment remains subdued.

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

Global supply chains they have already been shaken by the pandemic and the war in Ukraine. The World Bank said recently that many countries are experiencing double-digit inflation.
Any conflict in Taiwan, which is key in supplying semiconductors to the world, could exacerbate the global chip shortage that has already plagued the global auto industry. The Taiwan Strait is also an important shipping lane for ships carrying goods between Asia and the West.

Taiwan Semiconductor Manufacturing Company is the world’s largest contract chipmaker, playing a key role in supplying products designed by tech companies like Apple, Qualcomm and Nvidia.

In an interview with CNN this week, TSMC president Mark Liu said that a war between China and Taiwan would be a loser for everyone. “If it takes a military force or an invasion, it will make the TSMC factory inoperable,” he said.
TSMC is one of the most valuable companies in Asia and represents 90% of super advanced chips in the world.
Pelosi's visit to Taiwan risks creating further instability between the US and China

Meanwhile, Eurasia Group analysts expected Beijing to stage an “unprecedented” show of military force across 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 traversing the waters around Taiwan, as planes and ships are diverted to avoid [People’s Liberation Army] exercises,” they said in a report on Wednesday.

“Lasting impact” will depend on the length and intensity of the episode, though at a minimum it will lead to increased planning and contingencies around supply chain disruptions, including for semiconductors, by companies and formulators. policy, they added.

“The potential crisis may not abate soon,” they said, adding that China could reveal more answers in the coming days, weeks and even months as the party’s 20th congress draws closer.

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

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