3 ways the confrontation between China and Taiwan could affect global markets

The standoff between China and Taiwan (and the United States) has escalated tensions to their highest level in decades, but – so far at least – economic observers have not seen a worst-case scenario.

The critical semiconductor industry in the island Evade a direct hit And while China currently has a de facto blockade of Taiwan, it is expected to end this week.

But White House officials and other observers say that does not mean that Taiwan’s economy and global markets are moving away from anything. Three major economic ripples – from global shipping to cyberattacks to trade wars – can be felt across global markets in the coming weeks and months, even if tensions do not worsen.

“We will not seek, nor will we want, a crisis,” said National Security Council Coordinator for Strategic Communications John Kirby Thursday reportersBut it was clear that China’s actions “undermine the status quo across the strait” on both economic and military issues.

Here are some of the immediate economic effects that will likely be felt even if China ceases all-out (or actual) economic warfare after House Speaker Nancy Pelosi’s trip to the island.

FILE - In this photo released by the Presidential Office of Taiwan, US House Speaker Nancy Pelosi, left, and Taiwanese President Tsai Ing-wen gesture during a meeting in Taipei, Taiwan, Wednesday, Aug. 3, 2022. Military fire drills in six declared areas of Its own self surrounds Taiwan in response to US House Speaker Nancy Pelosi's visit to the island that Beijing claims as its territory.  (Taiwan Presidency Office via AP, file)

FILE – In this photo released by the Presidential Office of Taiwan, US House Speaker Nancy Pelosi, left, and Taiwanese President Tsai Ing-wen gesture during a meeting in Taipei, Taiwan, Wednesday, Aug. 3, 2022. Military fire drills in six declared areas of Its own self surrounds Taiwan in response to US House Speaker Nancy Pelosi’s visit to the island that Beijing claims as its territory. (Taiwan Presidency Office via AP, file)

China’s effective blockade of the island

Pelosi was the highest-ranking American politician to visit Taiwan in 25 years, and according to the White House, China fired an estimated 11 ballistic missiles toward Taiwan in response as part of a dramatic display of military might. The exercises were conducted all over the coast of the island and had a foundational effect effective economic blockade.

But even with military tensions at the highest level in decades, there could be limited economic repercussions if the Chinese fleet of ships eventually returns to their home ports as scheduled this weekend.

Video screenshot shows a missile launched by the missile force of the Eastern Theater Command of the People's Liberation Army of China, targeting selected sea areas to the east of Taiwan Island on August 4, 2022. On Thursday, the Eastern Theater Command conducted joint combat exercises and exercises around the island of Taiwan on an unprecedented scale.  (Xinhua Photo via Getty Images)

Video footage taken by Chinese state media shows the launch of a missile targeting specific sea areas in eastern Taiwan on August 4 (Xinhua via Getty Images)

Meanwhile, airlines they adapt With some flights to Taipei completely cancelled, others have been cancelled Looks like he’s ready to move on By avoiding some of the contested atmosphere in the waters around Taiwan.

However, ships in and out of Taiwan are largely grounded, although they are expected to return to action soon. Even if they did, one long-term economic consequence could be that shippers are less likely to enter the waters around Taiwan, especially if China continues to inform passing ships of its disapproval.

Herbert Lin, a senior researcher at the Center for Security and International Cooperation at Stanford, told Yahoo Finance Friday that “you can easily imagine if shipping lines to and from Taiwan were in any way threatened. [then insurance rates could go up] And that’s BFD.”

For her part, House Speaker Pelosi made strengthening economic and trade relations between the United States and Taiwan the focus of the trip, Pointing out how she said to the Taiwanese “our Chips and the law of science It will go a long way in strengthening our economies, as well as we have expressed our support for the 21st Century Trade Framework.”

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House Speaker Nancy Pelosi and her congressional delegation leave Taipei Songshan Airport after their visit to Taipei on August 3 (Taiwan Foreign Ministry/Handout/Anadolu Agency via Getty Images)

Chinese cyber attacks

Another area under close watch is any change in China’s ongoing campaign of electronic warfare against Taiwan.

China and its allies are suspected of being behind the cyber attacks to disrupt Taiwan’s society and economy for years. In recent days alone, he seems to have hacked everything from 7-Eleven . Stores to me Presidential office in Taiwan To show their dissatisfaction with the visit.

The question is whether China will increase the ferocity of attacks in the coming days and whether the United States can be drawn into this conflict.

On Thursday, Kirby was asked about the cyber attacks and declined to go into any specific measures, but made clear that the United States is closely monitoring the situation. “For many good reasons, we are not talking about the steps we are taking either unilaterally or bilaterally in cyberspace,” but immediately added, “We are committed, as we have been for decades, to self-defense in Taiwan.” [and] I’ll leave it at that.”

Professor Lin notes that the increased cyber attacks may continue for a long time.

Of China, he said, “It is really costly to continue conducting large-scale military operations as they have been doing,” noting that missile launches could be rolled back, but that electronic warfare is a “cheap and easy way to express your dissatisfaction.”

Experts have also often reminded that if the conflict continues, Nor are Americans safe from direct cyber attacks. The vulnerabilities of US business in the cyber arena have emerged from the Chinese and Russian governments – as well as informal actors – repeatedly in recent years.

economic coercion

Economic coercion efforts are another continuing danger.

Kirby took those efforts off the White House podium on Thursday, and Beijing announced it would Block selected imports indefinitely Such as citrus fruits, fish and other foods from Taiwan, even after the end of the effective blockade.

Notably, however, China has said it will continue to allow imports of semiconductors from Taiwan. Taiwan Semiconductor Manufacturing Co.TSM) is the world’s largest semiconductor company, with its products powering countless electronics in China and around the world.

Experts note the divided response from Beijing to the proposal of economic coercion efforts It may not have as profound an effect as some might fear.

Taiwan Semiconductor Manufacturing Company (TSMC) Fab 15B, one of the four Giga semiconductor manufacturing plants, is photographed in Taichung, Taiwan on September 2, 2021. REUTERS / Yimou Lee T

A semiconductor manufacturing plant of the Taiwan Semiconductor Manufacturing Company is photographed in Taichung, Taiwan (REUTERS/Yimou Lee)

In the past, China banned Taiwanese imports of things Like sugar and wax apples and pineapple, but actions are often limited to more token products – unlike exports that would severely disrupt any economist.

This week’s move was another example of this trend.

On semiconductors, for example, Beijing is not seen as likely to impose a ban anytime soon. Sarah Krebs, professor and director of the Technology Policy Lab at Cornell, Recently Yahoo Finance That “chips are almost becoming a third rail,” which China is not keen on touching.

Ben Wershkull is the Yahoo Finance correspondent in Washington.

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